The Decline in Number of U.S. Manufacturing Plants

Thursday, January 24, 2013

Single-minded attention on runaway plants, and for that matter their return to the United States, is misplaced. Relatively few plants are shut down in the United States by an owner who opens up an identical facility abroad and supplies the U.S. market with imports from the foreign affiliate. A widespread, more fundamental reason for plant closings and openings is the sourcing decision (where firms purchase intermediate goods and services—from domestic or foreign suppliers). The procurement decision is based on cold, hard calculations of the total cost of ownership. Although economic forces and business requirements seem to be shifting in favor of domestic sourcing, there is little evidence that a manufacturing revival has occurred—the necessary positive economic and strategic forces are not reinforced by sup­portive public policy.