For those pessimists who believe America has lost its global leadership in manufacturing and China is destined to dominate the world market, it’s time for them to eat a little crow.
In fact, some economists are predicting that by 2015, the fully loaded costs involved in operating a manufacturing facility in the United States won't only match that of China, but will actually be less costly and far more efficient.
China’s reliance on cheap labor is about to hit a great brick wall. Pay for factory workers in China has soared by nearly 70 percent between 2005 and 2010. Assuming that Chinese wages continue to rise at about 20 percent a year while U.S. salaries stay constant, American labor will be a bargain.
There is already a steady shift of American manufacturers opting out of moving operations overseas and a growing number are moving their offshore operations back to the United States.
China isn’t the only country that is losing favor with U.S. manufacturers who are also heading home from Mexico, India and other countries in Asia.
As an American manufacturer and exporter, I am always looking for opportunities to make and source more things here. American products made by American workers, fairly competing in the global marketplace is a simple proposition with far-reaching implications. Believe me, “Made in America” is still a very powerful selling tool. Its comeback is long overdue.
Why the change in attitude? It’s not just about wages. It’s about efficiencies and protections. The cost of corruption, deficiencies in infrastructure, non-existent due process, intellectual-property theft, kowtowing to technocrats, restrictions of activities, cultural nuances, personal security concerns, higher costs of basic necessities such as energy and communications and the complications of managing a work force half-a-world away, was never factored into original justifications to move overseas.
Those building plants in China are forced to divulge their technology and partner with local entities that bring no value. When their technology is pilfered, U.S. companies must deal with a legal system that is crooked and skewed against them.
This propels the proliferation of intellectual-property theft which the U.S. Department of Commerce estimates costs American companies more than $300 billion a year, which ironically is equivalent to our trade deficit with China.
American business owners are sadly learning a costly lesson that when playing by the rules, not only do they lose control of their trade secrets, they also wind up creating their fiercest competitors.
Add to the mix the growing cost of transportation and logistics, which by necessity is reflected in higher prices. Supply chain challenges driven by keeping inventory costs down and the expectation of immediate deliveries are further justifications for staying stateside.
I don’t begrudge those American companies that have taken the plunge and moved overseas. We love to pin blame for our failings and many in our country lay blame on our corporations. As an entrepreneur, to keep our companies growing and vibrant, we must deal with the world as it exists, not how we wish it to be. The world is full of inequities and contradictions.
The U.S. government for so long has been able to make abysmal decisions without sacrificing the perception of prosperity because of the seemingly never-ending wealth of our country. These days are gone.
Combine this with China’s penetrating focus on creating every advantage for itself that it could possibly contrive and you have the dysfunctional world in which must find a way to fit in or perish.
However something is amiss. It has taken some time to realize, but the benefits of moving overseas have been greatly exaggerated. Our government must seize this opportunity and create the conditions whereby this trickle to return home becomes a flood. They could start by pledging not to raise taxes.
I don’t want to paint an overly rosy picture. There are still many multinationals building overseas facilities to meet growing foreign market demand.
And because of excessive bureaucracy and regulations, it can take five years or more to build a new factory here. But if this movement gains momentum, which I believe it will, workers in the U.S. will soon see a light at the end of the tunnel.
We must re-instill the belief that America is coming back and it’s still the land of opportunity.
“Made in America” means “Jobs in America.”
© 2017 Newsmax Finance. All rights reserved.