Talk of a reverse migration of manufacturing from China to the U.S. has been buzzing across union halls and factory floors, corporate boardrooms and Wall Street.
The cost of shipping outsourced goods from China to U.S. customers has doubled in just two years thanks to high oil prices, and labor costs in China are rising sharply.
I suspect that a lot of the low end manufacturing that was done in China will wind up in Latin America. America will benefit where we have an existing base of facilities and talent. China likely will still be a force in high tech goods and other items that are labor intensive and have a high value to weight ratio. Going the other way, I wonder what the impacts of high transportation costs on U.S. agricultural exports will be?
When the various free trade agreements were inked, the line was that Americans would be moving out of low value manufacturing and into high value Information Technology jobs. Rising energy costs are having a much bigger impact on moving physical goods than on moving data. Perhaps Paul Krugman was right.