What US Manufacturers’ “U-Turn” Tells Us

American businesses that once headed overseas are now returning to their home soil. This means that, instead of decreasing production in China and other emerging nations, manufacturing companies like Ford, GE and Caterpillar are increasing their domestic, U.S.-based production. Indeed, the proportion of American manufacturing outsourced to China in October 2011 had fallen by half of last April’s levels. Companies that entered China have returned to the U.S. at a rate increased by 10 percent, while this year, that figure is projected to rise to 21 percent. Almost enough to fanfare an American economic revival.

We can already pinpoint the main factors behind American businesses’ return to domestic grounds: Wages are spiking in countries like China, while the cost of offshore manufacturing is also on the rise. The average Chinese hourly wage in 2000 was about 50 cents. It has now has risen to US$3.50.

But it would be inaccurate to attribute this U.S. retreat solely to factors shaped by emerging countries. Other important factors include improved American productivity and wage stability, all of which have enhanced the appeal of domestic production. President Obama recently announced a daring tax reduction policy in this regard. This bold measure promised lump-sum tax breaks to American companies that make a “U-turn” and bring overseas profits home in the form of investment in worker training programs. It was an inevitable turn in Obama’s pursuit of job creation.

These factors are creating a synergistic effect that is bringing business back to America. This homecoming is not an indication that the manufacturing-focused America’s economic recovery is temporary. This homecoming points to the increased possibility that it is a sign of long-term recovery. As of now, the U.S. job growth rate — especially in the manufacturing sector — is higher than that of any other industrialized nation. The current situation in Korea lies in stark contrast with the mood in America. The general consensus seems to be that manufacturing no longer plays a significant role in the economy, no jobs are to be had and that big businesses are to blame. It is this anti-business attitude that’s raising taxes on conglomerates and toughening market entry regulations. Even if we try to call overseas businesses back to Korea, these anti-business conditions are no different from trying to drive out the rest of our country’s faltering companies.