Manufacturing reshoring is a lie: someone is paying for its propaganda to counter neo-protectionist motions

Please read the article below.

This article below is not entirely wrong, but you have to look carefully at the base year of the comparison. The New Yorker picks 2010 as the year from which it is counting all the gains. And it’s true that there have been gains since then. But remember that 2010 was the bottom of the great recession. Not at all a normal year. So the gains he references since then are pretty much what you would expect in a recovery cycle. But actually, the recovery has been weak. So these gains are actually not very impressive compared with similar gains in the wake of previous recessions.

If we look at manufacturing employment and wages in 2005 and compare to now, we are still not at the level of 2005. So this is a case in which figures don’t lie, but liars do some figuring.

It is true that the cheap energy in the U.S. has stimulated some manufacturing investment, but with oil now at $40/barrel, the U.S. no longer has a big energy advantage. Well, that’s not entirely true. Natural gas is very cheap in the U.S. compared to elsewhere, so this is important for chemical and aluminum industries and we have seen substantial new investment in the US.

I don’t know where the figures are coming from regarding the return of manufacturing from Asia and especially from China. I am suspicious of those numbers because Boston Consulting has been trying to sell the return of manufacturing story as a contrarian story to get publicity for its consulting. I don’t trust Boston Consulting on this issue. Another firm I don’t trust is Rhodium. It is also a consulting firm that specializes in China. It needs good ties with China and that means it tends to be a propaganda organ for China.

Another point to look at is the wage numbers he cites. He talks about $20/hour wages. But in much of U.S. manufacturing wages in the past were closer to $40/hour. Of course, it depends on the industry, but overall average wages in the U.S. have not risen for the past fifteen years.

Keep in mind also that while US official statistics show unemployment at about 4.9%, the percent of working age people who are actually working is only about 62%. So there are a lot of people who should be working who are not working. They are not counted as unemployed because they have not registered with an employment agency in the past six months, but they are not working. Many of them have just given up looking for employment because they have been looking without success for a long time.

In conclusion I don’t buy the reshoring argument. I do believe that offshoring of manufacturing jobs has slowed, because there is not much left to offshore any longer. China incoming FDI has been stuck for several years at 100-120 $B/year, but its share of manufacturing has been declining and it is now <30%. There is manufacturing reshoring from China into Vietnam, Bangladesh and Indonesia in textiles, shoes, toys and other light manufacturing sectors, but it is not really manufacturing coming back to the West. Current foreign investment in manufacturing into China is either Chinese money recycled thru HK or is due to the need to get close to the final growing China market in automotive, Pharma, chemicals and others.

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