US on Fast Track To Competitiveness

BY the mid-1990s, some United States companies will bring back the manufacture of consumer electronics goods to this country.

That may be hard to believe. But this is what Edward Miller, president of the National Center for Manufacturing Sciences (NCMS) in Ann Arbor, Mich., predicts. Indeed, he sees this nation on a fast track to world-class manufacturing standards.

"It is not an easy task," he concedes. "But the US has taken very dramatic strides in upgrading its competitiveness."

At the moment, almost all the TVs, VCRs, videocameras, and other consumer electronic items that Americans buy are made in Japan, South Korea, Taiwan, or other foreign nations.

Those products plus automobiles are major factors in Japan's 1991 trade surplus with the US of around $100 billion and a current account surplus (which includes investment flows, tourism, and insurance as well as trade) of more than $80 billion. When President Bush and an entourage of American businessmen arrive in Japan next Tuesday, they will push for trade concessions aimed at trimming that export surplus.

But the efforts of Mr. Miller's Center to boost American competitiveness in manufacturing could well be more important in the long run for the US trade balance. This year NCMS, an organization with a membership of more than 150 top US manufacturers, will be farming out between $150 million and $200 million in research and development in manufacturing technologies, up from $90 billion in 1991.

C. Fred Bergsten, director of the Institute for International Economics, holds that Mr. Bush can do a great deal immediately for US competitiveness by getting Japan to revalue the yen. At present, 125 yen buys $1. Mr. Bergsten would like the finance ministers of the Group of Seven industrial democracies to get together, as they did in New York's Plaza Hotel in 1985, and decide to raise the value of the yen to 100 to $1. That would likely involve major intervention in the foreign exchange markets. Bergste n figures such a yen upgrading would make US products 10 to 15 percent more price competitive against Japanese products. This, he adds, would create far more new jobs in the US than minor Japanese trade concessions.

Since Japanese investment in plant, equipment, and other property abroad has dropped off enormously, the Japanese are now using the proceeds of their trade surplus to pile up funds abroad in bank deposits, treasury bills, and other short-term investments. It smacks of mercantalism - the post-feudal view that a nation's welfare was enhanced by acquiring a huge hoard of bullion. Bergsten says the Japanese should use their wealth instead for a program of public works and other needs at home.

The NCMS, besides its R&D program, has began to establish a network of 150 "teaching factories" in the US. Miller sees these as crucial to spreading new manufacturing technologies quickly to the 357,000 manufacturing firms in the US.

Japan has nearly 170 of these teaching facilities scattered around the country, instructing Japanese workers in the latest technologies. By this system, a new technology can be spread to most of Japan's manufacturers in about 18 years, Miller says.

In the US, the spread of a new manufacturing technology has historically taken about 55 years. Miller expects his teaching factories to shrink that time dramatically. At the moment, NCMS has four such facilities launched in collaboration with universities in Huntington, W. Va.; Toledo, Ohio; St. Louis; and Albuquerque, N.M. This year he hopes to get 15 to 20 more underway, all connected with universities.

Businesses, foundations, state and municipal governments are raising the $25 million to $50 million required to launch each of these teaching factories because they recognize their importance to the competitiveness of industry in their area, Miller says.

A 150-facility network, he figures, should reach the most receptive 10 percent of manufacturers with a new technology in five years. Then that technology "takes off," spreading to most other companies within eight to 12 years.

Today, the cost of wages and capital are not much different in Japan and the US. So, says Miller, as US firms adapt new technologies to improve efficiency and quality, they will bring more manufacturing back home to reduce transportation costs.

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