Is reshoring – the return of manufacturing jobs from China and other low-cost Asian countries back to the United States – more hype than reality?
That's what consulting firm A.T. Kearney concludes in its 2015 U.S. Reshoring Index, its attempt to quantify trends in trade flows by looking at U.S. manufacturing data and comparing that with manufactured imports from 14 trading partners in Asia.
"The U.S. reshoring phenomenon, once viewed by many as the leading edge of a decisive shift in global manufacturing, may actually have been just a one-off aberration,” said Patrick Van den Bossche, a partner at the firm and co-author of the study.
“The 2015 data confirms that offshoring seems only to be gathering steam, while the U.S. reshoring train that so many predicted has yet to leave the station," he said.
The company said that reshoring slowed in 2015, for a variety of reasons, to 60 cases in its database, down from more than 200 in 2013 and 2014.
It said its reshoring index showed that reshoring did not keep pace with offshoring in 2015, with the index showing its largest year-on-year drop in a decade and it estimated that imports of manufactured goods grew 6.5 percent in 2015.
I admit I'm sometimes puzzled by the many claims and counterclaims and anecdotes on reshoring.
Reshoring advocates criticize Kearney's study as off base, saying that counting imports doesn't look at the whole picture, that it discounts executive decision-making and that reshoring is real if you look at long-term trends.
The Reshoring Initiative, for example, said that 140,000 manufacturing jobs were lost to offshoring in 2003.
But by 2014, the group said the pendulum had swung to a more balanced place, with 30,000 to 50,000 jobs offshored and 60,000 manufacturing jobs created in the U.S. by both reshoring and foreign direct investment.
Rosemary Coates, executive director of the Reshoring Institute, said in a recent essay that she's very optimistic that reshoring is real and will continue.
But she also suggested that jobs created by reshoring and jobs lost to offshoring are roughly equal at this point: “U.S. jobs loss to offshoring is now about equivalent to jobs created or reshored to America.”
Maybe the better headline about reshoring is that the push and the pull of reshoring and offshoring has come into balance.
Not a great renaissance of reshoring at this moment, but a better picture than it was a decade ago, when offshoring seemed to dominate.
The Kearney study offers a number of reasons it says reshoring will slow, including a stronger U.S. dollar, declining oil prices, a tightening U.S. labor market in manufacturing and the Trans-Pacific Trade Partnership, if it's passed by Congress.
And it notes that even manufacturing costs rising in China don't necessary result in a return to the United States.
Instead, it says some of that work shifts to Vietnam (which it said absorbed the “lion's share” of Chinese manufacturing outflows), went to other Asian economies or “near shored” to Mexico.
The report notes that even if reshoring is not happening as much as some analysts say, foreign investment continues into U.S. manufacturing for other reasons, including the size of the U.S. market, the relative political and economic stability and the skilled U.S. manufacturing workforce.
