Looking ahead to 2004, there is good news, bad news, and news that will scare your socks off.

The good news is Gov. Locke and lawmakers held the line on taxes and fees and reformed unemployment insurance in 2003. That helped pump new life into our sluggish economy and played a key role in Boeing’s decision to assemble its new 7E7 in Washington. Making Washington more competitive seems to have taken hold, but will it stick? Is it enough?

The bad news is we still have a long way to go. The question is do we have the will to change?

For example:

• Liability lawsuit reforms died in Congress and the state legislature;
• Washington’s workers’ compensation needs a major overhaul;
• The regulatory system at the local, state and federal level must be restructured to make it user-friendly and less costly; and
• Something has to happen to reduce energy and health care expenses.

If that isn’t bad enough, consider a study just released by the National Association of Manufacturers (NAM). NAM found that intensive global competition has forced manufacturers to cut the price of their products over the past seven years while their external, non-production costs skyrocketed. Those costs, such as employee health care benefits, regulatory compliance, lawsuits and energy pushed our production costs 22 percent higher than our nine biggest international competitors. That’s equivalent to an extra $5 per ‘man hour’ in costs to U.S. employers – a major factor in our loss of trade and jobs.

“This study dispels the myth that most of our industrialized partners face higher manufacturing costs than we do,” said economist Jeremy A. Leonard, author of the study. “[O]ur report shows that American trade is increasingly with developing countries where production costs are considerably lower than in the U.S.

Taken together, external non-production costs have offset a large part of the 54 percent increase in American productivity achieved since 1990.

So where does that leave us heading into a new year?

“U.S. manufacturing has demonstrated the ability to overcome pure wage differentials with trading partners through innovation, capital investment and productivity,” said James Berges, President of EMERSON. “But when the additional external costs described in this paper are piled on, the task becomes unmanageable, even in the best companies.”

“There are many self-proclaimed friends of manufacturing expressing concern who are nowhere to be seen when these excessive non-production costs are on the table,” said Jerry Jasinowski, NAM president. “It is imperative that our elected representatives at all levels take a hard look at the costs created by their actions – and sometimes lack of action – and the impact on our economy.”

Well said!

"How Structural Costs Imposed on U.S. Manufacturers Harm Workers and Threaten Competitiveness," by economist Jeremy A. Leonard is available at http://www.nam.org/costs.