One bet on the economy is that American manufacturing is staging a comeback. With labor costs rising in China, U.S. companies are taking a second look at operations and incorporating more domestic production.
Now in a twist on "Made in USA" and the larger reshoring movement, more small to mid-sized U.S. businesses are making and exporting goods as part of their growth strategy. Six years after the recession began, the U.S. recovery is patchy. A measure of Americans working, and those seeking jobs—the labor force participation rate—has tumbled to near 35-year lows.
More business owners are canvassing this new normal and thinking: We need to export.
Large multinationals have been exporting for decades. Now, even smaller companies based in smaller cities—thanks to e-commerce and access to ports—are courting international markets. Inside regional U.S. airports, entrepreneurs are boarding international flights to pitch products. Workers at U.S. ports are loading more containers, packed with everything from U.S.-origin lumber to glass.
A Pennsylvania company is shipping building materials to Mongolia. It's one of the coldest countries, where effective home insulation is a big challenge. A Tennessee business is ramping up patterned glass production, destined for churches and homes in South America and Europe. A Florida maker of porcelain lighting is not only exporting but has opened an Australian outpost after orders climbed. Only a handful of U.S. companies make porcelain lighting and opaque patterned glass, with the bulk of such production is in China.
More businesses are making bigger bets on exports, as many American consumers spend cautiously.
"Every company needs a fallback contingency plan," said Eric Kerney, president of Heritage Glass in Kingsport, Tennessee. "Our contingency plan is we can diversify."
And this direction of "Made in USA" goods overseas is contributing to the post-recession recovery. "Manufacturing is key to providing jobs and driving the economy," said Bryan Scott, co-owner of Barn Light Electric based in Titusville, Florida.
"Even small companies are participating and exporting their products to China," said Hal Sirkin, senior partner at The Boston Consulting Group in Chicago.
Global manufacturing is shifting. And one key reordering of winners and losers is the narrowing gulf between China and the U.S.
Triggered by changes in wages and energy costs, the difference between China and U.S. in manufacturing costs—before transportation—has narrowed to less than five points, as recently measured by the consulting group in an April report. A decade ago, that gap between the U.S. and China was wider at 14 points, said Sirkin, who led the research.
"It used to be that if you said more or less you wanted a low-cost manufacturer, you go to South America and Asia. If you wanted a high-cost manufacturer you go to Europe and the U.S.," Sirkin said. "That's no longer true."