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Why America Needs A Competitiveness Audit

By / 7.28.2016

The division between the trade skeptics and the trade supporters in the Democratic Party is on stark display at this week’s convention in Philadelphia. The Progressive Policy Institute favors smart, high-standard  trade agreements, as PPI president Will Marshall  and senior fellow Ed Gerwin recently wrote.

Yet both trade skeptics and supporters can agree on one critical point: The government must do more, much more, to provide American manufacturers, especially small ones, with the tools they need to compete successfully against foreign rivals on global and domestic markets.  If American manufacturers can compete more successfully, that will lead to more jobs for Americans.

A good first step: The International Trade Commission, the Bureau of Labor Statistics, and the Department of Commerce should jointly lead a government-wide project to do a “competitiveness audit of the U.S. economy, as PPI wrote in a previous policy brief, “How a Competitiveness Audit Can Create Jobs”.  This competitiveness audit would compare the price of a wide variety of US-made products with the price of similar imported products, based on functionality and quality.  The audit would cover the full range of manufacturing industries, from communications equipment to furniture to chemicals to machinery. So, for example, the audit would compare the producer price of a piece of household furniture produced in the United States versus the import price of a similar piece produced in China.

The competitiveness audit is likely to show a big gap between US-made and import prices for some products. But other products are likely to have a small and perhaps shrinking gap, making them prime targets for expansion of US production.

Armed with this information, American manufacturers will be able to target markets where the United States has a competitive advantage.  Small companies, especially, will benefit from information produced by the competitiveness audit, since they don’t have access to the global networks that their bigger counterparts do.

The competitiveness audit can also stimulate the formation of new manufacturing businesses by pointing out market opportunities to potential entrepreneurs.  People who want to start a new manufacturing business in Ohio, say, will be able to use the competitiveness audit to attract funding.

In addition, mayors and other local officials would be able to use the results of the national competitiveness audit to help direct their economic development efforts. Right now, they are simply shooting blind, without adequate information about where the US has a competitive edge.

Surprisingly, the government currently does not collect or publish data comparing prices of domestic and imported products. That’s an egregious hole. Filling that hole would not only help manufacturers, but would also help economists resolve some big issues about the impact of trade on the economy.

No matter where you fall on the trade question, a competitiveness audit makes sense: If we want to see a revival of manufacturing employment, we have to provide small manufacturers and local officials with the information they need to make good decisions.

Reference

Michael Mandel and Diana Carew , “How a Competitiveness Audit Can Help Create Jobs,” Progressive Policy Institute, November 2011.  http://progressivefix.com/wp-content/uploads/2011/11/11.2011-Mandel-Carew_How-A-Competitiveness-Audit-Can-Help-Create-Jobs.pdf