As a journal teaser line put it: “Some argue that a renaissance is already under way. Here’s the case they make – and how the skeptics respond.” In case you missed their take, we’ll reprise the key points today, while admitting to our distinctly Midwestern pro-manufacturing bias right up front.
Pro: U.S. Costs are getting more competitive. Case in point: China’s overall manufacturing cost advantage over the U.S. has shrunk to just 4% according to the Boston Consulting Group. And the surge in U.S. oil and gas production (can you say fracking?) has pushed down our energy costs.
Con: It isn’t just about costs. It’s also about worker skills and supplier availability. Both shrank the past 20 years as production was pushed overseas. U.S. firms complain now about a shortage of skilled workers. And there is a profusion of suppliers growing on the Asian side as well, especially for things like motors and small parts.
Pro: Companies are more eager to produce near their customers. Obviously, goods manufactured here are sourced and supplied more quickly. Not to mention what happens after Asian earthquakes and floods. Supply chains across the Pacific can begin to look a lot thinner.
Con: China and India have more consumers. Many companies still see their best long-term growth prospects in Asia, Latin America and Africa – turns out, it’s where the people are. Emerging markets are growing faster than U.S. / European ones. U.S. firms have spent a lot more on cap ex overseas than here.
Pro: The political climate for manufacturing in the U.S. has improved. While federal gridlock remains, states are competing fiercely for investment, and it’s paying off with new plants all over the place. The declining power of unions has helped too.
Con: The political climate is still not that great. U.S. corporate tax rates remain among the highest in the world, and much U.S. cash is thus left overseas. And did we mention Washington gridlock? Companies are highly uncertain… about everything, including taxes, health care and infrastructure.
Pro: Foreign companies are betting on U.S. manufacturing. Lots of European manufacturers have expanded operations here in the U.S. While direct investment in China hit $258 billion last year, the U.S. came in second at $193 billion.
Con: The flow of jobs goes both ways. About 40,000 U.S. jobs were created last year due to firms moving production back here. But roughly the same number of jobs moved out last year as well. Trade factors don’t’ necessarily point to any notable gains in U.S. competitiveness, while signs of a U.S. factory-building boom remain weak. Others argue however that the U.S. is just in the beginning stages of a manufacturing recovery.
So… Is it too early to tell? What say you, now that you’ve heard what the experts have had to say?