look homeward, manufacturers

Here are a couple of interesting statistics pulled off the Web site of the National Association of Manufacturers (NAM). Goods manufactured in the United States represent about four-fifths of all U.S. exports, and U.S. manufacturers export about $60 billion of goods each month—about the same as American farmers export each year. About 85 percent of U.S. manufacturers' investments are in factories and equipment in the United States. An index of manufacturing production based on constant prices stood at 55.8 in 1986; late last year, it stood at 116.4.

I looked these up during the holidays after I got into a brief debate with a relative over trade and the state of U.S. manufacturing. I argued that U.S. manufacturers are producing more than ever and that they still employ millions (14.1 million, according to NAM). My sparring partner in the discussion was lamenting the loss of U.S. manufacturing to low-cost countries.

We were both right. You can also read this on NAM's Web site: "American manufacturing is ... challenged by the most intense global competition in world history." Millions of jobs have been lost either to offshore competitors or as a result of U.S. manufacturers' moving operations to lower-cost countries. The productivity gains that have helped U.S. manufacturers compete at home and around the world often have come at the cost of what were once considered stable jobs. That's why trade issues may have been second only to the war in Iraq as a major issue in the recent political campaign. My point was that manufacturing is not going anywhere and will remain a critical part of our economy.

I thought of that again while reading a report from JPMorgan Chase Vastera on global trade risks and rewards for 2007. One section in particular caught my attention, led by a phrase we may hear a lot more often in the next couple of years: on-shoring. Bernie Hart, the firm's global product head, observed that factors like port congestion, high landed cost, and high fuel costs are causing some companies to consider North America for production.

That's not a unique observation. A trio of McKinsey consultants wrote in a 2005 report that offshoring may not make sense for companies whose products have short shelf lives, high obsolescence costs, and relatively low labor costs. Then add worries about how security constraints could affect imports. It makes sense that producers would look homeward once again. No one can tell if this is a trend or a blip, but it should be interesting to watch.