Expand on this: North American companies rate NAFTA a plus for global competitiveness

North American manufacturers consider the United States the most desirable country for expansion over the next three years, according to a survey released by the National Association of Manufacturers (NAM); The Manufacturing Institute; the Canadian Manufacturers and Exporters (CME); and Deloitte Touche Tohmatsu.

The survey, Made in North America, reflects the views of 321 top-tier executives in North American manufacturing companies of all sizes. The majority of companies represented—45 percent—are based in the U.S.

The largest number of North American companies (44 percent) surveyed intend to expand production in the United States over the next three years, while 57 percent of U.S. manufacturers say they will become more globally competitive over the next five years across the supply chain from sales & marketing and customer service to engineering and IT.

But the news isn't all rosy.

DeRocco adds that structural non-production costs—e.g., corporate tax rates, employee benefits, legal costs, natural gas prices, and pollution abatement—for U.S. manufacturers have increased to an amount 31.7 percent higher than the average for major trading partners.

Nearly 80 percent of respondents also identified tax cuts for manufacturers as the key factor for promoting innovation and R&D. “Congress needs to extend the R&D credit that expired at the end of last year,” notes DeRocco.

The survey also sheds new light on how North American manufacturers view free-trade agreements. Contrary to widely held perceptions, North American manufacturers paint a positive picture of their experiences with the North American Free Trade Agreement (NAFTA) after almost 15 years. Nearly half (49 percent) say NAFTA made their business more competitive, while only 10 percent say it hurt their business. The remaining 41 percent say it did not affect them one way or the other.

“The big surprise was how positive respondents were regarding the impact of NAFTA,” says Craig Giffi, vice chairman of Deloitte's consumer & industrial products industry practice. “And when we asked about plans for improving competitiveness—where they were going to expand operations—there was significant emphasis on North America across a variety of functional capabilities, including manufacturing production.”

Yet despite plans to expand production capabilities in the U.S., “one anomaly in the findings that stands out,” Giffi says, “is that 61 percent say in the area of production capabilities alone, they were competitively weaker today than they have been. That stands in contrast to other areas where they feel stronger, such as in sales and marketing, engineering, and design—virtually all other functions.”

One key reason is the growing concern surrounding skilled labor at a cost they can afford in North America. Tied into labor costs are high costs of health benefits.

On the trade policy side, concludes Frank Vargo, NAM VP of International Economic Affairs, “The significant competitive momentum that is felt among U.S. manufacturers in this survey is reflected by the surge in U.S. export sales that has stabilized the U.S. economy this year. This report is a clarion call to negotiate and approve free trade agreements that will knock down barriers to U.S. exports. Congress should heed the news in this report and vote to strengthen the ability of North American-based manufacturers to compete effectively in the global economy.”

MBT invites you to download the full survey at http://www.nam.org/northamericansurvey.