Offshoring is how American multinationals and the tech industry make things. They and Wall Street profit immensely from this system. For both groups, offshoring has become the American way. U.S. production capabilities and skills have deteriorated and become decrepit as a result. The country now faces formidable obstacles to reshoring and, consequently, in its ability to innovate. Those obstacles are now so significant that we should not expect private market solutions, nor can we assume that any individual CEO can solve them. The failings are systemic and collective. The time for incremental solutions has passed. More radical interventions are required.
Our article on reshoring in the Summer 2020 issue of this journal gave an overview of the financial incentives and ideology that led to so much offshoring in the first place. Its focus was on the need for more demand-side solutions. Without stable demand for domestically produced products and components, no company will invest in building up production capacity, and no worker, manager, or investor will invest in acquiring and honing the necessary skills. Trade-related levers could certainly help drive domestic demand—such as the selective use of tariffs, as well as measures addressing currency manipulation, forced technology transfer, and dumping—but these are already well known and often hard to implement. Instead, we argued that “made in America” requirements for government purchases, including tightening the loopholes in existing executive orders, should form the core of policies to ensure stable demand.
This second article on reshoring complements the earlier piece by primarily focusing on the supply side. The United States needs to rebuild its production capabilities and reintroduce market competition in ways that support domestic production. Rather than waging a costly and ultimately unproductive cold war with China, the United States should learn from China, and build the needed institutions and related policies that are now standard in every other major country in the world. These polices have been proven to work. Yet they are largely missing from U.S. policy discussions about how to revive prosperity and production.
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