Commerce Secretary Locke on Manufacturing

Nearly two years after the peak of the financial crisis, rich nations are struggling to find a way to lower unemployment and find a new source of economic growth. With financial services discredited, and the green technology revolution still mainly a hope for the future, countries including the U.S., the U.K., France, and Germany are taking a second look at old-fashioned manufacturing as an engine of job creation. NEWSWEEK's Rana Foroohar spoke to U.S. Commerce Secretary Gary Locke about why factories are hot again, and about America's relationship to the world's No. 1 manufacturer (China). Excerpts:

A recent U.S. Council on Competitiveness survey recently ranked the U.S. quite high—fourth, behind China, India, and South Korea—on its list of the most competitive manufacturing nations. One reason was that talent edged out cost of labor as the key factor in determining competitiveness. How do you explain the result?
More educated workers are more productive workers. That means we have to address the full higher-education spectrum, and recognize that a lot of the needs of our industries can be met through our community- or junior-college system, and not just necessarily a B.A. or B.S. degree in engineering.

What about immigration policy? Are you in favor of blanket rules that would allow every foreign Ph.D. student in America to be given an automatic green card?
We have to look at the details. But obviously, we should not be stifling or cutting off the supply of future innovators and leaders and owners of companies that will then create so many good-paying jobs for other Americans. So many companies that we view as American icons were started by immigrants.

What is your view on the labor protests and the labor unrest in China at the moment? And what are the implications for the U.S.?
What I've heard from the U.S. companies is that the labor advantages of China are shrinking. And that in many cases, given the cost of transportation, the volatile prices of fuel, and the demands of modern industry for just-in-time deliveries, that many companies are moving manufacturing back to the United States, and seeing the U.S. as a better location for manufacturing.

Intellectual property is a key advantage for U.S manufacturers. How can we ensure that we keep that edge?
Well, first of all, we need to speed up our processing of patent applications within the Patent & Trademark Office. Right now, it takes almost three years before a company will get a yes or no on their application. Our goal is 12 months.

A lot of people feel that foreign business is increasingly at a disadvantage in China. Do you agree?
Well, the tensions have always come and gone, and the fact of the matter is that we have a very strong economic relationship with China. But with any complex trade relationship, you're going to have disputes. And they're getting to be very detailed, which shows just how sophisticated and how mature that trade relationship is.

Are you concerned about the possibility of a trade war, as many Chinese are?
What the Chinese are talking about are the number of cases that are filed against Chinese firms for dumping or for receiving improper government subsidies. While the number of cases in 2010 has gone up significantly, when you look at the industries that are subject to penalties, it still represents less than 5 percent of all exports from China to the United States. Hardly evidence of a trade war. That said, we are concerned that the Chinese favor their own companies in a variety of sectors.