“The growth model China has relied on for the last 30 years – one predicated on low-cost exports to the rest of the world and investment in resource-intensive heavy manufacturing – is unlikely to serve it well in the next 30 years.”
– Gary Locke
“In this 21st century world, some of our country’s most significant exports extend beyond goods and services. They also include innovation, knowledge, discovery, and healing.”
– Kathleen Sebelius
John here. This Friday, writing day finds me in Grand Lake Stream, Maine; but fortunately for me, this week’s letter has been written by my associate Patrick Watson, giving me a week off. Patrick takes up where I left off last week, when we discussed the uneven distribution of the benefits of globalization. That globalization has in fact been positive for humanity and for our country is incontestable – you would have to ignore mountains of data to dispute that fact – but there is no doubt that the benefits have not accrued equally to everyone, leaving large swathes of the US population (and many in the rest of the world) feeling like they weren’t invited to the party, but have been forced instead to watch through the windows at all the other participants enjoying themselves.
This week Patrick discusses another aspect of globalization, one that has a direct bearing on questions of equity. He explores the technologies that allowed globalization to take hold and the new technologies that are actually allowing production to “re-shore.” I mentioned that topic in passing last week, and it turned out that one of my readers heads an organization that is focused on assisting companies in re-shoring their production back to the US. He tells me that 250,000 jobs have already returned to the US. Patrick tells us an interesting story about how this trend will continue to unfold.
The impact of offshoring on the U.S. economy and the environment has been significant. The growing U.S. trade deficit with China alone cost 3.2 million jobs between 2001 and 2013. Job losses occurred in every state, primarily in manufacturing. Offshored jobs have diminished American employment opportunities, helped contribute to wage erosion, had a dramatic and negative effect on the domestic economy, and negatively impacted the environment through higher carbon emissions and other pollution from some developing countries and from long distance transport.
However, the bleeding of manufacturing jobs to offshore has stopped. Reshoring, including FDI, balanced offshoring in 2015 as it did in 2014. In comparison, in 2000-2007 the United States lost net about 200,000 manufacturing jobs per year to offshoring. That is huge progress to celebrate!
Read the report: http://www.reshorenow.org/content/pdf/2015_Data_Summary.pdf
With 3 to 4 million manufacturing jobs still offshore, we see huge potential for even more growth.
The impact of closing the trade deficit would be:
a. 3-4 million manufacturing jobs at current U.S. levels of productivity
b. 6-8 million total jobs
c. Improved income equality
d. Cut U.S. budget deficit by about 50%
e. Provide more funding for other programs
f. 25% - 30% increase in manufacturing
g. Reduced economic volatility
The winning strategy is balancing the trade deficit with a strong investment in automation and skills training and increased corporate use of Total Cost for sourcing and plant siting decisions. A competitive USD and corporate tax rates would accelerate the process.
The Reshoring Initiative Can Help
The not-for-profit Reshoring Initiative’s free TCO Estimator can help corporations calculate the real P&L impact of reshoring or offshoring.http://www.reshorenow.org/tco-estimator/
Do you want to help accelerate jobs coming back to the U.S? If so, please email us at [email protected] to find how we can help each other.