Government Incentives Enough to Reshore US Manufacturing Operations? – Part Two

by on

President Obama’s administration, for one, would be happy with the approach of “doing the right thing” when it comes to giving Americans more jobs, as we outlined in Part One of this article, and if the president means what he says, companies like Element Electronics would have even greater incentives to move ahead with reshoring.

Most of President Obama’s State of the Union address this past Tuesday focused on US manufacturing and its lead role in bringing the US economy back above board. In the speech, he said:

If you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers…It’s time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America. Send me these tax reforms, and I’ll sign them right away.”

Still unclear, obviously, is exactly what the tax incentives for manufacturers looking to reshore would look like (or, ultimately, if the extent of the incentives is relegated to tax deductions). If any of these incentives are to become reality, Congress should act immediately to get them rolling — but the likelier outcome is that we won’t see much in the way of important legislative activity until 2013.

If implemented, however, government and other incentives for reshoring could play a huge role in stimulating overall economic health, according to Harry Moser, a reshoring guru behind the TCO Estimator who was recently invited to participate in President Obama’s Insourcing Forum. As Moser sees it, successful, broad reshoring efforts could eliminate the trade deficit to the tune of $600 billion a year, add 3 million manufacturing jobs, and 8 million total jobs, effectively cutting the unemployment rate to 4 percent.

If recent updates on the reshoring landscape are any indication, the trend may become more real than scattershot. Back in mid-December, Industry Week cited a Cook Associates Executive Search that found 85 percent of C-level and VP-level manufacturing execs seeing the possibility of certain manufacturing operations returning to the U.S.” The greatest percentage cited overseas cost concerns. Obviously, a possibility” of reshoring certain” operations could be as close to a sure thing as the Chicago Cubs winning a World Series title next year.

So the successful reshoring of the majority of manufacturers’ operations is still relatively far off. But with the proper incentivizing structures and a growing middle class and higher inflation in the Chinas, Taiwans and Indias of the world, perhaps the impetus for companies like Element Electronics to do the right thing” will be actual total cost advantage to produce in and export from the United States.

–Taras Berezowsky

Comment (1)

  1. Rickdpc says:

    Quality control will have to improve, It’s a Win Win

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.