Reshoring is on the Rise: What It Means for the Trade Debate

11 May 2018 12:00 PM | Anonymous

The 2017 data is in, and job announcements are up substantially for U.S. manufacturing.

By Harry Moser and Millar Kelley; used with permission by Harry Moser, Founder of the Reshoring Initiative.

Reshoring and foreign job announcements (FDI) surged in 2017 to over 170,000 U.S. manufacturing jobs. This is strong evidence that work can and will be successfully brought back—and is especially relevant in a time of intense debate over tariffs and the trade deficit.

All told, job announcements were up 52% from 2016, and a whopping 2,800% from 2010. Announcements lead to hiring typically within 6 to 24 months.

There is substantial potential for many more jobs to come back, if the right policies are implemented going forward.

Implications for the Economy and Manufacturing

President Donald Trump has announced tariffs on solar panels, appliances, steel, aluminum and a broad range of Chinese products. His aim is to eliminate the $700 billion/year non-petroleum goods trade deficit, thus increasing U.S. manufacturing by about 40%--about five million jobs.

Many observers question these actions based on likely retaliation and higher U.S. consumer prices. Others question the feasibility and wisdom of trying to increase manufacturing’s share of the economy by bringing back to the U.S. the industry that we have lost over the last 40 years.

We observe from our 2017 data on reshoring, combined with other Reshoring Initiative reports, that:

  • It is now clear that U.S. manufacturing, including foreign-owned plants, can be started up or grown to support a substantial flow of work back to the U.S.
  • U.S. and foreign companies increasingly recognize that it is in their interest to supply more of the U.S. market by local production and sourcing.
  • Based on timing of announcements, much of the surge was due to the anticipation of lower taxes and regulations and higher tariffs. To bring back more than about 10% of the five million offshored jobs will require more U.S. competitiveness, more leveling of the playing field—including some combination of lower USD, stronger skilled workforce training, still lower corporate tax rates, and a VAT (Value Added Tax).
  • Bringing so many jobs from offshore disproves the weak claim that only 4 to 13% of the decline in manufacturing jobs has been due to offshoring, with the rest to automation. If so few had been lost to offshoring, so many could not be recovered in one year.

In addition to federal policy, states and cities need to play a role:

  • Some states are more attractive and effective as destinations. The Southeast and Texas have dominated. The Midwest is now moving up in the rankings. Government incentives are the most frequently mentioned motivating factor
    Education and skills training need to be improved in almost all regions. Skilled workforce is the third ranked driver of reshoring and FDI.
  • Infrastructure is highly ranked.

Companies can profit from the data below—here are some things to keep in mind:

  • Skills training is a corporate responsibility. Some companies have taken that responsibility; others have ignored it. Without a larger and better trained workforce, the flow will decline rapidly. Skilled workforce is the third highest ranked motivator of reshoring.
  • Industry 4.0. Automation, productivity, innovation and lean collectively are the highest ranked enablers of reshoring. Have you optimized?
  • See which industries or companies are reshoring. Join them or sell to them.
  • Reevaluate offshoring. Recognize and quantify the frequently mentioned costs and risks. For example: quality, delivery, inventory and IP risk are often ignored when offshoring.
  • Made in USA branding is the fourth-highest rated factor. Would increased volume and a moderately higher price cover the cost differences on some products?

Read the entire article at Reshoring-Rise-What-it-Means-for-the-Trade-Debate?

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