GATT\u2019s most important principle was trade without discrimination, in which member nations opened their markets equally to one another. Once a country and one of its trading partners agreed to reduce a tariff, that tariff cut was automatically extended to all GATT members. GATT also established uniform customs regulations and sought to eliminate import quotas.<\/p>\n\n\n\n
Unfortunately, our government leaders didn’t pay attention to the effect this was having on American businesses, and we started having a trade deficit in 1980 because of greater imports from Japan, Germany, South Korea, Taiwan, and the Philippines. <\/p>\n\n\n\n
When NAFTA went into effect in 1994, it started the trend of moving manufacturing outside the U.S. When the World Trade Organization was formed in 1995, tariffs were reduced between all member countries. However, after President Clinton granted China Most Favored Nation status in the year 2000 and China was allowed to become a member of the WTO, the great exodus to setting up manufacturing in China began, and the trade deficit sky rocketed. According to Alan Uke\u2019s book, Buying Back America<\/em>, the United States has a trade deficit with 88 countries\u2014some deficits are small, but some are enormous, such as China. <\/p>\n\n\n\n As a result, over 70,000 manufacturing sites closed in the past 25 years, and at the low point in 2010, we had lost 5.8 million lost middle-income manufacturing jobs.<\/strong><\/p>\n\n\n\n Globalization of U.S. Supply Chains Failed<\/strong><\/p>\n\n\n\n When the COVID pandemic hit, it sent shock waves throughout the world of manufacturing. Too late, we realized that we had become 70 to 95% import dependent, primarily on China. It was impossible to scale up our domestic supply chain fast enough for PPE goods and pharmaceuticals. <\/strong><\/p>\n\n\n\n In an article<\/a>, \u201c<\/strong>It\u2019s About Time to Build Regional Supply Chains,\u201d on March 30, 2022 on Industry Week, Christopher S. Tang wrote, “I do believe most global supply chains are going to end. They had a good run over the last few decades, enabling Western companies to grow profitably and helping developing countries alleviate poverty. But concurrent and unprecedented events have blown apart their cost efficiency\u2026Decades of outsourcing and offshoring have hollowed out the U.S. manufacturing sector. Building domestic supply chains in the U.S. can be time-consuming and cost-ineffective\u2026Small and medium-sized manufacturers are facing the reality that there will inevitably be more disruptions in the future and they must prepare themselves now<\/em> by strategically evaluating and mitigating their supply chain risks.\u201d<\/p>\n\n\n\n This crisis could have been prevented if more American Manufacturers had utilized Total Cost of Ownership Estimator<\/strong>\u2122 that Harry Moser made available for free in 2010 when he founded the Reshoring Initiative<\/a>. Mr. Moser\u2019s TCO Estimator has been the right tool to facilitate returning manufacturing to America. It actually includes calculations for the “hidden costs of doing business offshore,\u201d such as Intellectual Property risk, political instability risk, effect on innovation, product liability risk, annual wage inflation, and currency appreciation.<\/p>\n\n\n\n In my experience as a sales rep, most companies only consider the quoted piece price or landed cost, at best. Because of inaccurate data, many companies make the decision to offshore on the basis of faulty assumptions. Some faulty assumptions are: Overseas laws will protect IP, longer lead times won\u2019t affect costs much, travel costs won\u2019t be significant, communication won\u2019t be a problem, and quality will be just as good as USA. The reality is that many companies are saving less than they expected, and in some cases, the hidden costs exceed the anticipated cost savings.<\/p>\n\n\n\n We need to change the main considerations for selecting suppliers from one based on the lowest price to other considerations, such as<\/p>\n\n\n\n Choosing the right location is the most critical choice. The choices are: Made in USA, \u201cOffshoring\u201d to China or another location in Asia, or nearsourcing to Mexico or Canada. The location of your customers influences the choice of manufacturing location. Here are some variables to consider:<\/p>\n\n\n\n There are current manufacturing trends that are also influencing supplier choice. Some of these are:<\/p>\n\n\n\n Some of the advantages of sourcing in the USA are:<\/p>\n\n\n\n In today\u2019s manufacturing supply chain, Reshoring helps companies have:<\/p>\n\n\n\n I strongly believe that if more companies would learn to understand and utilize the Reshoring Initiative\u2019s TCO estimator (free at www.reshorenow.org<\/a>), they would realize that the best value for their company is to source their parts, assemblies, and products in America.<\/p>\n\n\n\n America is at a crossroads<\/strong>. We can either continue down the path of increasing trade deficits, increasing national debt, and loss of manufacturing jobs by allowing anything mined, manufactured, grown, or serviced to be outsourced to countries with predatory trade policies. Or, we can forge a new path by developing and implementing a national strategy to win the international competition for good jobs, sustained economic growth, and create a strong, secure domestic supply chain.<\/p>\n\n\n\n![\"\"](\"http:\/\/savingusmanufacturing.com\/blog\/wp-content\/uploads\/2022\/05\/US-Trade-Deficit-to-2020.png\")
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