Made In America… Again! – Bloomberg

? you’re watching “market makers,” i’m erik schatzker.

Made in america, you’ll be seeing that label more and more.

Politicians and big retailers are embracing what they believe is the job-creating power of u.s. made products.

A story out today says a majority of manufacturing firms are manning to reshore jobs back to the united states from china.

Hall sirken is a senior partner at the boston consulting group who ran the survey and is here to tell us why so many companies are jumping on the made in america bandwagon.

There are a number of reasons, hall.

Some of them surprising and some not.

Let’s go through them.

Most importantly is there’s been a fundamental shift in economics of producing in china versus the united states.

Over the last few years we’ve seen the gap closing and had been a 15% to 20% wage differential from the united states and china and that’s a huge advantage for the u.s. there had been so the fact it’s closing is an advantage.

Exactly.

There has to be more to explain it than just cost and the reason i say that is because there are other low-cost centers, vietnam, for example.

Some places in africa are trying to get into this game, low-cost manufacturing, taking what china has and making it their own.

Because it’s been a good route for china?

Absolutely.

A number of countries are doing this.

They don’t have the ability china has the ability to make high end products and you can do some things in vietnam and bangladesh, mostly shoes and clothing.

These are the number one reasons companies cited as bringing jobs back to america.

Cost is a big factor.

You were talking about quality.

Exactly.

And the proximity to customers.

Proximity is important for a number of reasons, one of which is there is a high transportation cost if i’m shipping something from china to the u.s. you may be paying in terms of taxes and duties and shipping costs something like 12% to 14%. that’s a huge difference.

And — keep going.

And i think that you also have an advantage in terms of just being near the customers so you can be near the r&d centers and know the products better.

I’m looking at more of the results and we can’t really reproduce the same graphic because it’s quite detailed but some things here that weren’t cited as big reasons to bring jobs back to the united states, surprise me, for example, you don’t see reference to the things that many people trumpet about the american economy, innovation, for example.

Ease of doing business.

These things do figure here but they’re not really prominent relative to cost, proximity and quality.

I think those things do bare and most people are taking them for granted when they think about the survey because people expect if you’re in the united states you’ll be more innovative.

They expect other things are there and people may not have thought of these things.

The other two that surprised me because you hear so much about them, access to skilled labor and taxes.

Right.

There are a lot of people who have you believe that we need to cut taxes in this country, particularly for corporations if we’re going to attract business.

The companies surveyed don’t say that’s a top priority.

Two things are important, skilled labor in the u.s. we don’t have a massive skilled labor shortage people believe.

And for things like welding the average age of a welder is 57 years old and will be retiring.

And on taxes, of course, that’s only a small portion of the cost structure.

You only pay taxes not only your total cost but the profits you make.

So i think there would be value to repate reation of earnings — repatriation of earnings kept overseas so taxes aren’t the big issue.

Let’s go to the conclusion the survey draws which is that twice as many companies now as those whom you surveyed back in february of 2012 say that they intend to move manufacturing back to the u.s.. when is that going to happen?

That data says within the next two years.

You’ve got to remember it takes a while to build a plant.

It’s three or four years to do so so we’re not going to see this.

This is a leading economic indicator.

Here’s the key question, manufacturing doesn’t necessarily mean jobs.

How do we know that the manufacturing that’s moved back from china, where there have been — where labor has been low cost, is going to translate into jobs, high value jobs in america and not a bunch of robots.

Even if you have a plant jai alai automated you still have manufacturing workers in that plant.

Typically if there were a hundred jobs when the plant was first in the u.s., it went up to about 350 jobs in china because they’re less efficient.

And when plants come back, it’s somewhere between 60 and 70 jobs.

It won’t be the hundreds that left.

It won’t an one to one.

The 60 or 70 is a lot of jobs coming back if you add it to a lot of plants.

By 2020 it could add as many as five million manufacturing jobs?

As many as five million overall.

Back to the peak but will take us quite a ways.

That’s a big change because for many years we’ve been seeing a drop in manufacturing jobs.

It was $24 million in 1970 and now $11.6 million in the u.s. the fundamentals are — those numbers actually matter.

Great to have you here and sharing the results of your survey.

Hall sirkin is senior partner at the boston consulting group, talking about reshoring.

In a moment we’re going back to the bloomberg markets 50 summit.

Three of the biggest names in the hedge fund business.

This is “market makers” on bloomberg television.

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