Earlier this week, I attended a meeting on Capitol Hill sponsored by the Illinois Science & Technology Coalition.  The purpose of the meeting was to meet with Hill staffers and discuss the importance of research and development funding for advanced battery technology.  Speakers from Argonne National Laboratory and the Illinois Institute of Technology outlined some of the federally-funded research being done at their institutions and the technology goals they hope to achieve.

The mood in the room, however, was somber.  It was clear that presentations aimed at increasing federal support for battery R&D were falling flat.  This was not surprising, since the staffers in the room had probably been spending most of the last several weeks looking for ways to cut the budget.  Requests for more money seemed a little off key.

Finally, towards the end of the program, one of the staffers raised his hand.  The top priority on the Hill, he said, was job creation.  How could he explain to his member how spending money on battery R&D was going to create jobs for American workers?  In the 1st Session of the 112th Congress, it was a very fair question.

Fortunately, there is a good answer.  A policy aimed at creating jobs in the U.S. manufacturing sector must be carefully targeted.  Talk about expanding manufacturing employment generally makes for good sound bites, but is little more than wishful thinking.  Many of the manufacturing jobs that have left the U.S. have left for good.  Asia will likely be the manufacturing colossus of the next decade, not the United States.

In planning to compete with Asia for manufacturing jobs, it is important to remember that not all jobs are created equal.  An effective jobs creation policy needs to focus on the manufacturing of high value products.  As important, it must focus on the types of products and industries that have, for unique reasons, an ability to give domestic manufacturers an advantage over foreign imports.  Subsidizing the creation of jobs manufacturing high labor content commodity products would be fools’ game.  The United States simply cannot compete long term for low value manufacturing jobs with low cost labor markets. 

Advanced batteries, however, particularly advanced automotive batteries, are exactly the types of products that can give domestic manufacturers an advantage.  Advanced batteries are heavy, complex and difficult to transport.  Manufacturers located physically close to end customers have a significant cost advantage over those that must ship product from overseas.  This logistics cost advantage is further magnified by the just in time inventory requirements of most modern manufacturing operations.  A foreign manufacturer of advanced batteries shipping product to the United States has to deal with multiple, serious problems that a domestic manufacturer does not.  These problems do not guaranty success for domestic manufactures.  But they can more than offset the lower labor cost advantage of foreign manufacturers and put domestic manufacturing operations squarely into the game.

The missing component for domestic manufacturers of advanced batteries is technology.  U.S. advanced battery manufacturers, for whatever their logistical advantage, must compete with foreign firms that have a nearly two decade head start in lithium-ion battery manufacturing and capital structures built on years of government subsidies.    It is no accident that, despite the theoretical cost advantage of domestic advanced battery manufacture, substantially all of the first generation mass market plug-in electric vehicles will be powered by advanced batteries made abroad.  If U.S. firms had the technology and the experience, the story would likely be different.

A few decades ago there was a popular joke about what Andrew Carnegie would say if he knew that it was possible in 1980 for Japanese steel makers to buy iron ore in Minnesota, have it shipped out through the Great Lakes, down the East Cost, through the Panama Canal to Japan, to have it processed there into steel coil, shipped backed across the Pacific, railroaded to the Midwest and then still undercut American steel producers on price.  The punch line of the joke was that Carnegie would say “What a great time to be in the steel business!”.

This is a great time for the United States to be in the advanced battery business.  Advanced batteries are an ideal product around which to build a jobs creation policy.  If the U.S. can develop advanced battery technologies that truly meet the needs of the automotive industry, the jobs will follow.  And unlike many other industries, those jobs will be in the United States and not in Asia.  This is a message we must send loud and clear to our leaders in Washington.