Finally! Due to the rising cost of outsourcing, some US companies are starting to look back to within our borders for their manufacturing needs. The comparison between the cost to produce goods in the United States or to produce them abroad has narrowed. For this we can thank a decrease in China’s competitive advantage.
The Chinese yuan has appreciated 18 percent against the dollar in the past three years. This meas that exports are now more expensive and less competitive. Chinese wages have also more than doubled over the past five years and the Chinese government has either lowered or eliminated tax breaks on exports.
Another factor is that oil prices have skyrocketed from $25 a barrel in 2002 to more than $125 today. This expense discourages American businesses from shipping manufacturing operations overseas.
Hard data documenting a shift homeward is not yet available, but a second-quarter survey of 314 member companies showed that 59 percent of respondents have seen “increased costs of materials and supplies imported from abroad” and 30 percent are purchasing more supplies from US sources.
Economic forces make it more attractive for an increasing number of manufacturers to move toward more domestic production. These factories won’t be built overnight, but increases in oil prices and shipping costs are making this much more cost effective.
U.S. production costs are also increasing along with China’s. The study said 79 percent of manufacturers report increased costs for domestically produced goods. Some businesses are finding that reducing costs by cutting overseas shipments sweetens the incentive to manufacture here at home.
Bottom Line…if given the choice, businesses will likely agree that American workers are better than anywhere else. There is a pride in workmanship that is missing in products produced in other places. This is just one of many advantages to producing in the USA.