Okay, I’ll admit that I took Spanish in high school, so that probably doesn’t make any sense. But you know what does seem to be making a lot of sense these days? Germany’s focus on manufacturing—and on manufacturing for export, in particular.
Last week, the Wall Street Journal, the New York Times, the FT, CNN, and just about everyone else ran stories about Germany’s amazing 2.2% second quarter economic growth (nearly 9% in annualized terms)—the country’s best performance since reunification.
Exactly how did Germany achieve such incredible results while the rest of Europe and America limped along? That’s right: manufacturing and exports. Of course the answer is slightly more complicated—involving major government reforms / restructuring over the last several years—but fundamentally, it comes down to a long-term manufacturing-based export strategy. In fact, Germany is the world’s second biggest exporter after China (note: China and Germany don’t have world’s 1st and 2nd largest economies) and the country’s sale of things like cars and industrial goods to emerging markets played a large part in its much-stronger-than-its-more-domestically-focused-neighbors economic recovery.
Here in the U.S, the recession seems to have shaken folks up and reminded us, too, about the importance of both manufacturing and exports. Take, for example, the recent push to enact the National Manufacturing Strategy Act, which calls for a quadrennial review of U.S. manufacturing policy—including assessing strategic industries, reviewing tax and trade subsidies and requiring agencies to coordinate strategies. Why? Because:
Since 2000, we’ve lost nearly one-third of all manufacturing jobs — more than 5 million. We’ve racked up $6 trillion in global current account losses, borrowing as much as $2 billion a day to cover our trade deficits.
Manufacturing directly employs 12 million Americans and indirectly supports another eight million jobs domestically. The industry is responsible for 70 percent of the nation’s Research & Development and 90 percent of new patent filings. The sector represents 12 percent of gross domestic product and produces 60 percent of the nation’s exports.
This effort follows on the President’s recently announced National Export Initiative—an initiative to double U.S. exports over the next five years.
Locally, the Prosperity Partnership has long been on the manufacturing and exports bandwagons. What can I say, we’re pretty smart and we love economic well being! But, I often hear people say that manufacturing doesn’t make sense for the Puget Sound or Washington, because our costs are too high and we just can’t compete. I think it’s time we really question those assertions and instead change the nature of the debate. After all, we actually do already have some world leading manufacturers and a highly skilled talent base.
Plus, somehow or another Germany makes it work. And Germany isn’t exactly known as a cheap place to do business. Rather, Germany has built its reputation by delivering high quality, precision manufacturing. Germany doesn’t try to compete as the lowest cost producer—it competes as the best.
As part of our work on the Metropolitan Business Plan to increase our region’s export of energy efficiency goods and services we’ve looked at Germany as a both competitor and role model. Their “Energy Efficiency – Made in Germany” export initiative looks to build on Germany’s established green image and manufacturing excellence to position the nation as the center of energy efficiency innovation and production. The website makes me jealous. The Puget Sound could be doing the same thing.
So, let’s learn from Germany’s example. As we all work together over the next year to develop our next five-year Regional Economic Strategy it’ll be crucial to think of ways to increase manufacturing and export across all of our industries.