India’s Jump in Doing Business Report Illustrates Signs of Reform, Need for Further Trade and Investment Reforms

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According to the World Bank’s recent Doing Business report, India jumped 30 spots from last year and now ranks 100 out of 190 countries. Manufacturers in the United States are pleased to see improvements to India’s business environment as a sign of progress, but their day-to-day experience in India shows there is still much work to be done to improve India’s trade and investment environment. Such work needs to cut through the red tape that often faces manufacturers in the United States trying to succeed in India.

The Doing Business report is based on quantitative indicators related to how easy or challenging it is for companies to start and operate a business in India. These include policies and practices related to areas such as starting a business, dealing with construction and other government permits, obtaining critical business inputs ranging from credits to electricity, protecting contracts and investors, paying taxes and resolving insolvency.

To be clear, India’s jump in the rankings reflects improvements in various areas. Most of these steps primarily benefit domestic Indian entrepreneurs and businesses, but these moves did include some changes that have a direct impact on manufacturers in the United States. India’s biggest jumps this year fall in a few specific areas: “getting credit,” “resolving insolvency,” “protecting minority investors” and “paying taxes.” These jumps can largely be traced to two high-level reforms over the past year: the passage of India’s Bankruptcy Law and ongoing efforts to reform India’s complicated tax system with the passage of the goods and services tax.

Both improvements have a broad enough impact on the commercial environment that they were listed among improvements in a recent letter to United States Trade Representative Robert Lighthizer from business groups, such as the Alliance for Fair Trade with India, stating that “U.S. businesses have seen small positive steps in the right direction, including foreign investment openings in a few sectors, fossil fuel and energy-efficiency policy initiatives, efforts to address infrastructure project permitting and licensing challenges and passage of legislation related to bankruptcy and tax reforms.”

While manufacturers welcome these changes, India must step up its efforts to accomplish Indian Prime Minister Narendra Modi’s repeatedly stated goal of reaching the report’s top 50. India still trails countries such as the Dominican Republic, Tunisia and Guatemala in the current rankings. Despite progress, India still ranks toward the bottom of the report in areas such as “starting a business” (156), “dealing with construction permits” (181), “registering property” (154), “trading across borders” (146) and “enforcing contracts” (164). Moreover, India fell in the rankings for some of these areas, including cross-border trade, property registration and business start-up. Many of these areas, particularly cross-border trade and enforcing contracts, rank among the most troublesome areas for manufacturers from the United States.

In addition to the focused business indicators listed in the report, manufacturers in the United States still face a wide array of longstanding and new trade barriers in India that make it extremely difficult to do business and undermine India’s efforts to rebrand itself to attract trade and investment. These trade barriers prevent fair access to its markets and ultimately stunt innovation and economic opportunities for both U.S. and Indian manufacturers. Examples of issues include new price controls on innovative medical devices and agriculture products, a series of forced localization policies across high-value industries and ineffective protection of patents, copyrights and trade secrets.

India’s efforts to climb the rankings of the Doing Business report must be applauded, but it clearly still lags behind most large economies, and even other emerging economies, such as China, in terms of its business climate. To boost foreign direct investment and truly position India as a leader in trade and innovation, Prime Minister Modi must take this jump in the rankings not as a victory lap, but as a reason to accelerate reforms and concrete actions to eliminate trade and investment barriers preventing manufacturers in the United States from investing and operating in India.

Why Hiring Veterans Could Solve the Skills Gap

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By John Buckley, manager of military relations at Koch Industries

I served more than 30 years in the Army, with tours of duty from Bosnia to Iraq. But perhaps my biggest test of all came when I returned home: transitioning to the private sector.

Millions of veteran service members face the same challenge every day, with another million troops returning to the private sector over the next five years. It is also a tremendous opportunity—both for those who honorably served and for a grateful nation. As the manager of military relations for Koch Industries—one of the largest manufacturers in the United States—I see firsthand the value of recruiting and retaining employees who have served.

Almost 3.5 million manufacturing jobs will need to be filled over the next decade, but the vast skills gap means that roughly 2 million of these positions will stay vacant, according to a study from Deloitte and The Manufacturing Institute. These open roles mean decreased productivity, lower earnings and a reduced GDP, as well as less innovation and flourishing in society.

Companies and entire industries are losing embedded institutional knowledge as an entire generation retires. As technical education offerings decline in public schools, we may have new workers who may lack the skills necessary to do these jobs.

But there’s hope. It is no coincidence that employers of military veterans, including Koch, have found that the traits that define the men and women who served our nation—character, dedication, perseverance and courage—match those of our most successful employees.

At Koch, we educate both business leaders—on understanding military culture and its applications in our daily business—and employed veterans—on how to recruit more quality talent. We recognize that only about 7 percent of all living Americans have served in the military at some point in their lives. As such, we take great care to bridge the gap between employees with different experiences and skill sets. We hold a monthly Skype session with veterans, and our military careers website features helpful tips on searching for jobs, writing a resume and preparing for interviews. Our website devotes a section to veteran recruiting, including a guide to managing the transition to civilian life. The results are undeniable: For the past two years, we have increased our protected veteran hires by an average of 30 percent each year, and Koch has received six awards from Employer Support of the Guard and Reserve, a Department of Defense program, for providing a supportive workplace for employees who served.

Adaptable, accountable and focused on compliance, veterans have years of skills, knowledge and leadership under their belt—important assets for any line of work, but especially manufacturing. When we hire veterans at Koch, we know that we are getting individuals with a proven track record of making their team—and their country—even better.

John Buckley is manager of military relations at Koch Industries. He is a retired U.S. Army colonel who commanded soldiers in combat and peacekeeping operations and contributed to the strategic and operational planning of multiple operations. 

Energy Brings Us Together

By | Economy, Energy, Environment, Policy Experts, Shopfloor Policy | No Comments

As the days get shorter and the months grow colder, we are fortunate to have energy that warms our homes and gives us light to read a favorite book.

What we may forget is that domestic energy is also fueling a manufacturing renaissance. New resource production made possible by technological innovation is supporting millions of jobs, increasing household incomes, boosting trade and contributing to a new increase in U.S. competitiveness around the world. Domestic energy allows us to be productive at home and work. Relying on one-third of the energy used in the United States, manufacturing contributed $2.18 trillion to the U.S. economy in 2016. Renewable sources are growing quickly and diversifying the nation’s energy portfolio; our fleet of nuclear power plants cleanly and efficiently produce a substantial portion of the nation’s electricity; we have abundant supplies of coal, natural gas and oil; and advances in energy efficiency continue to save money.

Unfortunately, some people try to use energy as an issue to divide Americans. But that’s shortsighted.

Rather than picking one energy source over another, we should harness American creativity and competitiveness to drive efficiency from all energy sources. By making use of all of the United States’ domestic energy sources, we can ensure the best environmental outcomes at the lowest costs. Nuclear and fossil energy complement renewables like hydro, solar and wind and help ensure we have a diverse mix of energy resources. While solar and wind can produce varying amounts of energy, other energy is available on demand immediately and provides critical support to our renewable resources. For example, natural gas complements renewables and diversifies our energy portfolio. We are stronger together; together, we can forge long-term energy solutions.

That’s why manufacturers are watching the House Natural Resources Committee. The committee is busy marking up broad bipartisan legislation to strengthen energy policy on federal lands. H.R. 4239, the Strengthening the Economy with Critical Untapped Resources to Expand American Energy Act, or the SECURE American Energy Act, reforms existing regulatory frameworks for energy development on America’s Outer Continental Shelf and the vast onshore acreage that is under federal ownership.

Although energy production has surged in recent years, the vast majority of this new activity has occurred on private lands, while exploration on federal lands has shrunk. As a result, energy production continues to be artificially limited, reducing manufacturers’ potential competitive advantage. The federal government owns approximately 640 million acres onshore, or roughly 28 percent of the land, in the United States. And with 86 percent of our offshore resources unavailable for development or analysis, America could be producing much more. To remain competitive in a global economy, we need access to all kinds of energy—and that includes sharing the riches under our seas and on federal lands.

The onshore provisions of H.R. 4239 would allow for more local control over energy plans on federal land. States that demonstrate they can effectively regulate would also receive the full 50 percent of mineral revenues, helping to fund schools and public services like local police and fire. H.R. 4239 would also stop instances of duplicative federal regulations when a state already has effective requirements. The SECURE America’s Energy Act also strengthens our access to offshore energy, opening new areas to offshore wind energy and giving more states and local communities a chance to reap the benefits of exploration.

Continuing to expand fair access to energy resources allows us to be less dependent on foreign oil and ensure America’s energy independence. Manufacturers will continue supporting measures that promote expanded access to U.S. energy resources that make manufacturers more energy secure, while driving job creation and growth. Energy is an issue that can bring us together.

The NAM Shines Light on Plaintiffs’ Attorneys “Reckless Assault” on Manufacturers

By | Energy, Environment, Manufacturers’ Center for Legal Action, Shopfloor Legal, Shopfloor Main, Shopfloor Policy | No Comments

We live in an era of lawsuits based more in emotion than fact. In the manufacturing sector, we see litigation costs continuously rising and often at the expense of a better wage for the American worker. The National Association of Manufacturers (NAM) will shine a light on this concerning trend, beginning with an opinion piece just published in Investor’s Business Daily.

Linda Kelly, NAM senior vice president and general counsel and leader of the Manufacturers’ Center for Legal Action, describes in Investor’s Business Daily how trial lawyers seek to extort American workers, consumers and shareholders purely for profit. The piece lays out the widespread ramifications that new lawsuits pose to manufacturers in America, including the 12 million men and women that the NAM proudly represents across the United States.

Since 2005, manufacturers in America have reduced carbon emissions by 10 percent, all the while growing the American economy by 19 percent. Despite this clear commitment to the environment and economic prosperity for the American people, trial lawyers have initiated a disingenuous campaign, backed by well-funded activists, to discredit manufacturers and reap financial benefits at the cost of American workers and their families.

“Manufacturers are committed to climate action and are actively crafting solutions to this complex global challenge.”

One lawyer in particular, Michael Pawa, is a repeat player in this arena. In 2008, he unsuccessfully argued that American manufacturers had created a “public nuisance” in an attempt to set precedent for future lucrative endeavors. U.S. courts resoundingly rejected Pawa’s claims, but his politically motivated legal efforts continue today in cities like San Francisco and Oakland.

“Manufacturers are confident the courts will once again dismiss these efforts and see these lawsuits for what they are—legal attacks aimed at punishing an industry they don’t like. But manufacturers continue to be harassed by politically motivated legal officers operating with impunity beyond the reach of the courts.”

As Kelly points out, “every dollar spent defending against meritless attacks is a dollar not spent on innovation and game-changing revolutions that make our world healthier and communities safer,” and American manufacturers can ill afford to sustain unnecessary costs to their businesses and reputations.

All Americans should be wary of this free-for-all targeting by trial lawyers against the lifeblood of our economy, especially given the remarkable achievements that manufacturers have made toward enriching our environment and economic prosperity. The NAM is proud to support its members facing these frivolous lawsuits and will continue to work on behalf of the millions of American workers, consumers and shareholders that bear the brunt of these misguided legal attacks.

House Moving Forward to Restore Joint-Employer Standard

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In 2015, the National Labor Relations Board, in the Browning-Ferris Industries case decision, overturned 30 years of case precedent by redefining a joint employer. Previously, businesses could meet the definition of an “employer” if they had “direct and immediate” control over another’s work. Now, a business owner who has “potential” or even “reserved control” over the practices of another business and its employees could be considered a “joint employer.” This change means businesses may now be liable for the contents of a collective-bargaining agreement they did not negotiate, employee overtime issues they did not cause and other employment practices.

This new definition affects more than 770,000 employers nationwide across multiple sectors and impacts every manufacturer that contracts for performed work with an outside entity. Manufacturers that contract out for any product or service with another company could find themselves mired in unexpected issues that arise from that company’s conduct.

The decision has already had a chilling effect on manufacturers’ ability and willingness to hire outside entities they would normally hire for specific expertise and services in differing fields. This hampers productivity and leads to increased overall costs. It also injects risk into the use of innovative and flexible workforce designs that manufacturers may use to cope with uneven production levels or market uncertainties.

The House will take up H.R. 3441, the Save Local Business Act, a bipartisan bill introduced by Congressman Bradley Byrne (R-AL), which will restore the previous standard by amending the National Labor Relations Act to define that a person may be considered a joint employer in relation to an employee only if such person directly, actually and immediately exercises significant control over the essential terms and conditions of employment. Due to the importance of this legislation to manufacturers, the NAM will be key-voting this measure. We are hopeful the Senate will do its part next and take up this important measure so that manufacturers and others can focus on job creation and running businesses, rather than trying to navigate the complicated labor policy landscape.

Manufacturers Support IPAB Repeal and Urge Health Care Reform to Address Costs

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While manufacturers continue to seek broad-based relief from the onerous mandates and costs of the Affordable Care Act (ACA), Congress today will vote to repeal one provision of the ACA that ushered in an unelected and unaccountable board known as the Independent Payment Advisory Board (IPAB).  The National Association of Manufacturers (NAM) sent a key-vote letter in support of the IPAB repeal. The IPAB, specifically tasked to reduce Medicare costs, risked shifting even more costs to the private sector. For example, uncompensated care delivered by hospitals and physicians and uncollectable hospital debt are passed on to patients and employers who provide coverage. This leads to additional and unwarranted increases of manufacturers’ health care costs.

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Closing the Manufacturing Skills Gap

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By Chris Muhlenkamp, Allegion Senior Vice President of Global Operations & Integrated Supply Chain

October marks Manufacturing Month, an opportunity for manufacturers across the country to highlight modern-day manufacturing, the many diverse sectors within our industry and the opportunities and challenges we’re facing. With a widening manufacturing skills gap, it’s more important than ever that we use this month’s momentum to continue pushing for recognition of our vibrant industry in 2018 and beyond.

Consider this: Deloitte and The Manufacturing Institute recently reported that, over the next decade, nearly 3.5 million manufacturing jobs will likely need to be filled. However, in that same report, it’s predicted that nearly 2 million of those jobs will go unfilled because of the growing manufacturing skills gap. Linked to a lack of STEM (science, technology, engineering and mathematics) skills among workers and fueled by a decline of technical education programs in high schools, closing the skills gap is imperative to the success of manufacturing in the United States and millions of American workers.

As someone who has worked in the manufacturing industry for 40 years, I believe manufacturing has a bright future. Manufacturers are innovators, and we continue to see the invention of new technologies and processes that result in shorter delivery cycle times and higher-quality products for our customers. As a result, it is critical to have employees who have the desire, knowledge, expertise and capability to run, manage and maintain such investments.

Informing and inspiring the next generation of manufacturers will require a good deal of work within our communities, but it’s a worthy cause. At Allegion, we’re committed to investing in our manufacturing processes and equipment, our people and the communities in which we work to further advance the manufacturing competency.

However, to get to where we want to be, we also need government leaders at all levels to work with us, prioritizing more resources in STEM education and supporting initiatives such as trade apprenticeships and tuition reimbursement programs. Manufacturing Month only underscores the need for our nation’s leaders to continue delivering on manufacturing priorities to boost the economy and bolster our workforce. Together, we can combat the skills gap and invest in the future of the country’s workforce and the communities we serve.

Why America and American Manufacturers Need a Pro-Investment and Pro-ISDS Enforcement Strategy

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Rules relating to investment overseas and the investor-state dispute settlement (ISDS) are back in the news. This morning, I had the opportunity to join several experts to explain some basics that seem to get lost in debate that seems to suggest that the sky will fall any day now:

1. Businesses invest at home and abroad to reach customers and participate in international projects. Most investment by U.S. companies is in fact domestic, helping companies reach customers here in the United States, the largest consumer market in the world. But 95 percent of the world’s consumers and more than 80 percent of global purchasing power is outside the United States. And that is why U.S. businesses invest not just here at home but in overseas markets to reach foreign customers. Indeed, investing close to your customers (as foreign companies do here in the United States) is often the best way to make a sale, including through activities to set up dedicated distribution networks and to tailor products to local consumer tastes.

In some areas, such as energy, natural resources or foreign infrastructure development, foreign investment is the primary way American manufacturers can participate and grow opportunities because that is where the resources and activities must take place.

The actual data collected by the Commerce Department’s Bureau of Economic Analysis confirms this basic, but often overlooked, fact: Year after year, decade after decade, the vast majority of sales by U.S. foreign affiliatesmore than 90 percentare made to foreign customers not returned to the United States.

2. The United States, its workers and businesses benefit enormously from U.S. investment overseas. U.S. companies that invest overseas are outsized participants in the U.S. economy and are stronger because of their access to foreign markets that help grow economies of scale and boost U.S. activity and wages here at home. The facts are clear. U.S. companies that invest overseas are America’s:

  • Largest exporters, exporting 47 percent of all U.S.-manufactured goods sold overseas ($660 billion in 2014);
  • Biggest producers, accounting for $1.363 trillion or nearly 65 percent of all U.S. private-sector value-added manufacturing output in 2014;
  • Most important innovators, expending nearly $269 billion on research and development in the United States in 2014 (of that, 68 percent (or $183 billion) was expended by manufacturers in the United States);
  • Largest investors in capital expansion, expending $713.5 billion or 24 percent of all investment in new property, plants and capital equipment in the United States in 2014; and
  • Highest-paying employers, paying U.S. manufacturing workers on average $96,030, or about 18 percent more than average U.S. manufacturing wages in 2014.

3. Having strong legal protections, backed up by ISDS, helps America win in a highly competitive global economy. For more than 30 years, U.S. administrations and Congress have strongly supported a pro-investment and pro-ISDS policy because it helps America, its businesses and its workers win. The investment rules—taken right out of the U.S. Constitution and other baseline U.S. laws for the protection of private property against discriminatory, unfair, expropriatory government action—set the basic rules to combat against foreign government market-distorting activities. For example, prohibitions on government forced localization measures and incentives (e.g., government mandates to buy local products or transfer technology in exchange for allowing an investment) help ensure that U.S. investment overseas can continue to support the growth of U.S. exports and jobs. And when governments violate these basic rules, ISDS is critical so that companies have access to a neutral venue to seek compensation.

4. The same anti-ISDS critiques have been leveled for decades, and the sky has not yet fallen. Those opposed to ISDS have been rehashing the same tired, false and discredited critiques for years, and they continue to be rejected by policymakers, including most recently in 2015 when a bipartisan majority strongly rejected Sen. Elizabeth Warren’s (D-MA) amendment to eliminate ISDS from Trade Promotion Authority; Consider the main critiques:

  • Types of cases: The vast majority of cases are about individual permit authorizations and the treatment of individual investors, not broad public interest regulation.
  • Types of claimants: Most claimants are individuals and small and medium businesses.
  • Impact on government regulation: ISDS panels can only order compensation, not a change in government policy. And not one case has ever found a violation of the investment rules through a nondiscriminatory, broadly applied public interest regulation.
  • Number of cases: Less than 20 cases have been filed against the United States in more than 20 years, even though the United States is the largest destination for foreign investment. Loud claims that the Korea–U.S. trade agreement would lead to hundreds of cases against the United States, for example, have continued to fall flat; not one case has been brought against the United States in the five years that agreement has been in force. Contrast that experience to the tens of thousands of cases filed in U.S. Federal Claims court every year on similar property claims.
  • Alternatives: Political risk insurance is a highly limited approach, far too expensive for small business and does not even begin to combat the broader investment rules that are vital to discipline foreign government market-distorting forced localization and other measures. When official government risk insurance is used, it would be the U.S. taxpayer, not the foreign government, bearing the cost of a foreign government seizure of America’s own property.
  • ISDS arbitrators: Arbitrators are chosen collectively by both sides in a dispute, are respected experts and held to strict ethical standards. If there is a bias, it is in favor of governments that win the vast majority of cases.

And as for letters, let us take a look at some from those who are experts in this field. Take a moment to look at this letter from academics whose actual expertise is in international law, arbitration and dispute settlement that strongly support the ISDS system. Or consider this statement of the International Bar Association, the world’s leading organization of international legal practitioners, bar associations and law societies, that felt the need to correct the record on ISDS because “erroneous information is subverting debate.”

As more than a hundred business groups representing millions of small, medium and large companies across every sector of the economy recently explained, investment rules and ISDS are very much in America’s interest as we all seek to grow manufacturing, well-paying jobs and U.S. competitiveness in the global economy.