American reshoring will challenge both Canada and the United States to change their manufacturing approaches. This gives both nations an opportunity to keep their workforces and supply chains globally competitive with economic competitors like China. But it will not return old manufacturing jobs, and may lead to additional job-loss in low-skill manufacturing.
In any case, economic growth now no longer runs solely through access to emerging markets low-cost manufacturing. Rather, it rests of market access to these nations and advanced economies using sophisticated approaches and a highly skilled workforce to build the in-demand products of the 21st century.
A crucial test for this economic opprotunity: Whether Canada and the United States can take their economic relationship to the 21st century through the Beyond the Border Action Plan and the Regulatory Cooperation Council.
From the Financial Post:
Earlier this year, research company Alix Partners released a report that showed the United States had reached cost parity with Mexico as a preferred near shoring location, and that it would reach similar parity with China by 2015.
In lay terms, that means it costs American companies no more to keep their production on home turf than it does to offshore it to traditionally low-cost locales in the far east.
From Prof. Biehl’s perspective, much of Canadian manufacturing is still rooted in more traditional production functions that require little skill and can be offshored at anytime.
“In Toronto, we have manufacturers who make margarine tubs — a low value item that is low risk and low capability. That is something that you can easily purchase from somewhere else. Why do we do that here? Maybe someone can eek out a living, but that doesn’t contribute much to our manufacturing sector.”
Observers predict there will be a significant contraction in the volume of manufacturing jobs and that the remaining jobs will be require much greater degrees of skill and training.
Prof. Biehl points to Germany as a successful case study of a jurisdiction with high labour costs and an unfavourable currency value that has succeeded in exporting its wares to the world.
“Not only do they sell their products but they’re able to customize their products to the demands of the customers, but also then provide services like installation, maintenance and trouble shooting through highly experience technicians or engineers… it’s a whole package they’re selling, not just a machine.”