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Michael Taylor, partner for international trade with the law firm of King & Spalding LLP, discusses the major factors that are influencing the decision of American manufacturers on whether to shift production from Asia back to the U.S.
The pandemic has hampered the ability of American companies to maintain visibility of their global supply chains, Taylor says. Consequently, it has prompted many to reconsider their decades-long reliance on sourcing and manufacturing in Asia. With current conditions in the trade, including factory shutdowns and severe congestion at U.S. ports and freight terminals, offshoring has disrupted just-in-time inventory strategies.
Another factor in sourcing decisions that was evident well before COVID-19 hit is unfair competition by foreign producers. In an attempt to revive their economies, governments have been increasing subsidies of domestic manufacturing, resulting in some cases in a loss of global market share by U.S. entities.
These and other developments, including the continuation by President Biden of tariffs placed on Chinese goods by his predecessor, are engendering serious conversations about reshoring production to the U.S., Taylor says. But there are obstacles to that goal as well, chief among them a shortfall of labor to staff domestic factories, thanks in part to fears of close contact during the pandemic. “Over time that will level out,” Taylor says, but it remains a serious concern in the short term.
President Biden’s executive order for a review of critical U.S. supply chains, followed by creation of a task force to address the issue, could play a major role in the push for reshoring. Merchandisers are eager not to repeat the experience of the early months of the pandemic, when many essential consumer goods and medical supplies became unavailable due to temporary factory closures and workplace lockdowns.
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