A shifting geopolitical global stage, a pandemic, and an ongoing trade war have all played roles in putting global supply chains in crisis. If nothing else, one thing is clear; the United States is too reliant on outside economies for too many of its goods. It’s time to get products Made in America again.
The mounting challenges manufacturers face producing goods off-shore and getting them onto American shelves have caused many industries to re-think their supply chain. As a result, more and more companies are ‘reshoring’ or bringing their entire supply line, from manufacturing to distribution, back to the States.
It’s not a massive migration, but it is an emerging trend starting to pick up steam as companies experience diminishing returns from off-shore manufacturing. So, how did it all begin, and why is reshoring so critical to the American economy?
Made in America – Where it All Began
President Biden recently spoke of “Made In America” becoming a more commonplace label on consumer goods, but President Trump deserves some credit for getting the ball rolling.
The Trump administration’s trade war on China, which levied tariffs on Chinese imports, played a significant role in incentivizing American companies to move their manufacturing back to the US. However, how much incentive is often the topic of many a heated debate because financial advantages are not the only influences behind the reshoring trend.
Chinese still classifies itself as a developing nation, and the WTO agrees, but that has not stopped the Chinese populace from demanding higher minimum wages. Every pay increase whittles away at the higher profit margins made possible by the low hourly rates paid to Chinese workers.
Rising wages are not the only concern. Supply chains with some distance between the manufacturer of a product and the consumer it is intended to reach put some pressure on market agility. It’s impossible to react quickly to emerging trends or adjust to shifting market demands rapidly.
Another motivator for manufacturers to shift their operations from China is the loss of market share through intellectual property theft. New innovative products designed by American companies with manufacturing plants in China soon find they are competing against cheaper Chinese products with features that are similar or exact reproductions.
Unfortunately, there is little they can do to protect against Chines manufacturers, as there is very little legal IP protection available under Chinese law.
Made In America the Advantages of Reshoring
The current global turmoil provides many reasons for companies to restructure their logistics, but there are many advantages to homegrown logistic channels and supply lines, including:
- Reduced opportunities to profit from lower wages
- Reduced compliance issues when made in America.
- Made in America is synonymous with high quality
- Lower risk of interruption to supply chains
- Domestic job creation supporting local economies
- When products are made in America the logistics is streamlined
- Made in America just makes more sense
If anything beneficial came out of the COVID-19 pandemic, it would be to highlight how at-risk American companies are to overseas supply chain distribution centers. There has never been a better time to consider reshoring and delivering more job opportunities in the United States.
The American economy can only benefit by keeping supply lines and manufacturing within its borders. More plants and factories mean more jobs for Americans and immigrants.
More than two million jobs were lost during the recession, a trend that began during the 1970s and coincided with the rise in China as a ‘friendly’ business partner.
However, manufacturing has become one of the largest employment sectors and drivers of employment growth in the States. Some of the credit for the more than 500,000 additional jobs can be attributed to post-recession demand, but it is not the only reason.
According to the Reshoring Initiative, a collection of trade associations and companies pushing for more factories in the United States, around 10% of the job market growth is due to increased manufacturing on American soil.
GE’s chief executive, Jeffrey Immelt, reported in an article published in the Harvard Business Review that the electrical appliance company planned to add more than 1,000 jobs at its Louisville, Kentucky plant.
Similarly, Whirlpool’s 2.5 million sq ft washing machine factory is the heart of the economy in small town Clyde and provides many job opportunities in the United States. More than 3,000 people, or more than half the town’s population, find employment on the factory floor. It’s the largest washing machine factory globally, and with modern technology improving efficiencies, Whirlpool is more competitive than ever.
How Immigrants support the US Economy when products are Made in America
The US economy is boosted by more than 50 million immigrants, a population that is more than twice that of Australia and equal to the entire population of South Korea.
The argument that immigrants take jobs from the local population is an inaccurate portrayal of immigration’s role in increasing the GDP of the United States.
An International Monetary Fund report states that for every 1 percent point increase in the share of migrants in the adult population, The GDP per person increases by up to 2 percent in the long term.
Low and high skilled immigrant workers improve productivity. Low-skilled immigrant workers often fill the vacancies and support existing skillsets where native-born workers may be in short supply.
In short, immigrants inject money, skills, and experience into the US economy and are a critical component of overall growth in GDP. They pay taxes to the government, which helps to support social benefits, local infrastructure, and pensioners.
Studies indicate that a high proportion of immigrants share an entrepreneurial spirit and are more likely than native-born Americans to start a company. Immigrants or their children Almost half of Fortune 500 companies are created by immigrants or their children.
It’s clear that immigration can provide significant benefits to the economy. However, ensuring migrants are integrated into the workforce is critical. Reshoring attempts by a growing number of American companies will ensure that there is a place for hard-working immigrants to secure employment.
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If you found the Made In America article interesting you might also want to read more about Joe Biden’s plans to move forward or the Biden and Harris Immigration policy that brings new hopes for immigrants worldwide.