National Association of Manufacturers: Past and Future

We’ve been moving more towards a service based economy than manufacturing, but manufacturing isn’t dead by any means. Granted, we are mostly a service based economy already but services are taking a stronger focus. NAM or the National Association of Manufacturers is a testament to that notion. Since the day the association was founded in 1895, their mission has always been to give a voice for the manufacturers in the United States, specifically in legislative and governing bodies that could either positively or negatively impact its members. But they do often interact with the media and public from a public relations standpoint, so they should be considered stakeholder groups in these discussions.

They have driven a lot of synergy between industries in this country, pushing innovation, job creation, and the technology that has kept the United States a major player in a globalized economy. Moreover, what I like is that the association publishes findings from all of its members. For example, there have been certain anomalies in manufacturing processes that are industry wide. Members have the benefit of recognizing this as a problem and can work together to solve it. Quality is certainly one of the key benefits of American manufacturing, and it isn’t going away any time soon. This is one of our tools to influence consumer opinions about what we produce here, and to foster at least a certain sentiment against products that are only manufactured in China. Obviously, we can’t produce everything in the U.S because of the resources necessary to build certain things aren’t regional. Many of the components for electronics require materials found in Taiwan, India, and other East Asian countries. So although we have to sometimes import raw materials to the U.S for our work in progress inventories, the finished goods will still be finalized here, and with the hopes of exporting it. NAM has always supported the exporting of goods from our companies. We know that diversifying your customer base will allow you to generate revenue beyond the confines of the U.S and Canada market place, and beyond the benefits of NAFTA. Many of the members of NAM have seen a spike in exports.

The International Trade Administration and the U.S Department of Commerce released data showing the goods and services from the U.S, and the numbers are enlightening. Given recent announcements of the S&P lowering the U.S credit rating, both the Dow Jones Industrial and other indexes took a fall, obviously over worries of how this would impact growth and our GDP. I have yet to see any reflection of this hasty action in the Federal Funds Rate, but if that is raised, it could hinder a certain level of both private and government investment. However, the numbers have already spoken, as these recent events are only speculative. Exports are up 4.6 percent in March 2011 reaching a record $172.7 billion since the beginning of February. Keep in mind this is from small to medium sized firms. Finished goods accounted for $124.9 billion which leaves $47.7 billion for services rendered during the same base period. The ITA and U.S Department of Commerce also reported that narrowing our focus to February and March alone, $7.7 billion of goods and services were exported, surpassing expectations and surpassing anything done in history. I think this information is enough to curb the concern over today, and that perhaps some companies, such as small and medium sized firms, are no longer afraid of globalized environment.

As previously mentioned, we’ll need to keep an eye on the Federal Funds Rate or FFR. This is the primary interest rate that the central banks give to lend, and so its adjustment trickles down to the smallest of banks and across every type of financing imaginable. The Export-Import Bank of the United States, requests for export financing started increasing in October of 2010, when the bank processed over 1,700 applications for financing, resulting in more than $2.4 billion in export financing. For smaller enterprise during the period of October 2010 and January 2011, financing rose to $1.5 billion, up $100 million the same time the previous year. If the Federal Funds Rate were to increase, we would want to watch the applications for exportation loans, because this would be a direct cause and effect relationship. If the number loan applications go down over a given period, so the amount of exports in the following months will also be lower. But to affirm the notion of things moving in the right direction, applications would only be so high if businesses were optimistic about growth and were seeking creative solutions to expand their operations. Coming out of the recession starts with the mindset that future periods are going to yield growth and profits, and executive orders follow suit. Because the bank is an independent federal agency, the financing they provide can include export-credit insurance, which helps ease the pain of exporting goods or services. This includes dealing with trade regulations of the European Union and others, where there are added taxes and fees to protect domestic firms. This is still available and will remain available even if the U.S credit rating takes a little bit of a plunge. One of the primary things that I would be worried about is the fluctuation in currency. Even over a period of 30 days, which is a normal payment cycle, we can easily assess a loss during currency conversion. This is something that any company faces, but those larger corporations may have the resources to better predict currency values during certain periods. On June 7^th of 2010, the U.S Dollar was $.83 per Euro, but as of today, the U.S Dollar has fallen down to $.67 per Euro. This is a 20% change in just the last year and the trend continues downward.