Another Perspective

Killing Manufacturing

Any wonder why our manufacturing has moved outside of our boundaries?

By 5.10.11

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One of the greatest threats facing our country today doesn't come from outside our borders. It's not the possibility of a terrorist attack. It is not the continually increasing illegal immigration across our southern border. It's not even the likelihood of a disrupted oil supply.

The greatest problem we face is the self-imposed cost and regulatory burden placed on the development of manufacturing businesses. America, at least the America I grew up in, was the land of the free and the home of the innovator. We used to celebrate entrepreneurs and reward those willing to take a risk. America, the "can do" America of my early years, allowed it's innovators to operate with relatively little restraint or restriction. If you wanted to start and operate a business, "have at it, we wish you success" was the motto of our great nation. If you had an idea for a "better mouse trap" build your plant, install your equipment, hire your people and good luck.

In the '60s we had a positive balance of trade and it was growing faster than anywhere else in the world. Japan, the second most industrialized country, produced goods that were considered inferior to those produced by our great American factories. China, South Korea, Mexico? Not even on the map! Today our balance of trade is negative by a long shot and the quality of our manufactured goods is inferior to that of many other countries. Much of what we consider manufacturing in the U.S. today is really the assembly of components manufactured in other countries. Manufacturing profits go to businesses outside America because we regulate manufacturing facilities into oblivion.

Today the environment for starting and operating a manufacturing plant is not good. Gone are the days of "Great, go to it, do the best you can." Replaced by, "NIMBY" -- Not In My Back Yard. The government has imposed itself as our costly overseer, placing environmental, zoning, and wage/benefit restrictions so burdensome in time and cost that businesses are left barely competitive if not impossible to begin.

Have a great idea? See a viable opportunity? Want to build a product or establish a manufacturing plant? Go see your local government officials. You will find the "go for it" attitude replaced with, Manufacturing??? Why do you want to consider such a dirty business? Why would you want to put your fellow citizens at risk? What would we do if someone were to get hurt? How could we possibly live with ourselves if, God forbid, some kind of particle escaped into the air or blew into a river? How could you live with yourself if your employees weren't all being treated equally and being supplied with incredibly attractive wages and benefits?

I would like to relate my recent experience trying to start a Carbon Fibre manufacturing company in a Northeastern U.S. State. After meeting for three weeks with the economic development offices of the State and City, it was determined that after I located and acquired a facility, at my cost and risk, even if it were properly zoned, it would have to be approved for a special use exception. Thereafter we were told to budget in excess of $300K for pre-approval EPA, environmental, and other studies. The studies would take about 6 months at minimum -- with no guarantee of a successful outcome. Even if we were approved, and in spite of the fact that at opening we would be hiring approximately 25 technically competent people in a high unemployment region, we would have to go to the Union hall and negotiate a trades contract before hiring the first employee. I would be forced to unionize and hire more expensive, "senior union members." I am not allowed to go to Craigslist and hire younger, entry level trainees. My cost of operation becomes higher before even opening my doors and I have no choice in this matter. Unbelievable!!!

Even if I am willing to take the time, spend the money, and successfully navigate the bureaucratic hurdles, what additional risks do I face? How about this: OSHA arbitrarily decides I'm not in compliance with one clause in their multi-thousand page regulatory bible. Or, an employee-union member decides he is not being treated fairly or that the benefits package is not equal to that of federal or state employees, and files a grievance How about the EPA deciding, retroactively, that in the event of a power outage there is a chance my factory might leak a "toxic" substance? I will be sued, shut down and possibly prosecuted criminally.

Now, consider my experience the last time I visited China. I was escorted by the governor of Tianjin State to one of his new cities and shown the process to open a manufacturing facility. I was led into a room with a series of desks. You start at the first desk where you present your plan. Thereafter you proceed from one to the next obtaining approvals or agree to modifications on the spot until at the last table where you are shown what lots and buildings are available that best suit your needs and the price of each. The total timeline for permits, from beginning to approval, takes about 3 hours.

At the end of the line you pay your fee, get your permit, and choose your construction manager if a new building is necessary. The city designates the building team to come the following day and begin construction. Generally you are guaranteed that you will be able to move your equipment in within 5 months.

There are no restrictions on importation of equipment, state officials help with marketing and sales inside the country and do not restrict exportation of the manufactured goods or profits. Now, this is China so the government and the state share 30% of your business, but considering the ease of entry, increased in-country sales and helpful attitude, this is a small price to pay, especially considering America's 35% plus corporate tax rates. Also, if the price of the lot or building seems high, and they like your project, they will negotiate the price and terms. 

This is why our balance of trade is so out of whack. This is why many companies move out of the United States for foreign environs. This is why the United States is losing its position as the greatest manufacturing country in the world.

The greatest threat to our American future doesn't come from other nations, it comes from within. We have become our own worst enemy.

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About the Author

Roger Pol is a lifelong entrepreneur who over a 30-year career has developed numerous real estate projects in Virginia, Washington D.C., North Carolina, and Tennessee. He is the founder of the World Distance Learning Institute, an international post-secondary education access point, and the founder and CEO of the Ownership Recovery Company of America. He also created and teaches an entrepreneurial course in how to write a business plan and how to successfully operate a start-up business.