Offshoring, Reshoring and the Rebound in American Manufacturing

Competition from workers in such nations as Mexico, Indonesia, Thailand and, in particular, China, has been fierce. For several decades, America’s manufacturing employment was declining while a vast amount of manufacturing has been sent overseas by U.S. firms.

Today, however, some U.S. industries are experiencing reshoring, or the practice of moving formerly offshored tasks back to America. As wages rise in countries such as China and India, a number of manufacturers are rethinking offshoring, taking into account higher productivity rates among American workers. Supply chain problems encountered during the Coronavirus pandemic have accelerated this trend.

This is not to say that vast numbers of manufacturing jobs are going to return to America. Many of the newest factories are relying on advanced technologies instead of large workforces. Robots and artificial intelligence are driving today’s most modern factories. An additional, informal classification of robots is collaborative robots, or “cobots.” This refers to robots that work closely alongside human workers, with the intent of making repetitive tasks easier and faster to complete.

Another factor fueling reshoring is energy costs, which continue to be lower in the U.S. than in many other countries. Savings through low energy costs can be further augmented by increased manufacturing efficiency. This is due to the growing adoption of robotics. 3-D printing (additive manufacturing) is another technology that is significantly lowering prototyping and product design costs.

While lower employee wages have been a factor in some offshoring, proximity to growing foreign markets is another. Giant multinational companies ranging from Apple to Kraft to General Motors find that a vast portion of their business now lies overseas, often in the rapidly growing, emerging nations. Many of the world’s largest companies find that they need to have local operations throughout the world.

Globalization has a profound effect on Americans—consumer prices become lower, while the U.S. job market changes considerably. Consumer goods are quite inexpensive due to the vast variety of items the U.S. imports from other nations, and prices for many categories of these goods have declined dramatically. Americans can purchase consumer electronics like laptop computers and color televisions at extremely low prices, and the price of many types of apparel is much lower thanks to globalization. For example, over 90% of the shoes sold in America are manufactured in low cost nations, especially China.

Consider the rapid globalization of the automobile industry. The entire global automobile sector is dominated by only a handful of companies, including Toyota, GM, Ford, Daimler, Honda, Volkswagen and Nissan, as well as the increasingly successful Korean automakers Kia and Hyundai. Car manufacturers in China are becoming more dominant as well. Car manufacturers commonly have engineering teams collaborating from offices in multiple nations, while parts and components may be imported from a wide variety of suppliers in various countries to undergo final assembly at home.

U.S. firms hold leadership positions in several key product and service sectors vital to the rest of the world, including health technology, artificial intelligence, pharmaceuticals and entertainment of all types.

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