UPDATE: Dow Chemical CEO Says US Needs New Industrial Policy

DETROIT -- Dow Chemical Co. (DOW) Chief Executive Andrew Liveris called Monday for "a new industrial policy" that he said is needed to increase investment in the U.S. manufacturing base and create jobs, couching his proposal in national security terms.

"A country can't be strong abroad if it's not strong at home," Liveris said in a speech delivered to the Detroit Economic Club. "It can't be strong in China or Chile if it's not strong in places like Cleveland and Canton. It can't be strong in Dubai if it's not strong first in Detroit."

He made the comments during an event to kick off plans for a national convention next year regarding a number of issues that affect U.S. economic competitiveness.

The convention, called the National Summit, will be held June 15 through June 17, 2009, in Detroit. Liveris and Ford Motor Co. (F) Chairman Bill Ford Jr. are serving as co-chairs of the summit.

Overall, Liveris said Monday that the U.S. is facing a crisis in its industrial sector that is undermining the nation's strength. To the extent the U.S. has an industrial policy now, it's mostly an "anti-industrial policy," he said, with "contradictory, ill-planned and ultimately self-defeating laws and regulations that are creating havoc at the manufacturing base."

Ford, who also spoke during Monday's event, concurred.

"I don't think it is surprising that we are profitable all around the world except here in our own market," Ford said. "We have a structural disadvantage."

Both Dow Chemical and Ford Motor are among the companies that have been hit hard by surging oil prices. High oil prices have substantially increased fuel and feedstock expenses for Dow and other chemical companies, and they have also driven consumers away from the large, gasoline-hungry vehicles that had been the lifeblood of the Detroit auto makers.

Regardless, Liveris pointed to a variety of economic statistics as evidence that the U.S. industrial sector is suffering overall. He noted that manufacturing currently makes up less than 12% of the U.S. economy, compared with nearly 22% of the U.S. economy three decades ago.

Liveris broadly outlined elements of the kind of policy he contends is needed to address such issues.

Among them, he called for lower corporate tax rates, a new regulatory framework and judicial reforms. He also said the country needs a comprehensive energy strategy and a solution to the crisis in health-care costs.

"We're burying our manufacturers under red-tape" when it comes to regulation, he said, saying, among other things, that the U.S. needs to resolve "the conflicts in law and regulation that hamper our abilities to do business efficiently and effectively."

As for energy, Liveris said the U.S. is "in the midst of the greatest wealth transfer out of this country in history," adding that "$500 billion plus (is) spent annually for foreign oil - and too few in Washington seem alarmed."

Dow Chemical is on track to spend about $32 billion on energy and related feedstocks this year, he said, "more than the entire U.S. chemical industry spent just a few years ago."

In July, Dow Chemical posted a 27% drop in second-quarter net income as two steep price increases announced during the quarter failed to offset sharply higher costs for fuel and raw materials.

Dow's decision to raise prices grabbed headlines over the summer, when the company instigated the across-the-board price increases. The increases were considered unprecedented at the time and sparked nationwide inflation worries because Dow products are used in a wide range of everyday goods.

-By Jeff Bennett, Dow Jones Newswires; 248-204-5542

-By Bob Sechler, Dow Jones Newswires; 512-394-0285