Insights
Biden Order Supports “Made in America” Personal Protective Equipment (PPE)
The COVID-19 pandemic exposed risks of offshoring the manufacturing of personal protective equipment (PPE). In an effort to return production of PPE back to North America, the National Council of Textile Organizations (NCTO) has launched a new initiative called MakeAmericanPPE.
NCTO’s efforts have been bolstered by President Biden’s signing of an executive order strengthening the federal government’s Buy American provisions. Among other things, the order directs federal agencies to close loopholes involving measurement of domestic content and increase the percentage of domestic content in American-made products.
Made In All of America Incentives Will Create Jobs
President Biden’s nominee for treasury secretary, Janet Yellen, said Thursday that the president’s “offshoring tax penalty” would incentivize U.S. companies to “create and maintain jobs at home.”
The tax penalty, which would establish a 28% corporate tax rate and 10% offshoring penalty tax on U.S. goods and services produced overseas, is part of Biden’s “Made in All of America” plan to bring manufacturing jobs back to the U.S. and encourage purchases of U.S.-made products.
“The president’s objective is to create incentives for American companies to create and maintain jobs at home,” Yellen, the former chair of the Federal Reserve, said in her written responses to the Senate Finance Committee where she was unanimously approved. She is expected to be confirmed by the full Senate as Treasury Secretary on Monday January 25, 2021.
USA and Mexico Fueling Job Growth From Reshoring
FDI Markets found that in 2020, reshoring accounted for more job growth than foreign direct investment (FDI), with 69,000 manufacturing jobs reshored compared to 42,000 roles created through FDI. The pandemic has accelerated this trend as companies look to strengthen supply chains and meet the needs of consumers as they search for U.S.-made products.
The automobile manufacturing industry will benefit from this trend on both sides of the border. For companies that are searching for ways to save money on labor while ensuring at least 75% of a vehicle is made in North America. Mexico fits the bill to achieve both of those objectives.
Mexican officials expect their country to play a larger role in supply chains of the future. Mexico is partnering with the private sector to develop infrastructure to support growth, with 29 infrastructure projects underway.
https://www.freightwaves.com/news/transmission-mexico-the-land-of-opportunity-for-auto-industry
Long-Distance Supply Chains Could Be Like Dinosaurs
The coronavirus crisis snarled global shipping in early 2020, as borders closed. Industry experts expected shipping to stabilize as vessels returned to position. A year after the pandemic started, the shipping crisis has become much worse. Standard container rates on some one-way transpacific routes that were $2,000 have increased to $13,000, transit times have increased and congestion at some ports has become a costly nightmare. If these problems persist, some experts now think that container shipping could eventually become extinct, like the dinosaurs. This is one more reason for companies to think about abandoning long-distance supply chains for more localized manufacturing and supply chains.
Forward-Thinking Texas County Looks to Catch the Reshoring Wave
Waller County, TX is located about an hour’s drive west of downtown Houston. The Waller County Economic Development Partnership (WCEDP) understands global opportunities and their leadership has positioned the county to benefit from a wave of multinational companies interested in reshoring operations to the U.S.
For decades, factors such as cheap labor, inexpensive transportation and endless incentives convinced companies to move their production facilities out of the U.S. But, according to the Reshoring Institute, “a growing number of businesses have rethought their global manufacturing strategies,” which has led to an increasing number of companies bringing at least part of their production back to the U.S.
“We realize that relocating facilities can be a costly investment. As such we have been preparing to attract new opportunities through our incentive program, working with local schools to develop a workforce and access to workforce grants and improving our infrastructure,” said Vince Yokom, WCEDP’s Executive Director. “While incentives can play a strong role in relocations, the workforce and infrastructure assets are usually considered more important to sustain long-term operations.”
Expect Waller County to play a proactive role in the trend to reshore from international locations.
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