Status of Manufacturing in NAFTA Region November 2010 * American Iron and Steel Institute (AISI) Steel Manufacturers Association (SMA) Specialty Steel Industry of North America (SSINA) Canadian Steel Producers Association (CSPA) Mexican Steel Producers Association (CANACERO)

USA’s Manufacturing Sector

U. S. Manufacturing Growing Slowly Again, But Manufacturing Trade Deficit Increasing Significantly in 2010 August 2010 Year-to-Date U.S. Trade Deficit in Goods was $ 425 billion Source: US Dept of Census

U. S. Manufacturing Workforce Suffered Major Losses in Great Recession 26% of job losses in 2008 and 2009 were manufacturing jobs 2010 has seen addition of only small number of jobs U.S. manufacturing lost jobs in August-October period Source: US Bureau of Labor Statistics

Government Initiatives Directed at Manufacturing Sector Congressional Actions that Became Law: The American Reinvestment and Recovery Act (ARRA) Cash for Clunkers (H.R. 2751) Miscellaneous Tariff Bills (H.R. 4380) Small Business Jobs Act (H.R. 5297) – included 50 percent depreciation bonus for 2010 Pending Congressional Legislation Multi-Year Transportation and Infrastructure Reauthorization Tax Extenders (including extension of R&D tax credit) Extension of 2001, 2003 Bush Tax Cuts Domestic Manufacturing & Energy Tax Credit Legislation The Manufacturing Strategy Act of 2010

Government Initiatives Directed at Manufacturing Sector Administration Programs: Department of Commerce Hollings Manufacturing Extension Partnership (MEP) Commerce Connect U.S. export assistance centers Sustainable Manufacturing Initiative Department of Energy Industrial Technologies Program (R&D funding) American Competitiveness Initiative Sustainable Development Partnerships (SDP)

Manufacturing Industry’s Advocacy Establish and enforce trade policies that level international playing field for all manufacturers Develop national energy policy that creates low carbon, affordable, abundant energy sources Pass multi-year transportation and infrastructure bill and invest in upgrading America’s infrastructure needs through long-term strategy Expand the size of collaborative (government and industry) R&D programs that develop “breakthrough” manufacturing processes and invest in R&D programs that promote domestic production of commodities and materials using clean energy technologies Eliminate anti-competitive tax policies that inhibit new investment and eliminate domestic regulations that impose excessive, unnecessary-cost burdens on U.S. manufacturers Promote greater investment in manufacturing plant and equipment through investment tax credits, accelerated depreciation and more predictable government policies

Canada’s Manufacturing Sector

Current Manufacturing Performance Weak Source: Statistics Canada M AL RT FI WT

Manufacturing Growth will Slow, Unemployment Near National Average (8%)

Government Initiatives Directed at Manufacturing Sector Federal Government Policy, Program, & Tax Measures Infrastructure Stimulus Fund - $4 billion (2009/ /11) Significant tax relief for Canadian businesses - $60 billion over to Lowering of the federal general corporate income tax rate from 22.12% (including the corporate surtax) in 2007 to 15% in 2012 Accelerated Capital Cost Allowance (2-years; expires in 2011) Recently expand for clean energy generation Elimination of remaining tariffs on manufacturing inputs and machinery: creating a ‘Tariff- free Zone’ Review of Research and Development assistance to business Harmonization of federal and provincial sales taxes Limited increase in Employment Insurance premiums

Manufacturing Industry’s Advocacy Extend 2-year Accelerated Capital Cost Allowance to 2016 and consider making permanent Make Scientific Research and Experimental (SR&ED) tax credit refundable and improve administration of program Introduce refundable tax credit for investments required for regulatory compliance Introduce refundable tax credit for workplace training to offset rising payroll taxes Follow through on planned reductions in federal corporate income tax rates and bring average combined federal and provincial rates to 25% by 2010

Mexico’s Manufacturing Sector

14 GDP Recovery: Explained by Manufactured Goods’ Exports Mexico: Gross Domestic Product, Quarterly, 2008 – 2010 (II) (Annual rate of growth - %) Source: INEGI Mexico: Manufactured Exports, 2005 – 2010 (August) (Annual rate of growth - %)

15 But Manufacturing Reaching Inflection Point and Investment and Employment Not Returning to 2008 Levels Source: INEGI Manufacturing Sector, 2006 – 2010 (August) Index 2003 = 100 Mexico: Investment, 2006 – 2010 (July) (Index: 2003 = 100) Employment in Manufacturing Sector, 2006 – 2010 (July) Index 2003 = 100

Main Government Initiatives Directed at Manufacturing Sector Customs and trade facilitation: To reduce time and cost of moving goods across NAFTA borders: Investment in infrastructure and technology Improvement of regulations and requirements Standards harmonization Intellectual property rights protection Infrastructure and services: New legislation to facilitate public and private sector collaboration for investment in infrastructure

Manufacturing Industry’s Advocacy Energy: Need to lower costs for electricity China Imports: Policies to address low-priced, unfairly traded steel-related imports from Asia competing with domestic manufacturing production Custom fraud and circumvention Custom facilitation Effective use and application of trade law Transport: Need to lower costs for freight and railroad transportation Climate Change: Monitoring international negotiations and working in steel program with government