Andrew Viteritti, commerce and regulations lead with The Economist Intelligence Unit, shares the conclusions of a recent whitepaper that predicts no major shift of manufacturing from Asia to North America over the next four years.
Contrary to increasing optimism about the possibility of manufacturing returning to North America, and even the United States, from Asia, the EIU paper identifies four major reasons why that’s unlikely to happen.
The first is the relative resilience of Asian economies, and their rapid bounceback from the impact of the COVID-19 pandemic. Asia’s exports have recovered more quickly than any other region, Viteritti says, and even a spate of new infections within the continent isn’t likely to seriously disrupt trade and production there.
Second, Asia offers opportunities for manufacturers looking to serve a growing consumer market. “The region is chockful of them,” Viteritti says, “which is going to discourage businesses from moving supply chains out of the region. They want to be close to those markets.”
Third is North America’s “relative lack of competitiveness.” While the Biden Administration seeks to repair trade and diplomatic ties with traditional allies, protectionist policies in the U.S. and Mexico continue to frustrate efforts to fully exploit the advantages of the new U.S.-Mexico-Canada Agreement. Mexico’s recent push for a “nationalist and statist” agenda is of particular concern, Viteritti says.
Finally, EIU expects COVID-19 to recede as a major issue for businesses, which have based many of their decisions over the past year on conditions caused by the pandemic. But as the virus becomes more contained, and vaccines are rolled out to more people, the pandemic will “move down in the pecking order, and we’ll see cost and competitiveness reign supreme again,” Viteritti says. And that means a continued emphasis on production in Asia.
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