‘Reshoring’ boosted by Wal-Mart

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‘Reshoring’ boosted by Wal-Mart

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A worker makes product to be supplied to Wal-Mart at a manufacturing facility in the United States. The world’s largest goods buyer announced a reshoring initiative in August 2013 and pledged 250 billion dollar over 10 years. [WAL-MART WEBSITE]

The world’s largest retail company, Wal-Mart, is one of the leaders of the awkwardly labeled “reshoring” movement, or bringing manufacturing back to the U.S.

The Wal-Mart Reshoring Initiative, announced in August 2013, pledged $250 billion over 10 years to supporting domestically produced goods. The goal was to restore America’s manufacturing industry, which has withered with globalization and outsourcing.

Deindustrialization refers to removal or reduction of industrial capacity in a country or area. For decades, U.S. manufacturers sourced more and more products from overseas, where labor and other costs were cheaper. The U.S. government wants to support reshoring, or bringing manufacturing back to the country, creating jobs.

After Wal-Mart announced of its initiative, Emilia Cosmetics moved its manufacturing from Israel to the U.S. Lonati, an Italy-based textile company, moved some manufacturing to the U.S.

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As of July, 68 Wal-Mart suppliers have decided to take part in reshoring. Boston Consulting Group concluded that Wal-Mart’s reshoring is capable of creating 1 million jobs in the U.S.

Reshoring is most effective when big companies like Wal-Mart take part. In the U.S., home-grown giants such as Apple, General Electric, Whirlpool and Ford are actively participating.

According to Lee Ji-seon, an analyst at LG Economic Research Institute, nearly 700 companies returned manufacturing to the U.S. after the country started reshoring policies from 2009 through 2014.

“If a conglomerate supports reshoring, small and midsize companies that supply goods to them can take part as well,” said Yang Geum-seung, a research fellow at the Korea Economic Research Institute. “If a country can persuade conglomerates, which play the role of hubs in an industrial ecosystem, partner companies and suppliers will hop on the reshoring plan.”

Cooperation with local governments is also important. Local governments target companies for reshoring in Japan, as each region has different needs and business environments. Bringing the companies back is the local governments’ role.

Mie Prefecture in Japan persuaded Sharp to build a manufacturing facility in the region. Saitama Prefecture even set up a team to attract companies. Shimane Prefecture offers subsidies for IT service industries and Aichi Prefecture released an aggressive land support plan for reshoring companies.

“[Korea] has to expand the discretionary authority of local governments to selectively attract companies that could boost local economies,” said Kim Eun-kyung, a researcher at Gyeonggi Research Institute.

Experts also stress the need to create business-friendly environments.

“For companies who shifted production abroad for lower labor costs, there must be some advantage to coming home that makes up for higher labor costs,” said Moon Jong-chul, a researcher at the Korea Institute for Industrial Economics & Trade.


BY MOON HEE-CHUL [kim.jeehee@joongang.co.kr]

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