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Re-shoring: real, or hype?

By Don Loepp | December 17, 2012 06:00 am ET
Keywords: China

Is the United States manufacturing sector experiencing a renaissance thanks to re-shoring, as OEMs bring work back from China?

One manufacturing expert doesn't think so, and the data seems to be on his side.

Alan Tonelson of the US Business & Industry Council has responded to two recent articles from The Atlantic that touted the re-shoring trend, "The Insourcing Boom" by Charles Fishman and "Mr. China Comes to America" by James Fallows.

Before we get to Tonelson's criticism, let me say that both Atlantic stories are excellent, and should be required reading for U.S. manufacturing executives. They're not really new to Plastics News or Plastics Blog readers. We've been writing for years about re-shoring, modern supply chain problems, and how North American factories have managed to become more competitive.

But executives should be aware of how the national media is reporting on these trends, and the Atlantic stories even have some plastics-specific angles.

Now, the rain for the parade.

Tonelson has written responses to both Atlantic articles. He wrote today that "the main thrust of the articles contrasts sharply with the wide range of manufacturing-relevant data I follow.

"My rejoinder argued that, although no one has a perfect crystal ball, forecasting the future realistically requires at least summarizing the troubling picture drawn by the most comprehensive data of manufacturing's present. And it marshaled the evidence showing that not only is domestic manufacturing not gaining on its main competitors; in many respects, it is slipping further behind."

Tonelson's response to Fallows' story ("Alan Tonelson: 'The Insourcing Boom That Isn't'"), points to government data that indicate that U.S. manufacturing is losing market share and becoming less competitive. He argues that some of the major examples of U.S. re-shoring -- for example, GE Appliances' decision to move some work back from China to Louisville, Ky. -- was driven by U.S. government subsidies.

"Using taxpayer dollars to pay manufacturing companies to move or stay may make perfect sense in many cases," Tonelson wrote. "And certainly most of America's major trade competitors engage in such practices pervasively. But relying substantially on government inducements is likely a losing proposition for domestic manufacturing advocates. After all, industrial rivals like China, Germany, and Japan are financially strong. The United States remains saddled with enormous debts - many owed to these very countries, and is unlikely to win a worldwide subsidy competition."

And the data indicates that U.S. manufacturing isn't exactly in full-renaissance mode, according to Tonelson.

"As robustly as the overall U.S. manufacturing trade deficit has risen recently, the China deficit has recovered just as dramatically, and from a much shallower trough. In fact, so far this year, the manufacturing trade gap with China has increased more four times faster than America's global trade gap," he wrote.

Continuing the debate, Fishman yesterday posted a reply to Tonelson's points. Fishman argues that the Atlantic stories make a case that global manufacturing is shifting, outsourcing may have been overdone, and that the data that Tonelson cites doesn't yet take into account the changes taking place right now.

"Tonelson's data points aren't wrong. But what GE is doing with its appliance division isn't a mere anecdote. It's a strategic bet that might signal a shift in the U.S. economy; and it's a competitive re-positioning that may cause some manufacturing companies to do what GE itself has done: Ask hard questions about where it really should be making products," Fishman wrote.

Check out the links and let us know where you stand on this important debate on the state of global manufacturing.


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Re-shoring: real, or hype?

By Don Loepp

Published: December 17, 2012 6:00 am ET
Updated: January 16, 2013 9:56 am ET

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