Intelligence Community Launches Assessment of US Manufacturing and Loss of Domestic Capability

Forbes, on the heels of the February 3, 2011 edition of Manufacturing & Technology News, recently reported that, “The Director for National Intelligence is undertaking a National Intelligence Estimate (NIE) on the state of American manufacturing. Growing concern over loss of domestic capability and dependence on foreign nations for key high-tech materials, components and systems has led the DNI office to start such an effort. An NIE according to Wikipedia, is an estimate of a National Intelligence Estimate “course of a future event. These documents are classified and given to policy makers for decision-making. NIEs, according to the Council on Foreign Relations are the “most authoritative and coordinated written assessment of a specific national-security issue,” as reported by Manufacturing & Technology News.

This development has great significance to our manufacturing readership for a number of reasons.

The first reason involves understanding why the Director of National Intelligence (who initiated the NIE) has undertaken this assessment. We can only speculate, but our best analysis suggests the concerns over the reliance on foreign sources of key raw materials and inputs such as rare earth metals combined with a growing trade deficit not merely explained away via higher priced oil and steady increases in industrial productivity have given policy-makers pause in an effort to better understand the nation’s supply risk.

In a recent Forbes blog post covering this story, Loren Thompson suggests that the concern not only relates to metals markets (he gives a lengthy example of armor steel only available via one producer here in the US) but also to key products such as antibiotics with the recent closure of the last Bristol-Myers Squibb antibiotics producing plant in NJ, as well as large tires used for the military. Finally, Thompson points to Evergreen, the solar panel maker in Massachusetts, that received US federal assistance but still moved its operations to China. Thompson said the reason for the move involved “low-interest loans from state-controlled banks.

Thompson goes on to suggest multiple additional reasons why the US Intelligence Community may have identified US manufacturing for this NIE. We have covered many of these on MetalMiner from comparatively “high US corporate tax rates to regulations that add cost layers to US businesses. But he suggests the real reason behind the need to look at US manufacturing more strategically has to do with China’s mercantilist policies.

Whether the results of this NIE make the mainstream news pages remains to be seen. Certainly US manufacturing strategies will need attention, as will the US trade deficit.

–Lisa Reisman

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