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For the past three decades, Western multi-nationals have been outsourcing production to low-cost centres like China, creating global supply chains. But business executives now appear to be moving away from the concept of globalisation.
Today, instead of celebrating free trade, US executives are calling for fair trade. This is a polite euphemism for better terms for US companies. Business leaders are aligning themselves with President Donald Trump's "Make America Great Again" rhetoric.
We're going to bring back made in the USA.
But there's evidence a shift was already underway. In 2012, a survey showed that 30% of executives said China was the most likely destination for US company investment, against 26% favouring local production. But in 2015, only 20% of companies planned to boost production in China as opposed to 31% that were looking to America.
One reason for the shift is a rise in relative wage costs in China. Another is that production costs in the US have fallen because of automation and cheap energy. However, a third point is that chief executives have realised that long supply chains create political and logistical risks. Nobody should overstate the speed of this shift-- it is subtle and slow. For better or worse, we face a more localised world. And that trend owes as much to robots and digital technologies as President Donald Trump.
We can turn it around.
