WASHINGTON ― A new report from a Ronald Reagan Institute task force aimed at revitalizing U.S. manufacturing to compete with China recommends reskilling workers using federal education grants, investing in sectors vital to national security and boosting tech development with allies.
Released Tuesday ahead of the Reagan National Defense Forum next month, the report laments a significant technical skills gap, productivity that lags America’s peers, lagging capital investment in manufacturing, a fragile supplier ecosystem and inadequate coordination both among local government entities and the U.S. and its partners.
“Our declining manufacturing competitiveness leaves America’s economic infrastructure and defense capabilities underprepared for geopolitical events, global competition, and even major armed conflict,” the 37-page report states. “To revive our manufacturing base and maintain our edge as the world’s leading economy, the United States must employ innovative thinking from both the public and private sectors.”
Meanwhile, centrally coordinated Chinese efforts are making gains in production capacity and tech investment, moving it toward creating a self-reliant defense-industrial sector and, more broadly, its “stated goals of supplanting America as the world’s foremost economy and recasting the rules-based international system,” according to the report.
The bipartisan Task Force on National Security and U.S. Manufacturing Base Competitiveness is led by co-chairs Marillyn Hewson, the former Lockheed Martin chief executive, and investment firm Bridgewater Associates Chief Executive Officer David McCormick. Members from outside the defense community include Johnson & Johnson Chief Global Supply Chain Officer Kathy Wengel and the co-chairs of a congressional task force with a similar focus: Reps. Mike Gallagher, R-Wis., and Elissa Slotkin, D-Mich.
The report comes as both President Joe Biden and former President Donald Trump focused attention on reviving U.S. manufacturing. The Senate this year passed the U.S. Innovation and Competition Act, a bipartisan package meant to make the U.S. economy more competitive against China and bolster U.S. supply chains. The legislation may surface this week as an amendment to the annual defense policy bill.
While the report sounds some notes familiar in Washington, here they’re coming from a task force comprised of business and political leaders that, according to Hewson, feel a sense of urgency and agreement on the scope of the challenge.
“We’re making that very strong connection between our national security and our economic competitiveness ― and there’s no dispute about that, you’ll hear it from both sides of the aisle,” Hewson said. “There wasn’t an argument about the issues, it was just about: what are the most important things we can do in this urgent situation to address them?”
The task force lays out four key recommendations, with dozens of ideas for implementing them:
1. To address a technical skills gap in the workforce, employers should be allowed to compete for federal education grant programs which traditionally subsidize college degrees to support credential programs, apprenticeships and internships. Another recommendation is for the federal government to provide direct financial incentives for students to earn credentials and degrees in key technical areas. Some problems are that workers in manufacturing jobs are underpaid, visas for skilled foreign workers are hard to get and fewer foreign students stay in the U.S. According to McKinsey & Company research underpinning the report, the situation is dire. If current trends continue, 2 million jobs would be lost by 2030.
2. To remedy underinvestment in manufacturing, a new public-private capability could finance investments in sectors critical to national security. The report offers calls for either a bond guarantee program, a government-backed sovereign fund, new private capital vehicles with their own tax incentives or an “industrial finance corporation” with similarities to Japanese and German financial entities. The report says action is needed because the greatest declines in American manufacturing over the past two decades have been in “learning-curve” industries like communications equipment and semiconductors. U.S. firms in capital-intensive manufacturing industries have to catch up with their European and East Asian counterparts when it comes to modernizing plants, property and equipment.
3. To strengthen supply chain weaknesses, some exposed by the pandemic, it recommends modernizing the Defense Production Act ― a law from the 1950s historically used to remove bottlenecks in the defense supply chain and more recently used to address pandemic-related shortfalls. Tweaks to the law could be used to authorize new “special manufacturing zones” with fast-tracked, simplified permitting, preferential tax treatment, focused workforce programs and capital investments. Or they could be used to create new visas and citizenship pathways for skilled immigrants working in critical manufacturing sectors ― with, say, fast-tracked visa and green card reviews for high-skilled applicants.
4. It also recommends a new body made up of G7 and Quad countries (U.S., India, Japan and Australia) to coordinate on issues like investment screening, export controls, artificial intelligence and 5G/6G networking. Dovetailing with the inaugural session of the U.S.-EU Technology and Trade Council this summer, it recommends expanding those discussions to Quad allies. Another recommendation is to allow U.S. suppliers to export license-free certain less-sensitive gear controlled by the International Traffic in Arms Regulation to the U.K. and Australia.
While the task force isn’t the first to look into the skills gap, supply chains and enterprise zones, Hewson said the idea was to bring them into a sharper focus for national leaders.
“What our task force tried to do was to really zero in on some recommendations that we think, given the urgency of the problem, that we can get on with right away,” Hewson said. “These are the key things that we think could make the biggest difference in the near term ― and even went so far as identifying what we thought it would result in, in terms of jobs and addressing the problem.”
A separate Reagan task force last year recommended steps to grow the defense innovation base and challenge China, including through the creation of a new National Guard-esque unit for technology and a special visa program.
Joe Gould is the Congress and industry reporter at Defense News, covering defense budget and policy matters on Capitol Hill as well as industry news.