TONELSON: Apple’s made-in-U.S.A. plan fuels wishful thinking

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ANALYSIS/OPINION:

Sorry to spoil the party, but I am completely unimpressed with Apple’s announcement last week that it will resume manufacturing some computers in the United States next year. I’m even less impressed with the larger narrative continually fed by such news for months — that America is reclaiming from an over-the-hill China the mantle of global industrial leadership.

Although Apple CEO Tim Cook’s motives may be unimpeachable, and American high-tech manufacturing won’t be rebuilt in a day, his decision certainly looks like tokenism. For example, in early 2011, the now-deceased Apple founder Steve Jobs reportedly told President Obama that the manufacturing jobs sent overseas by the company “aren’t coming back.” Suddenly, Apple now sees a dramatically different sourcing picture? At the same time, the product reportedly to become American-made again is a desktop computer — a breed that innovation by Apple and many other tech firms is rapidly making obsolete.

The $100 million Mr. Cook says Apple will spend on the new facility sounds considerable — especially for a PR gambit. But the company’s cash hoard tops $120 billion, and its 2012 nonretail capital expenditures budget is about $9.5 billion. From that perspective, its glowing new notices are a screaming bargain. And Mr. Cook no doubt expects the actual cost to be far less, once state and local governments start falling all over themselves trying to lure the investment with big tax breaks and subsidies.

No more credible is the all-but-viral America-supplanting China meme, which most recently is dominating the new issue of the Atlantic monthly. A seemingly endless string of anecdotes and high-profile champions — including Mr. Obama — compellingly buttress the claim. So do falling energy costs for domestic industry, rising Chinese wages, and the appeal to manufacturers of locating close to customers.

The only problem: The national- and global-level data say almost exactly the opposite. For example, if China’s manufacturing clock is rapidly being cleaned by America, why have the Chinese taken the global industrial output lead during the past two years, according to the consulting firm IHS? Why does the manufacturing-dominated U.S. trade deficit with China keep growing robustly despite stagnating overall U.S. economic growth? Why did the U.S. manufacturing trade deficit with China set a new monthly record, as shown in Census Bureau data released yesterday?

Why are American purchases of Chinese manufacturers today increasing faster relative to U.S. economic growth than before the recession, when no one had spotted an American manufacturing renaissance? Why have high-value goods as a share of these U.S. imports risen from 15.5 percent to 20.86 percent since 2000 by the most conservative methodology — and from 16.39 percent to 28.64 percent if products like cellphones and smartphones are included? And why will an upcoming U.S. Business and Industry Council report reveal that the share of high-value U.S. manufacturing markets supplied by China is up more than tenfold since 1997 and hit 6.20 percent last year?

Moreover, if American manufacturing is becoming such a world-beater, why do IHS’ calculations show it losing ground in global output rankings to the crisis-ridden European Union? Why did the overall U.S. manufacturing trade deficit hit its own all-time high in October, according to new U.S. government figures? And why were foreign-based manufacturers last year supplying fully 37.57 percent of U.S. consumption of a broad cross-section of advanced industrial goods, up from 24.49 percent in 1997?

American manufacturing’s promise remains unmistakable — reflecting strengths like robust innovation and high productivity. But its performance remains hamstrung by public-policy blunders — especially international trade decisions that have permitted unfettered import competition from countries that impede U.S. exports, that produce in conditions unacceptable in the United States, or both. Once these policies are overhauled, national reindustrialization could actually move the economic needle. But not one instant before.

Alan Tonelson is a research fellow at the U.S. Business and Industry Council, a national business organization whose nearly 2,000 members are mainly small- and medium-sized domestic manufacturers. The author of “The Race to the Bottom,” Mr. Tonelson also is a contributor to the council’s website, www.AmericanEconomicAlert.org, and tweets at @AlanTonelson.

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