This explains why clothing- and furniture-making, for example, are unlikely to return to the U.S. in a big way. But in capital-goods manufacturing, labor costs matter less than technology and the existence of a local ecosystem of suppliers, consultants and skilled workers that can take a while to put together. In their rush to offshore, then, U.S. manufacturers may have permanently destroyed their ability to make certain products here. As Gary P. Pisano and Willy C. Shih wrote in a 2009 Harvard Business Review article:

In making their decisions to outsource, executives were heeding the advice du jour of business gurus and Wall Street: Focus on your core competencies, off-load your low-value-added activities, and redeploy the savings to innovation, the true source of your competitive advantage. But in reality, the outsourcing has not stopped with low-value tasks like simple assembly or circuit-board stuffing. Sophisticated engineering and manufacturing capabilities that underpin innovation in a wide range of products have been rapidly leaving too. As a result, the U.S. has lost or is in the process of losing the knowledge, skilled people, and supplier infrastructure needed to manufacture many of the cutting-edge products it invented.

This loss of capability could be what we're seeing evidence of in the trade data. If so, a true U.S. manufacturing renaissance may be a long time coming.

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