By Adina Moloman
Sources: Forbes, Manufacturing & Technology News
Globalization has brought a growing practice among transnational corporation to relocate part of their domestic operations to lower-wage countries abroad in order to meet competitive demands on product manufacturing.
Nearshore Outsourcing to Mexico and Offshoring has presumably caused a reduction in U.S. output.
When US corporations send work overseas to foreign affiliates that they own or control such as those entities manufacturing in Mexico, those goods or services come back in the form of imports.
The US federal government’s statistical agencies are considering the reclassification of manufacturing in US where transnational companies that outsource their production will be categorized as domestic manufacturers. Those goods or services that come back in the form of imports will no longer be considered imports because there is no change of ownership during the outsourcing and import process, according to the proponents of the reclassification.
So, the US Government statisticians are proposing the creation of an “input price index” for manufacturing that can measure the savings that US transnational companies achieve when they switch from domestic to cheaper foreign sources of parts, components, products and services. They consider it in providing pricing details for many manufactured goods. Such creating a new system that measures the price impact of import substitution and offshoring.
It won’t be an easy task and definitely not cheap research when it might need gathering information of pricing data for their materials, components, parts and other inputs that where used in the country where the goods were manufactured.
If the necessary funds will be allocated to this research, the new measure system may be implemented as early as 2017. This will provide new ways to examine the nature of offshoring and its impact on the U.S. economy.