U.S. Manufacturing:
Challenges and
Recommendations
How to Best Ensure the Continued Strength of U.S. Manufacturing
By Kristin Forbes
Kristin Forbes is a member of
the President’s Council of
Economic Advisers. She is the
youngest person to ever hold
this position. She is on leave
from the Massachusetts Institute
of Technology’s Sloan School of
Management, where she is the
Mitsubishi Career Development
Chair and Associate Professor of International Management. She has worked in the
U.S. Treasury Department, Morgan Stanley, the World
Bank, and Fleet Financial Institutions. Her research
addresses a number of important policy-related questions
in international finance and development economics,
and she has published in scholarly journals including
the Journal of Finance. She is a faculty research fellow
at the National Bureau of Economic Research and was
honored as Sloan School of Management’s “Teacher of
the Year.” She received her Ph.D. in Economics at MIT
and her BA, summa cum laude with highest honors,
from Williams College.
The U.S. manufacturing sector was hard hit in the
recent recession, particularly with respect to employment.
This paper examines the recent challenges for
U.S. manufacturers, discussing short-term factors related
to the characteristics of the recession as well as
longer-term structural issues, such as strong productivity growth. It also discusses the role of increased trade
with China. Based on this analysis, the paper then
evaluates what should, and should not, be done to help
U.S. manufacturing. Some proposals could significantly
damage the competitiveness of U.S. manufacturers.
Instead, the Administration has enacted and proposed a
number of policies to ensure the continued strength of
the U.S. manufacturing sector, as well as a broader
recovery in the U.S. economy.
This paper is based on a presentation at NABE’s Policy Conference, March 25, 2004.
By Kristin Forbes