Report: Heartland stands to benefit most from reshoring

The COVID-19 pandemic highlighted the country’s reliance on overseas manufacturing production when there was a lack of medical supplies and equipment to treat those affected by the virus as supply chains were reliant on supplies from outside the country. A recent report from Heartland Forward finds that many domestic and foreign companies are recognizing the strategic advantages of locating in the U.S. and are considering reshoring operations. With the heartland’s historic manufacturing capabilities and its remaining culture, skills and infrastructure to support production facilities, it stands to benefit the most from reshoring activity, and bipartisan support for such an effort has never been stronger, the report maintains. Heartland Forward defines the heartland as the 20 states located largely between the Appalachian Mountains and the Rockies.

The report notes that estimates have suggested that firms fail to accurately estimate the costs of production in other countries by as much as 20 percent and that 10 to 30 percent of projects considering offshore production would find it cheaper to remain or expand within the U.S. if those additional costs were considered. Heartland Forward’s report also notes that the reshoring issue extends to concerns over industrial supply chains, worker training and national security, and goes beyond current pandemic concerns. As many as 400,000 jobs were returned or remained in the U.S. from offshore in 2019, according to figures in the report. One survey cited revealed that up to 70 percent of firms surveyed said they were likely or extremely likely to reshore in the coming years.

To help the reshoring effort, regional economic development strategies should prioritize small, traded sector firms capable of major growth and preserve or attract existing large firms in traded industries, the report holds. “This emphasis should not be confused with a bias against small businesses. … Similarly, large firms in a region can provide a healthy environment for local firms of all sizes and provide a consumer for their goods and services.”

Reshoring would require various policy fixes including tariffs, tax policies that encourage investments in reshoring, loans and loan guarantees, grants, public-private partnerships, as well as supportive educational and physical infrastructure to promote such things as the development of critical rare metals here, the reports says. It also suggests new initiatives in education and a greater understanding of the role of tradeable sectors, as well as major investments in infrastructure. It encourages the federal government to use instruments like “federal loans, loan guarantees and grants under the Defense Production Act, the National Network of Manufacturing Institutes, and the Manufacturing Extension Partnership (MEP) of the National Institute for Standards and Technology (NIST), as well as new tax incentives for investment in high value-added traded sector industries, among other policies.”

“Ultimately, this is about the American economy’s future, particularly those parts of the country where production industries are most concentrated,” the report concludes. “In working toward a comeback of American manufacturing, we would also recommit ourselves to the task of rebuilding our productive capacity and, with it, the economic health of our communities. The Heartland is the logical place to start, and it is poised to lead this charge.”

The full report, made possible in part by a grant from JobsOhio, is available here.