{"id":410,"date":"2013-03-11T16:51:07","date_gmt":"2013-03-11T23:51:07","guid":{"rendered":"http:\/\/savingusmanufacturing.com\/blog\/?p=410"},"modified":"2013-03-11T16:52:24","modified_gmt":"2013-03-11T23:52:24","slug":"import-penetration-still-outweighs-reshoring-trend","status":"publish","type":"post","link":"https:\/\/savingusmanufacturing.com\/blog\/outsourcing\/import-penetration-still-outweighs-reshoring-trend\/","title":{"rendered":"Import Penetration Still Outweighs Reshoring Trend"},"content":{"rendered":"

In January, the U. S. Business and Industry Council released a report<\/a>, \u201cImport Penetration Rises again in 2011; Challenges Manufacturing Renaissance, Insourcing Claims,\u201d by Alan Tonelson. According to the report,\u201d the share of U.S. markets for advanced manufactured goods controlled by imports reached another all-time high in 2011\u2026 and domestic manufacturing\u2019s highest value sectors keep falling behind foreign-based rivals.\u201d<\/p>\n

The USBIC report shows that \u201cimports captured 37.57 percent of the collective $2.01 trillion American market in 2011 for a group of more than 100 advanced manufactured products,\u201d up from 37.07 percent in 2010. When government data to calculate import penetration rate were first issued in 1997,\u201dimports controlled 24.49 percent of substantially the same group of U.S. manufactured products.\u201d<\/p>\n

\u201cFully 29 of the 106 sectors for which reliable data were available featured import penetration rates of 50 percent or more in 2011. In 2010, 31 of these industries had lost half of their home U.S. market to imports, and in 1997, only 8 of the 114 sectors initially studied were in this situation.\u201d<\/p>\n

Between 1997 and 2011, 98 industries lost shares of their home market while only 8 gained shares. The industries that gained shares are:\u00a0 \u201csemiconductor machinery; saw mill products; paperboard mill products; motor vehicle stamping operations; transformer, inductor, and coil manufacturing; electron tubes; computer storage devices; and heavy duty trucks and chassis.\u201d<\/p>\n

The 98 industries include:\u00a0 \u201csemiconductors; electro-medical apparatus; pharmaceuticals; turbines and turbine generator sets; construction equipment; farm machinery and equipment; mining machinery and equipment; several machine tool-related categories; and ball and roller bearings.\u201d<\/p>\n

The report states that \u201cfrom 1997-2011, output fell in 38 of the 106 total industries studied over this time span \u2013 nearly 36 percent of the total. These \u2018declining\u2019 industries include electricity measuring and test instruments; relays and industrial controls; motors and generators; motor vehicle engines and engine parts; several machine tool-related categories; and environmental controls.\u201d In 11 more sectors, output growth was less than 10 percent, \u201cincluding semiconductors; semiconductor production equipment; motor vehicle transmission and power train equipment; miscellaneous industrial machinery; and medicinals and botanicals.\u201d<\/p>\n

Mr. Tonelson writes, \u201cHigh and rising import penetration rates for this many critical domestic industries over nearly a decade and a half represent powerful evidence of chronic, significant weakness in domestic manufacturing.\u201d<\/p>\n

In a section titled, \u201cThe Manufacturing Renaissance that Isn\u2019t, he disputes the predictions of the Boston Consulting Group\u2019s 2011 report, \u201cMade in America, Again: Why Manufacturing Will Return to the U.S.\u201d This report contends that American manufacturing would experience a renaissance because of rising costs in China and other parts of Asia so there would be a convergence in the total costs of manufacturing by some regions of the U. S. by 2015.<\/p>\n

If U. S. manufacturers are still losing market share to foreign competitors through import penetration in their home market, this is a sign that \u201cthe United States has not even started to become \u201cincreasingly attractive for the production of many goods sold to consumers in North America\u201d as predicted by the Boston Consulting Group, much less experiencing a Manufacturing Renaissance.<\/p>\n

What is even more troubling to Mr. Tonelson is that the USBIC report focuses on the capital-and technology-intensive sectors that are \u201ckeys to maintaining national prosperity, technological leadership, and national security.\u201d\u00a0 The report shows that \u201cdozens of America\u2019s most advanced manufacturing industries are becoming just as vulnerable to import competition \u2013 and in some cases to import domination \u2013 as labor-intensive industries like clothing and toys.\u201d<\/p>\n

He concludes that the conventional stimulus strategies have had the disappointing results of \u201cless growth and employment bang per investment-target stimulus buck with each passing year\u201d because \u201cU. S. imports of capital goods as such generates much less American output supported by much less American employment than purchases of domestically produced capital goods.\u201d<\/p>\n

In his opinion, President\u2019s Obama\u2019s goal of doubling exports during the 2009-2014 period isn\u2019t going to improve the situation either when imports keep rising faster than exports. While there was a 15.45 percent improvement from 2010 to 2011, the January-October 2012 period only showed a 4.56 percent improvement.<\/p>\n

Mr. Tonelson points out that negotiating new trade agreements isn\u2019t producing the desired effect of increasing exports. The latest agreement negotiated with Korea has had the opposite effect\u00a0 ? U. S. exports to Korea dropped by more than 18 percent while imports from Korea are up 4.74 from when it came into force in March 2012.<\/p>\n

He concludes that the continued rise of import penetration in the U. S. indicates that American industry is losing ground relative to foreign-based competitors and \u201cthe nation is not making enough of the structural changes needed to create healthy growth and avoid reflating the last decade\u2019s credit bubble.\u201d<\/p>\n

In an interview by Richard McCormack in the January 15, 2013 issue of Manufacturing & Technology News, Mr. Tonelson, stated, \u201cI think the only way that these trends reverse meaningfully is if American trade policy changes. Unless we reduce the incentives of U.S. companies and companies all over the world to supply the U.S. market from overseas, this tide will not turn.\u201d<\/p>\n

While reducing the incentives of U. S. companies and foreign companies to supply the U. S. market from overseas is an important step in turning the tide, it would be the first of many steps we need to take. As I have written previously, we need to change our trade, tax, and regulations policies to help U. S. manufacturers be more competitive in both their home market and the global marketplace. We need to develop a national manufacturing strategy<\/a> that would address all of the various factors that are resulting in the decline in the decline in the United States\u2019 share of the global manufacturing output.<\/p>\n

I did take exception to Mr. Tonelson\u2019s dispute of the predictions of the Boston Consulting Group\u2019s report and told him that the data is lagging reality ? \u201creshoring\u201d is happening. As a manufacturers\u2019 sales rep for American companies that perform fabrication services, I am in the \u201ctrenches\u201d competing with offshore companies. Nearly every manufacturer I represent has experienced gaining new customers that are \u201creshoring\u201d manufacturing from China. I have interviewed dozens of companies at trade shows over the past year and a half, and every company I interviewed had experienced \u201creshoring.\u201d Nearly all of the San Diego region\u2019s contract manufacturers of electronic manufacturing services have benefitted from \u201creshoring\u201d in the past year.<\/p>\n

The Reshoring Initiative<\/a>, founded by Harry Moser in 2010, has documented case studies of companies reshoring. In the article<\/a>, \u201cPumping Muscle into U.S. Manufacturing,\u201d by Craig Barner in the March 6, 2013 issue of Forbes magazine, Mr. Moser said, \u201cFor example, about 220 to 250 organizations have brought manufacturing back to the U.S\u2026.with the heaviest migration from China. This represents about 50,000 jobs, which is 10% of job growth in manufacturing since January 2010, he said.\u201d<\/p>\n

\u201cThe top reshoring industries include electrical equipment, appliances and components; transportation equipment; and machinery, Moser said. Key reasons for returning to the U.S. include rising wages offshore, better quality of goods produced in the U.S., easier access to repairs and lower delivery costs, he said.\u201d<\/p>\n

On March 4, 2013, Prime Advantage, the leading buying consortium for midsized manufacturers, announced<\/a> the findings of its eleventh semi-annual Group Outlook Survey. \u201cA large majority \u2014 more than 70% of respondents \u2014 have increased their material and service purchases from American suppliers and service providers. Mexico is the second choice for sourcing, with nearly 28% of respondents moving sourcing to that region. The most frequently cited benefits that manufacturers hope to see in nearshoring are shorter lead times, as indicated by 67% of respondents, and lower inventories (49%). Among other benefits, companies cited better supply chain control (40%) and better overall communication (39%).\u201d<\/p>\n

If more American manufacturers would utilize the free Total Cost of Ownership Estimator\u2122<\/a> developed by Harry Moser, more companies would understand the benefits of \u201creshoring\u201d and foster a true renaissance in American manufacturing.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

In January, the U. S. Business and Industry Council released a report, \u201cImport Penetration Rises again in 2011; Challenges Manufacturing Renaissance, Insourcing Claims,\u201d by Alan Tonelson. According to the report,\u201d the share of U.S. markets for advanced manufactured goods controlled by imports reached another all-time high in 2011\u2026 and domestic manufacturing\u2019s highest value sectors keep […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,51,3,6,4],"tags":[90,91,26,32],"class_list":["post-410","post","type-post","status-publish","format-standard","hentry","category-economy","category-manufacturing","category-outsourcing","category-reshoring","category-tradepolicy","tag-import-penetration","tag-manufacturing-renaissance","tag-reshoring-2","tag-trade-policy"],"_links":{"self":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/410","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/comments?post=410"}],"version-history":[{"count":3,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/410\/revisions"}],"predecessor-version":[{"id":412,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/410\/revisions\/412"}],"wp:attachment":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/media?parent=410"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/categories?post=410"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/tags?post=410"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}