Crain's: Why did so much manufacturing leave America in the first place?
Moser: Much of it began in the mid-1980s when the value of the dollar surged 20 percent and 30 percent against most foreign currencies. I was at a maker of machine tools in Cleveland then, and suddenly we found that the Japanese and Germans could sell the same products we were making for 20 percent less. One American company after another went out of business, and some of those that survived had to find a way to make products offshore.
We also lack the skilled workforce for manufacturing that you find in, say, Germany, which produces sharper high school kids who either study to become engineers or are hired into apprenticeship programs where they get lots of training to work in production. Many American companies gave up on apprentice training years ago in their quest to cut costs and boost their quarterly profits.
Q: Are you trying to persuade companies to bring jobs back here as a patriotic gesture, or does it make good business sense?
Moser: We bring data and math to the arguments we make. Too many companies have made the decision to take production offshore based on simple manufacturing cost. We show them they are missing a lot.
Our statistics show that if you are looking only at the export prices from China versus price in the U.S., then the U.S. wins just 8 percent of the time. What you can buy for $7 in China costs $10 in America, on average. But what is often missing here is the cost of freight and duty and the carrying costs of inventory — the products from China can take three months for delivery while products made here might take a week — and then add other things like travel back and forth to Asia by your designers and engineers, and intellectual property risk and even out-of-stock risk.
Add all of that into the equation, then the U.S. wins one-third of the time. But the ratio in favor of the U.S. rises to 55 percent if the 25 percent Section 301 Trump tariffs are applied. We show companies that U.S. manufacturing is often the better deal on a net basis.
Q:With all of the freight and sourcing chaos during the COVID pandemic, was the argument for reshoring made even stronger?
Moser: Surveys in 2012 showed that just 8 percent of American companies were planning to reshore. The same surveys 10 years later showed that 91 percent of companies were either reshoring or planning for it. Since then, we've had Russia break out into war and the Chinese threatening to invade Taiwan. COVID showed us foreign supply is risky, and now U.S. companies are recalculating their priorities.
Q: You don't campaign just in favor of reshoring. You also suggest more nearshoring, which essentially brings manufacturing from offshore to Canada and Mexico.
Moser: Our first priority is the U.S., but if a product is so labor intensive that you can't bring it to the U.S., then companies are sometimes surprised to find that wages in Mexico are far lower than in China. The average Mexican manufacturing worker earns $4 an hour, while the rate in China — where wages have been gaining 10 to 15 percent a year — is currently around $7, and in the U.S., it's roughly $23. Products coming from Mexico end up with an average 40 percent U.S. content, while in China they have 5 percent U.S. content. Mexico can benefit our economy.
Q: You've put together statistics that show that reshoring has gained momentum in the past decade. The transportation equipment industry, for instance, saw nearly 1,300 companies return 368,000 jobs here between 2010 and 2021. Some 900 machinery companies returned 153,000 jobs in that time and 826 companies returned 51,000 apparel-making jobs.
Moser: Apparel was the first to go away and it will be the toughest to bring back. Our costs are high and we don't have enough skilled workers. But surveys have shown that the majority of American consumers will pay 20 percent or 30 percent more for apparel made in the U.S. If you do the math, you'll find that an extra 20 percent price at retail will be enough for American retailers to make as much profit on American goods as imported. The problem is that, in too many stores, it's tough to find the Made in America goods. We're asking mass merchants to identify home-grown goods on displays.
Q: Bringing back manufacturing and jobs to America is a noble mission, but the obvious question is that with U.S. unemployment at 3.5 percent, where will the workers come from?
Moser: The American economy has been hypercharged since we gave away trillions during the pandemic to consumers. In time, unemployment will revert to a more typical 4.5 percent to 5 percent. At that point, it will be easier to find workers.
We also need more investment in productivity. Too many manufacturers continue to depend on outdated 30-year-old machines run by 60-year-old workers. We need more young people willing to go into manufacturing. Recently, it's been found that university enrollment here is down by 15 percent, and enrollment in apprenticeships is up by 50 percent vs. 10 years ago. We need to see that favorable trend continue while we find a way to lower the value of the dollar on international currency markets, which will level the playing field for all.
This story appeared in the ChicagoGlobal newsletter, a joint project of Crain's Chicago Business and the Chicago Council on Global Affairs.