Assembly February 2017 : Page 80
Moser on MANUFACTURING Harry Moser President, The Reshoring Initiative ecent developments are already impacting U.S. manufacturing. Presi-dent Trump is committed to bringing back manu-facturing jobs to the U.S. He faces severe headwinds, but he has the power and determination to provide a major boost to reshoring. The headwinds are substantial. The U.S. dollar is up about 30 per-cent since 2012. China’s currency has fallen about 11 percent since 2015, and Mexico’s has declined about 50 percent since 2009. Oil prices and freight rates are down substantially from several years ago. Favorable macro trends include: Ⅵ Localization. Companies are producing more in-market, caus-ing international trade to plateau. Ⅵ Industry 4.0. New technology is resulting in fewer labor hours per unit of output. The remaining labor is in higher skill categories, where the wage gap between U.S. and developing countries is small-est. A more capital-intensive man-ufacturing model means the U.S. will have equal or lower capital equipment costs, since we do not have a value-added tax (VAT). Ⅵ Blockchain technology. This new technology will add transpar-ency to the supply chain, improv-ing the quantiﬁ ed value of local, dependable sourcing. President Trump and Congress will add tailwinds. These are like-ly to include: Ⅵ Tax, regulation and healthcare reform. A much lower corporate income tax and reduced regula-tions will improve return on in-vestment for U.S. factories. R Reshoring Will Trump Offshoring in 2017 Ⅵ Border adjustment corporate tax: President Trump wants to tax imports and give a credit to exports. At the borders, it would work like a VAT. Ⅵ Currencies: President Trump has promised to push back on un-dervalued currencies and intellec-tual property theft. Ⅵ Tariffs: President Trump has vowed to impose tariffs on coun-tries that fail to stop unfair trade Trump is committed to bringing back manufacturing jobs. practices or currency manipula-tion. “Tariffs will be used not as an end game, but rather as a negotiat-ing tool to encourage our trading partners to cease cheating,” says Wilbur Ross, Commerce Secretary nominee. “If, however, the cheat-ing does not stop, Trump will im-pose appropriate defensive tariffs to level the playing ﬁ eld.” Those are powerful tools for bringing manufacturing jobs back. I would add a few more: Ⅵ Skilled workforce. The primary focus of the Labor and Educa-tion departments should be to help communities and companies develop the skilled manufactur-ing and engineering professionals needed to balance the trade deﬁ cit. Ⅵ Industrial ecosystem: The gov-ernment should identify gaps that prevent companies from aggres-sively reshoring. It should then encourage U.S. and foreign com-panies to ﬁ ll those gaps. This ef-fort will be especially important as other actions drive up the cost of some imports. Ⅵ U.S. currency: We should reduce the value of the dollar by 30 percent against almost all other currencies. John R. Hansen, Ph.D., a former economist with the World Bank, has proposed a “market access charge” system that would eliminate the overvaluation of the dollar caused by the ﬂ ow of world funds into the safe haven that is the U.S. Ⅵ Total cost of ownership (TCO): We must educate company man-agement on the use of TCO in making sourcing and siting deci-sions. Since about 60 percent of companies rely on less accurate metrics, such as piece-part value or landed cost, approximately 25 percent of what is now offshored would be more proﬁ tably pro-duced here for the home market. The Reshoring Initiative be-lieves the winning strategy for the country is leveling the play-ing field and recruiting and train-ing the world’s top workforce. We must encourage companies to develop and implement strategies to adapt to the coming changes in global trade. To get started, are you think-ing about offshoring? Before an-nouncing the move, use the free online TCO Estimator from the nonprofit Reshoring Initiative to be sure you have quantified all the costs, risks and strategic impacts of offshoring. You may find that you will actually be more profit-able staying in the U.S. It may be better to do the math today, than get a call from President Trump tomorrow. A 80 ASSEMBLY / February 2017 www.assemblymag.com
Moser On Manufacturing
Reshoring Will Trump Offshoring in 2017
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