President Obama and Harriet in Georgia. “Outsourced” jobs are NOT coming back

In president Obama’s Internet Town Hall yesterday he responded to a video question from a woman identified as Harriet in Georgia. Her question related to his plans to bring “outsourced” jobs back to America. Sadly he failed to directly answer her concern.

When our corporation was formed in 1977-79 we sold products for east coast electronics sources to OEM’s and military contractors in California and were called “carpetbaggers” as there were many qualified local sources right here in California.  A few years later we were told that in order to be competitive we needed to sub contract with off-shore sourcing. My joking response, during a 1985 international electronics conference presentation in Anaheim, is that we import products from Catalina Island thereby qualifying them as “imported” goods.

Fast forward to a 1991 Plenary Session presentation that I made in Dallas at another international IEEE electronics conference where I addressed “protectionism” against the USA coming from a unified market of 345 million people in Europe. To crack that market, we had to move operations (or establish joint partnerships). Major factors in that decision included local manufacturing start-up and sustaining capital costs, ideal plant locations, banking and legal issues to employee hiring and worker benefits. Having a “local” presence helped us deal with smoothing of peaks and valleys related to different demand cycles between the US and the European markets.

Another aspect of my presentation dealt with establishing manufacturing operations closer to the US, just over the border in Mexico. This “in-bond” program is better recognized as “Maquiladora” plants. At that time, quoting 1988 data provided by the Committee for the Promotion of Investment in Mexico, Maquiladora’s comprised a work force of 460,000 in 1700 plants exporting $15 billion in products, duty free, to the US. In that presentation I wrote that unlike Pacific Rim manufacturers, who use Asian suppliers, Mexico imported 70% of its goods from the USA which creates jobs in America.

As I reflect back to that timeframe I am reminded of 1992 presidential candidate Ross Perot who warned us about a “giant sucking sound” of job losses to Mexico (and Canada) as he strongly opposed the NAFTA Agreement.

With close to 19 percent of the votes cast in that election many Americans agreed with Ross Perot who in truth possibly cost president Bush 41 his bid for re-election to former president Bill Clinton.

My point in providing this now ancient history is that major factors are considered by management before moving any part or all of a manufacturing operation be it off-shore to Europe, Mexico and South America or any of the many low cost labor nations in Asia.

To Harriet in Georgia, and everyone else who watched president Obama’s Internet Town Hall, I would opine that the vast majority of outsourced jobs are not coming back. 

 We’ve visited Pittsburg and Cleveland. Try to find Bethlehem Steel or huge smoke stacks belching soot into the atmosphere as we address global warming and greenhouse gas emissions. You can’t have both fully functioning steel mills and clean air simultaneously.

Try to find major appliances or big screen TV’s made in America. How about camera’s and infant toys. They are all imported.

Speaking of outsourcing. April 15th is just around the corner. Did you know that Bangalore, India may be processing over 100,000 tax returns as a cost savings for domestic CPA firms? Have you heard that US hospitals have outsourced to radiologists in Bangalore who are reading your x-rays?

With a focus on going green perhaps we should return to being an agrarian nation and simply feed the world.

About Larry Gilbert