Global gap on costs narrows for US manufacturers

[November 14, 2008]  WASHINGTON (AP) -- Costs that hamper the competitiveness of U.S. manufacturers have fallen in recent years compared with those of foreign producers, but high corporate taxes and other expenses still put domestic products at a distinct disadvantage in global markets, an industry group said Thursday.

The National Association of Manufacturers reported that structural costs, which include expenses such as health care, taxes and expenditures on environmental issues, have fallen since 2003 relative to the United States' nine largest trading partners.

U.S. manufacturers now face a 17.6 percent disadvantage because of the structural costs, down from 22.4 percent in 2003, and 31.7 percent in 2006, according to the study comparing the U.S. with Canada, Japan, Germany, Korea and the United Kingdom.

The drop comes as U.S. manufacturers contain costs, while expenses rise for overseas producers.

For example, health care costs represent less of a drag as U.S. companies introduce plans with higher employee deductibles and health savings accounts. Meanwhile, manufacturers in countries such as France are spending more on supplemental coverage to government-funded health plans.

But manufacturers say the U.S. corporate tax rate of 35 percent is still too high, third behind only Japan and Chad, and the trade group is pushing President-elect Barack Obama and Congress for changes, such as a reduction in the rate to 25 percent or lower.

"Manufacturers face continued, serious disadvantages compared to other producers," said John Engler, NAM's president.

The group also plans to lobby an upcoming lame duck session of Congress for corporate relief measures due to the ongoing financial crisis. Those include a push for more spending on infrastructure projects, delaying some funding requirements of a 2006 pension reform law, and tax breaks that would allow domestic companies to bring foreign earnings back to the United States.

[Associated Press; By STEPHEN MANNING]

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