By Bart Taylor | Feb 21, 2021
Any discussion of reshoring manufacturing jobs from China to the U.S. runs headlong into two realities.
First, American OEMs and brands outsource manufacturing for a reason: the combination of skilled labor, infrastructure, and materials in China is often unavailable onshore. As good as it sounds to reshore production -- and the benefits of domestic manufacturing are compounding -- companies must first ask the question, "Exactly what am I reshoring to?"
An inadequate supply chain in the U.S. provides an easy answer for many companies. Or, as Phunkshun Wear president Jay Badgley told me, "Reshoring was a term I heard frequently when the tariffs were announced, but I haven't heard any manufacturer use it in months. I don't know of any apparel brand that's reshoring."
Badgley's outdoor industry apparel brand manufactures in Denver. He's an outlier in an industry that found qualified, cheap labor in Asia decades ago, and that hasn't looked back. Today the factories in China -- and Vietnam and Bangladesh and other Asian outposts -- that make shoes, apparel, accessories, and components used in the assembly of any of a thousand products, are world-class, funded by brands in America and around the world.
This, then, is the other barrier: As much as they're demonized here, China's a rational actor -- and a manufacturing superpower. Meaning, they won't give up manufacturing jobs easily. The Chinese have used U.S. investments in people and factories to build a highly advanced manufacturing ecosystem. As Badgley says, "Look at a jacket from The North Face. It's a thing of beauty. The stitching, the technology, the quality. That coat couldn't be made here, for a reasonable price."
China is also incentivized to maintain superpower status by its staggering demographic conundrum. Sarah Rathke, a partner at Squire Patton Boggs and speaker last week at CompanyWeek's Supply Chain Reality Check webcast, turned me on to James Kynge's China Shakes The World.
Kynge says this about what he calls China's "population paradox": "Even when the economy grows at 9 or 10 percent, it fails by a margin of several million to create the 24 million new jobs required each year. So while China appears to the rest of the world to be enjoying an amazing growth bonanza, the officials working behind the high walls of their leadership compound in Beijing feel trapped in an endless employment crisis."
Rathke says these are primarily manufacturing jobs, noting, "The 24 million annual figure covers both new entrants into the job market, and a certain amount of transition by rural citizens, each year, to urban manufacturing work."
Facing the daunting prospect of creating 20+ million jobs every year, it's a certainty China will redouble efforts to keep every single American brand happy, and every job in China.
What, then, can we do to reshore a mere 5 million manufacturing jobs, a number that according to the Reshoring Initiative's Harry Moser, would balance American trade deficit and set the U.S. back on a path to providing companies here more domestic options.
Reduce costs, for one. Moser estimates that through a combination of workforce training, more deliberate management of the value of the dollar, and a cohesive pro-manufacturing industrial policy, the U.S. must lower its across-the-board manufacturing costs by 20 percent to be competitive with China. (Hear Moser outline the numbers in the CompanyWeek webcast.)
Moreover, it's clear we can't displace China as the global manufacturing leader. We can't make everything. China moves millions of citizens into manufacturing work every year. Manufacturing, and manufacturing alone, is the engine that moves millions of Chinese into the middle class.
If we can't make everything, what should we make?
It's here that a new U.S. industrial policy must be more nuanced than the current dialogue. We know products and components purchased with federal dollars will be a priority, especially in biotechnology, defense, and other national security-related industries. We know a new generation of consumer-led manufacturing in consumer categories -- like food and beverage, as well as transportation -- is already powering a U.S. manufacturing comeback.
What then, of other industries manufacturing offshore and dependent today on outsourced labor and infrastructure? The current thinking is that some just aren't "strategic," or that barriers are too great to justify investing in more U.S. production.
It's the wrong approach. Public and private actors should collaborate to find ways to encourage more domestic production in even the toughest industries -- like apparel. Moser's cost formula is a foundation.
And who would argue that the outdoor industry, for example, isn't a "strategic" economic sector? Very few in America's West. But if we can't cut and sew, what should we do here to help companies bring production home, even incrementally? What can be accomplished here, with American assets, ingenuity, and inspiration?
With the idea that no job that can be done here should be left offshore, this is the question that should occupy manufacturing advocates across a dozen industries.
No soldier left behind. Booyah.
Bart Taylor is publisher of CompanyWeek. Email him at email@example.com.