Should Offshore Manufacturing be counted as U.S. Production?

Outsourced manufacturing

Globalization has had such a dramatic impact on manufacturing in the United States that federal agencies are considering changing the way they define and measure U.S. output and production.

A new manufacturing classification, which may be implemented as early as 2017, according to the August 20 edition of Manufacturing and Technology News, could mean wholesalers that outsource their production are categorized as domestic manufacturers.

The proposal, put forward by the U.S. Economic Classification Policy Committee (ECPC), is an attempt by the federal government to track just how much production is being offshored and which American companies are linked to manufacturing, even though they don’t make the products they design and sell.

The new classification comes in response to the vast number of American businesses that outsource their manufacturing to countries like China and Bangladesh, and the somewhat outdated way economists measure U.S. output. Under the new definition, factoryless goods producers like Nike and Apple, as well as garment and apparel companies, will have their sales counted as U.S. production.

The way we understand exports and imports could also change. Goods that are manufactured overseas for American companies and then brought back into the U.S. will no longer be considered imports because, the ECPC argues, there is typically no change of ownership during the outsourcing and import process.

The question of ownership could have far-reaching consequences.

For one, it’s still unclear which companies can truly be defined as factoryless producers. A company like Apple may own the design, production and sale of its product, but it may not have full ownership of the materials, equipment or processes used in the making of that product.

The ECPC wants to paint a broad stroke, defining any company that offshores manufacturing while retaining economic ownership and intellectual property rights over the finished product as a factoryless producer. A wholesaler outsourcing to China who fits the ownership model will be considered a U.S. producer and its foreign counterparts could potentially be subject to U.S. regulators like the FDA, the EPA and OSHA.

This in turn could place a huge burden of factoryless producers to record and document their outsourced manufacturing and supply chain activities, and in the event of another Foxconn, U.S. companies will have to face legal ramifications along with the public flogging.

The recommendations of the ECPC have provoked nationalist sentiment among some groups who claim that it’s an attempt to fudge the numbers, making it appear that American manufacturing is thriving. Whatever the motives, it’s likely that the reclassification will provide new ways to examine the nature of offshoring and its impact on the U.S. economy.

What do you think? Should America’s outsourcers be classified as domestic manufacturers?

About Nancy Pardo

Nancy Pardo is a Seattle-based writer and editor. She holds an MA in Professional Writing. She began her career as a Washington DC-area reporter, moving on to become an editor and contributor for several top industry magazines in the U.S. and the Middle East. Nancy currently works for PTC as content marketing director and manages the company's award-winning blog Product Lifecycle Stories.
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8 Responses to Should Offshore Manufacturing be counted as U.S. Production?

  1. james says:

    It has a effect. If it remains in house. It saves companies paying the Vat tax overseas to bring here. A tax break and a big one for shipping jobs overseas. A fresh backstabbing of the American worker is what I see.

  2. LBFM says:

    You can call a road apple a bar of gold, but it still smells.

  3. Nicholas Smith says:

    Hell No! American jobs in America by American Citizens should be the measure.

  4. BraveyCat says:

    It is a terrible plan. It is as bad as using GDP as the main measure, which supplanted GNP. If this goes forward, the “numbers” could show 100% production, while zero is actually being produced in America. Down with Globalization! Let’s return to the concept of International Trade and reinstitute Tariffs. Perhaps we could recapture some of the 40% of production on American soil that big business has handed over to other countries at the detriment to our society.

  5. Dave S says:

    That’s ‘cooking the books’. no different that counting part time workers to make the unemployment numbers look better. Does anyone believe any number our government puts out about anything?

  6. Jenny says:

    It is cooking the books, that is what the Obama fraud has done to the US

  7. aNNA says:

    The average USA citizen doesn’t care about anything but getting Nikes for little Johnny or Jenny….they CHOOSE to not see the long-term cost / negative impact.

    Meanwhile, the govt will continue their PC changes to increase their control and tax revenue.
    Meanwhile, corporations will continue slave labor.
    Meanwhile, little Johnny/Jenny become enraptured in a materialistic/entitled world.

    WAKE UP PEOPLE…..

  8. Nuke MM-USS Theodore Roosevelt says:

    What should we expect from the government, no matter if it is run by the Democratic or Republican party (that is the party establishments). Far too much of our government and our politicians care about one thing, their own benefit/wealth/power. The point of this whole “change the numbers” bs is to manipulate the story to make things look good for themselves. Obama did it before the election with unemployment numbers, government in general does it for whatever power grab/tax/law they want to implement. Unfortunately the truth doesn’t seem to work!!! If Americans only knew the true numbers about what goes on, we would revolt. The numbers for the national debt have held steady for the last 5-6 months according to the government (Do you really believe that?), the cost of adding millions of people to our free government medical care is basically adding money to our coffers, bringing in millions of illegals into our country and making them legal won’t cause wages to drop, nor will it cost government anything…LOL. Lie after lie after lie!!!!!!

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