‘Reshoring’: Will U.S. Manufacturing Make a Comeback?

Call it “reshoring,” or “insourcing” if you prefer. By any name, a significant movement of manufacturing back to U.S. shores is exactly what our economy needs. Factory movement overseas has opened a hole in the American job market that nothing else can truly fill, a point stressed in blue-collar populist appeals from both political parties.

The rehsoring movement is, by definition, a fusion of politics and economics. No amount of political hectoring will persuade industrial giants to move operations back to American soil if doing so makes no sense from a financial standpoint. Given the expense involved in relocating factories, some of the gloomier analysts believe decades of movement overseas might be irreversible. Every business cost is ultimately passed along to consumers, whose willingness to pay significantly more for goods with a “Made in America” label has always been greater in theory than in practice.

However, government policies were a big part of the reason offshoring happened, and wise policy can set the economic conditions that make bringing capital back home attractive. Naturally, after agreeing that America wants manufacturing to come home, candidates from different parties have dramatically different ideas about what those policies would look like.

The one thing we should be able to agree on is that Obamanomics isn’t getting the job done. Like much of the Obama economy, reshoring has involved a lot of hype and smiley-face editorials about how the recession is finally over, even as the promised booming recovery fails to materialize, year after year. The year 2014 ended with a round of stories about how the much-heralded return of manufacturing jobs wasn’t the triumphant parade everyone hoped for.

“Reshoring Trend Has Little Impact On U.S. Economy, Study Finds,” according to NPR,  “While a growing number of companies are returning to the United States to do their manufacturing, the trend is smaller and less significant to the economy than it appears.”

It was the very definition of a pro-Obama media hype bubble bursting. The A.T. Kearney management consulting firm noticed a wave of jubilant media stories popping up in 2014 about manufacturers supposedly stampeding back to the United States, so they decided to compile hard data on reshoring, and found its effects had been greatly exaggerated. It’s happening, but the number of companies bringing operations home is actually quite modest.

In the same week of December, prompted by the same study, the Wall Street Journal posted a story about how reshoring was actually lagging behind offshoring. In other words, the manufacturing jobs coming home were still exceeded by jobs heading overseas. A.T. Kearney partner Patrick Van den Bossche explained reshoring “is not what it’s cracked up to be,” because “there’s basically still more stuff being pushed out than is brought back.”

Van den Bossche added a hopeful note that “we’re definitely on an upward trend in terms of U.S. competitiveness,” but the WSJ stomped on even that ray of speculative sunshine by noting that no such trend yet appears in the data.

Reshoring hype was largely driven by a few high-profile anecdotal examples, such as General Electric moving appliance-manufacturing operations back to the United States in 2012, prompting the Atlantic to announce the dawn of an “insourcing boom” that never actually happened.

Certain industries have been especially enthusiastic about bringing their factories home, leading to big predictions about a broad-based reshoring “movement” that has yet to begin. One notable example is the apparel industry, whose return to domestic manufacturing operations is described in an interesting Forbes article from February.

Brooks Brothers, which has increased hiring at new and upgraded factories in the U.S. over the past decade while steadily increasing sales, is cited as a standout of reshoring. The very same A.T. Kearney report portrayed in a glum light by NPR and the Wall Street Journal spotlighted apparel as one of the top three industries for increasing American production.

The reasons for the return of apparel manufacturing, and their policy implications, are interesting. Every industry with positive movement on reshoring mentions lower energy costs, which makes it a very good thing that the Left wasn’t able to strangle the energy boom and force the high gas prices it desired in service to global-warming mythology, and a pity President Obama was nevertheless able to kill the Keystone XL pipeline. Reshoring companies also routinely cite increased wages in China as a reason American labor has become more competitive, so artificially increasing labor costs with more taxes, more mandatory benefits, and an increased minimum wage would be dangerous.

Garment manufacturers additionally describe the importance of remaining flexible in their industry, asserting that domestic factories make it possible to produce smaller product runs and reduce the amount of excess inventory that ends up on clearance racks… or gear up rapidly for high-production runs of popular items, as needed. The short turnaround time from design to manufacture made possible by domestic manufacturing is also highly desirable for the trend-conscious fashion industry.

Those virtues might be difficult to sell to industries that don’t place such a high value on flexible manufacturing, but one other appealing aspect of onshore manufacturing mentioned by Forbes is universally intriguing: keeping factories in the U.S. makes it possible for businesses to start smaller. A certain magnitude of sales is needed for the cost benefits of overseas manufacturing to kick in.

Therefore, we should desire policies that make small business entrepreneurship easier, to increase the demand for small-scale onshore manufacturing. Reversing the Obama Administration’s legendary hostility to small business owners won’t be easy, and neither will be trimming the size of the leviathan government that leaves us with such a diminished, hyper-regulated market for entrepreneurs to play in… but if Americans want a real reshoring boom that lives up to media hype, they should vote for a president who vows to make those things happen.