'Reshoring' Trend Has Little Impact On U.S. Economy, Study Finds
A report on the phenomenon known as "reshoring" — the opposite of offshoring — shows that 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.
The authors of Monday's report say they had been intrigued by the large number of recent media stories suggesting a small stampede back to the United States by manufacturers but had thought much of the evidence seemed anecdotal. So they began tallying up the number of reshoring cases they found.
"We saw that the number of cases was definitely growing, and so then that begs the other question, which is, well, what's the economic impact of that?" says Patrick Van den Bossche, a partner at A.T. Kearney.
There were just 64 reshoring cases in 2011, while this year there will be around 300, with electronics and transportation equipment companies leading the way. High-end apparel surprisingly was the third most common sector. The driving factors include energy costs lowered by the shale oil boom and a closing wage gap with China.
But Van den Bossche says that while more companies have good reasons to consider coming home, in context, the impact of the small number actually returning is less significant than it appears.
"You see more manufacturing activity within the U.S.," said Van den Bossche, "but relatively speaking you're actually seeing even more in Asia for products coming to the U.S."
And that means the U.S. trade deficit with the rest of the world is still huge.
"There's a trend here that says that, 'Yes, we are starting to manufacture more, we are getting more and more competitive,' but it's not quite yet showing in the economic data," Van den Bossche says.
None of that is exactly news to Harry Moser, the founder and president of the Reshoring Initiative, which helps manufacturers relocate to the United States. Moser has been a big promoter of the reshoring trend, but he says the phenomenon can be overstated.
"No one claims — at least we don't claim — that you're going to see a million new jobs from reshoring next year," Moser says. "That would be totally irrational, irresponsible. And we don't have the workers, the skilled workers, to do it."
Moser says things are changing, but that these have been — and will be — long, drawn-out processes.
"It's taken 60 years for [offshoring] to happen, and it's going to take decades for it to reverse," he says. "For our trade deficit to be eliminated, for reshoring and foreign direct investment to bring many of those jobs back."
The important thing, he says, is that the incentives to move overseas are growing less attractive, and more companies are at least thinking about manufacturing domestically. He says his group's figures show that while the U.S. was losing 150,000 jobs a year to offshoring 10 years ago, the numbers of jobs lost to and gained from overseas last year were roughly even.
Moser believes that trend will continue — even if, as this report suggests, it's taking a while to build up steam.
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Transcript
RENEE MONTAGNE, HOST:
Here's an expression that's caught on of late - reshoring. That's the growing number of manufacturing jobs that are returning to the U.S. It seems to go against the trend over the past few decades of moving operations overseas or offshore to cut costs. Now, a study released yesterday takes a closer look at a reshoring. NPR's Jim Zarroli has this report.
JIM ZARROLI, BYLINE: The authors of the report say they were intrigued by the large number of recent media stories suggesting a small stampede back to the United States by manufacturers. Much of the evidence seemed anecdotal, so they began tallying up the number of reshoring cases they found. They discovered that the number was small but rising. There were just 64 reshoring cases in 2011. This year, there will be around 300, with electronics and transportation companies leading the way. Patrick Van den Bossche is a partner at A.T. Kearney.
PATRICK VAN DEN BOSSCHE: We saw that the number of cases was definitely growing. And so that begs the other question which is, well, what's the economic impact of that?
ZARROLI: And Van den Bossche says the impact is less significant than it appears. He says the uptick in reshoring cases needs to be put in context.
VAN DEN BOSSCHE: Basically what you see is you see more manufacturing activity within the U.S. But relatively speaking, you're actually seeing even more in Asia for product coming to the U.S.
ZARROLI: And that means the U.S. trade deficit with the rest of the world is still huge. Van den Bossche says that energy costs are falling in the United States because of the shale oil boom. And wages are rising in China. So more companies have good reason to think about moving back home. But the number who have actually done so is still small and has had a negligible impact on the economy.
VAN DEN BOSSCHE: There's a trend here that says that, yes, we are starting to manufacture more. We are getting more and more competitive. But it's not quite yet showing in the economic data.
ZARROLI: None of that is exactly news to Harry Moser, founder and president of the Reshoring Initiative, which helps manufacturers relocate in the United States. Moser has been a big promoter of the reshoring trend, but he says the phenomenon and can be overstated.
HARRY MOSER: No one claims - at least we don't claim - that you're going to see a million new jobs from reshoring next year. That would be totally irrational, irresponsible. And we don't have the skilled workers to do it.
ZARROLI: But Moser says things are changing. He says the movement of U.S. manufacturers to China and India and other low-wage countries was a long, drawn-out process. And reshoring will be, too.
MOSER: So it's taken 60 years for that to happen. And it's going to take decades for its reverse - for our trade deficit to be eliminated, for reshoring and foreign direct investment to bring many of those jobs back.
ZARROLI: The important thing, he says, is that the incentives to move overseas are growing less attractive. And more companies are at least thinking about manufacturing domestically. That's something they weren't doing a few years ago. And Moser believes the trend will continue even if, as this report suggests, it's taking a while to build up steam. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.
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