Stepping up

After years of handwringing, lawmakers finally may be taking action to support the manufacturing sector

Daniel J. Munoz//February 14, 2022//

Stepping up

After years of handwringing, lawmakers finally may be taking action to support the manufacturing sector

Daniel J. Munoz//February 14, 2022//

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New Jersey Manufacturing Extension Program CEO John Kennedy said “normal failed” during the pandemic so a better system is needed. – Aaron Houston

Congress is considering a measure designed to tackle some of the biggest challenges facing manufacturers in New Jersey and throughout the country. The bill comes as lawmakers and manufacturing leaders and executives here examine ways to build capacity.

Supply chains broke down in 2020 and early 2021 as the pandemic swept across the globe, forcing factory closures or reduced operations in some locales. Following the shutdowns, the manufacturing, shipping and trucking industries were hit by labor shortages; at the same time skyrocketing demand for goods fueled backlogs that kept products from reaching store shelves.

“A lot of people are talking about ‘let’s go back to normal.’ I don’t want to. Normal failed,” said John Kennedy, CEO of the New Jersey Manufacturing Extension Program, at an event in December.

The America COMPETES Act calls for tens of billions of dollars to be spent on U.S. manufacturing – especially semiconductors – and scientific research. In addition, the bill would make major changes to trade policies dealing with China. It was approved by the U.S. House of Representatives on Feb. 4 in a 220-210 vote along party lines. Although President Joe Biden has voiced his support for the measure, it faces a tougher fight in the U.S. Senate where Democrats and Republicans each hold half the seats.

House Republican leader Kevin McCarthy, in a statement, criticized the bill as “toothless” and said it “includes no measures to make China pay for the chaos they created.”

Under the proposal, the U.S. would spend $52 billion to bolster the production of microchips; $45 billion to strengthen supply chains and prevent future disruptions; and $160 billion on science, technology and research.

The bill is essentially a response to the U.S. Innovation and Competition Act, passed by the Senate last June, which sets aside $50 billion for chip manufacturing and $250 billion for scientific research.

“Not only would its provisions help address inflation and alleviate supply chain challenges we’re facing today, but the bill provides significant investment in U.S. semiconductor manufacturing, which would also help us avert future crises,” Jay Timmons, president and chief executive officer of the National Association of Manufacturers, said in a statement. “This legislation would strengthen U.S. leadership in global climate innovation, improve environmental research and fill critical gaps in data—all while holding China accountable as the world’s biggest emitter.”

U.S. Sen. Bob Menendez noted that the pandemic exposed the vulnerability of the nation’s supply chain.

The details

One important component is the creation of a nationwide supply chain database that would be run by the National Manufacturing Extension Partnership and done in tandem with all 50 states. The provision was added on as an amendment and was part of a measure sponsored by Democratic U.S. Sen. Bob Menendez, who warned in a recent statement that the COVID-19 pandemic “exposed deep vulnerabilities in our national supply chain databases that continue to impact our long-term economic recovery.”

Such a database would provide manufacturers and public officials anywhere in the country with real-time information on the raw materials or finished goods they need to manufacture any kind of product, to save time and money while reducing reliance on overseas goods.

Manufacturing leaders told NJBIZ that of all the proposals in the bill, the creation of the supply chain database would be the most helpful for the industry. “It is reasonably simple to understand that in order to properly employ your supply chain; you need to know what assets/capabilities are in it before we can effectively fill in any gaps,” Kennedy said.

“It is easy to find products. It is next to impossible to find capabilities,” said Unionwear President Mitch Cahn. – Aaron Houston

Mitch Cahn, founder and president of the Newark-based manufacturer Unionwear, said the proposal would move “contract and parts manufacturers out of the shadows.”

Unionwear, which makes hats, bags, binders and other promotional materials, shifted in 2020 to making personal protective equipment such as plastic face shields, gowns, and non-surgical facemasks.

“It is easy to find products. It is next to impossible to find capabilities. When there is a national emergency and the federal government needs supplies immediately, there is currently no way to locate who has the capability and capacity to fill gaps in critical infrastructure,” Cahn explained.

Kennedy said that while New Jersey has its own database of roughly 9,000 manufacturers and businesses, the databases run by other states “didn’t talk to each other” during the pandemic.”

“Here we are trying to put the pieces together here to try to figure out who makes parts for certain types of PPE and ventilators, and it was taking us weeks,” he said in December.

But the bill falls short of assigning responsibility for the maintenance of such a sprawling database once it is established, said Kevin Lyons, an associate professor of supply chain management at the Rutgers Business School. If it works, Lyons said, the database can “provide alternatives in real-time” in the event that “a manufacturer cannot meet the timeline for delivery or cost.”

The $52 billion in chip funding would be spread over five years to boost the research, design and production of semiconductors in the U.S., according to a bill summary. With most chips coming out of China, proponents say the current shortages have exposed a vulnerability in this country.

Grants and loans totaling $45 billion over the next six years would be available to support the manufacturing of goods deemed of national and economic importance, such as products used for public health; energy and transportation; and agriculture and food.

The $160 billion in research funding would go to the Department of Energy Office of Science, and the National Science Foundation. And $3 billion would be spent to bolster the nation’s solar energy manufacturing supply chain.

The existing Trade Adjustment Assistance program, which provides wage subsidies for manufacturing workers who lose their jobs or whose wages are cut because of an increase in imports, would be expanded. U.S. Rep. Bill Pascrell, D-9th District, said this provision was in part inspired by the closure of the Mondelez cookie factory in Fair Lawn, which brought the loss of 600 jobs.

“The continued relocation of good jobs to Mexico and overseas by many in big business has rendered incalculable damage to the American worker,” Pascrell said in a statement.

At the state level

Manufacturing proponents contend that most of the proposals developed in New Jersey to bolster the industry deal with state subsidies and added training and apprenticeship programs. “One of the areas is supporting our manufacturers by creating and expanding state programs and aid,” said state Sen. Linda Greenstein, D-14th District, who chairs the Legislative Manufacturing Caucus.

A $30 million tax incentive program included in New Jersey’s $14.5 billion Economic Recovery Act subsidizes PPE production. The Made in New Jersey Tax Credit Act, A881, would provide corporate tax breaks to companies that buy New Jersey-made products. Senate Bill 594 would provide tax breaks covering 20% of the costs for New Jersey manufacturers to buy new equipment, and 20% of the costs for the renovation, modernization or expansion of existing facilities in New Jersey. And the Manufacturing in Higher Education Act, A2014, would require various state entities to promote career pathways in the manufacturing sector and provide assistance for students.

State agencies dealing with higher education, vocational schools, four-year universities and county colleges would be required to design a “manufacturing career pathway.” The bill would create a $10 million grant program for public higher education institutions to create or expand manufacturing programs and curriculum.

The state would designate a particular college as a business resource center for manufacturers needing to modernize their operations. And it would create an 11-member New Jersey Advanced Manufacturing Council, which would also support the expansion of the state’s manufacturing workforce.

“We see that as a great opportunity to connect vo-tech, high schools and four-year universities, as well as the county and community colleges,” said Catherine Frugé Starghill, a former state labor official and the current senior director of strategy and workforce partnerships at the New Jersey Community College Consortium for Workforce and Economic Development.