Now is the perfect time for America to leave China manufacturing behind

OPINION:

Despite record-high inflation, soaring gas prices and rising mortgage rates, consumer spending is, oddly,  as strong as ever. Retailers are trying to contend with unprecedented demand, but skyrocketing shipping rates and port congestion are severely hampering their efforts. Now, at a time when demand is as high as it is, there has never been a better opportunity to switch to local, U.S. manufacturers, rather than continuing to put up with the supply chain disruption and exorbitant costs currently being incurred by overseas production.

Over the past year, in the face of a variety of economic pressures, U.S. retail sales have been steadily and defiantly on the rise. As an inventor this is exactly the environment you want to be operating in. Retailers are on the look-out for greater diversity of products, and it’s getting easier to get units placed in the likes of Walmart, Home Depot and Lowe’s.

However, this exciting terrain is in danger of being parched by the U.S.’ crippling reliance on overseas manufacturers. Over the past couple of decades, we have been actively suffocating our manufacturing sector as companies instead choose to open up cheaper factories in countries such as China and Vietnam.

From 2016 to 2018, for instance, nearly 1800 factories across the U.S. disappeared. The news of Mondelez International – formerly Kraft Foods – putting 600 Americans out of work as they moved their factory abroad has become a drop in an ocean of similar cases.

Especially now that Trade Adjustment Assistance, which has thus far been America’s main antidote to this virus of avoidable job loss, has been terminated, it is time that we invest in re-establishing the U.S. as a manufacturing hub.

It is becoming less and less practical to continue relying on Chinese factories, when shipping spot rates have reached all-time highs and the cost involved in virtually all routes, including the pivotal channels of Asia-West Coast and Asia-East Coast, are also leaping up. Unprecedented levels of port congestion are adding to the delays and disruption. Home Depot has even taken the drastic step of buying its own boat as a last-ditch effort to overcome these far-ranging shipping problems.

The traditional peak season for ocean shipping has just gotten underway, so these unsustainable pressures are only going to grow more intense.

The solution is right under our noses, but the government has so far been too eager to appease foreign superpowers to open their eyes and see it. While the cheaper labor costs have traditionally been the key motivation for opening overseas factories, this is now being outweighed by the shipping chaos. The longer the supply chain, the greater the opportunity for mistakes and delays.

Similarly, reintroducing an emphasis on homegrown manufacturing can help businesses to reduce their delivery costs and lead times. From a more socially-minded perspective, this offers a much more eco-friendly alternative to ocean shipping, which is responsible for around 940 million tonnes of annual CO2 emissions, while it also creates jobs in the local community.

Aside from this, there is the obvious point of quality. If your manufacturer is on home soil, you can keep a closer watch on the process and ensure that the finished product meets your specifications. Particularly for inventors looking to create their first prototypes, this is crucial in enabling them to secure a lucrative retail deal.

This is a transition that consumers have long been calling for. 91% of Americans believe that it’s important to have U.S.-made goods, while 64% report that they would be happy to pay more for a product that was made in America, compared to an overseas item.

In order to instigate this shift towards local manufacturing, President Joe Biden’s ‘Made in America’ tax credit is a welcome sign of progress, as is his commitment to ensuring that the Federal Government is using taxpayer dollars to buy American products and support US supply chains.

However, the consumer demand we are currently experiencing presents an unparalleled window of opportunity for inventors and manufacturers. The longer we take to solve our unhealthy overseas dependence, the narrower this window will become, until it is a mere chink of light that is blocked out by a handful of large corporations. We must look to the example of Germany, in which manufacturing comprises a larger share of the GDP than any other European country. Germany also boasts over 53 patents per 1000 researchers, compared to the U.S.’ 39.

Germany has become a manufacturing powerhouse through a variety of factors, such as the institutional support offered by its technical universities, as well as strong regional-state collaboration to implement core policies, such as the apprentice system. The U.S. can learn from all of this; but above all, we must share Germany’s commitment to investing in its workers. While the U.S. sends everyone through the same structured four-year degrees, Germany offers a dual education system, which provides vocational experience alongside classroom learning. This includes highly skilled manufacturing work. In addition to this, they provide a significantly higher level of hourly compensation for factory workers compared to the U.S.

We need a targeted approach from the U.S. government in order to bolster long-term investment in the manufacturing sector, and to make the industry more appealing industry for ambitious, young workers. These measures must be coupled with the continued introduction of more immediate policies in the same vein as Mr. Biden’s ‘Made in America’ tax credit, which will provide incentives for companies to return to onshore manufacturing.

We stand on the precipice of a golden age for inventors. What a waste this will be if we instead choose to turn back and fund a golden age for Chinese manufacturing.