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Home / Washington Business - January/February 2007 / Chair's Corner: It's time to remember the world is flat |
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Chair's Corner: It's time to remember the world is flat |
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Written On: January/February 2007 |
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Written By: by Kirk Nelson - Chair, Board of Directors |
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Kirk Nelson is state president for Qwest Communications International. Nelson is the company’s business and policy leader in Washington, responsible for all state operations, including legislative and regulatory advocacy.
Having money in the bank is comforting. Fortunately, legislators coming to Olympia in January will have that luxury. Starting out with $1.9 billion in the black is much better than the $2.7 billion in red ink that Gov. Locke faced in 2003.
That year, the governor and key lawmakers adopted the Priorities and Price of Government standards to prioritize what the state would fund in the 2003 to 2005 biennium. In the end, they avoided a tax increase to balance the budget,
but some tough choices had to be made.
In 2007, our elected officials in Olympia have an opportunity to take what we’ve learned from POG and Gov. Gregoire’s Government Management, Accountability and Performance program and build on the prosperity we’ve enjoyed for the last couple of years. As they have in the past, they must continue to prioritize funding for programs and figure out ways to make them more effective and efficient.
That is what the private sector is doing every day—finding ways to do more with less and do it better. It’s the only way we can compete in the modern marketplace.
Thomas Freidman, author of The World is Flat, vividly illustrates what our country is up against. Our foreign competitors have economic growth rates that are nearly in the double digits. China and India alone have over 2.5 billion people, many of whom are joining the middle class, buying cars, traveling and shopping for other luxury goods.
The question for Americans is how much of those heavily populated markets can we penetrate with our goods and services?
Part of the answer lies in how cost-competitive we will be. Washington is a major manufacturing state, and the news for us is not good. According to the National Association of Manufacturers, the situation is bad and getting worse.
In a 2003 study, NAM found that external costs added 22.4 percent to U.S. manufacturers’ production costs compared to their nine global competitors—countries like Canada, Japan, China, South Korea and Mexico. The most recent study shows a dramatic escalation to 31.7 percent—a whopping 42 percent increase since 2003.
Everyone must realize that manufacturing is now competitive worldwide. It is impossible for U.S. producers to pass cost increases along through higher prices. In fact, prices in the global marketplace are virtually flat. For example, in the last decade, manufacturing prices have increased only 4 percent, while prices in construction, health care, education and other non-manufacturing sectors increased nearly 60 percent.
The stakes are enormous. Manufacturing in the U.S. generates about $1.4 trillion a year, or about 12 percent of our gross domestic product, and supports 20 million family-wage jobs with good benefits. It accounts for 75 percent of our industrial research and development and two-thirds of U.S. exports of goods and services.
The question is, what can we as leaders of this state do to make sure we can compete and provide family-wage jobs? There are three things:
First, continue the GMAP and POG process. Prioritize funding for programs to make sure they’re running efficiently and jettison those that are outdated, inefficient or marginal.
Second, persist in streamlining regulations. Make sure rules are easy to understand and easy to comply with. Make sure rules are sensible, cost effective and don’t overlap. Rules should be designed to accomplish what is intended as quickly and as easily as possible.
Third, save a little money for when times are bad. It’s the sensible thing to do. Gov. Gregoire’s proposed rainy day fund is a good start.
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