The National Retail Federation is writing off US manufactures. This is the gist of a recent press release. In this specific case, they are complaining about a provision in the tax reform proposal that would remove the tax incentive for offshore manufacturing by switching to a destination-based tax system (rather than an origin-based system). According to the Federation’s press release, this would amount to an “import tax” on American consumers. This is because:
Relatively few consumer goods are manufactured at competitive prices or in commercial quantities in the United States, so retailers can’t easily shift to domestic products to avoid the tax.
In other words, American manufacturing can’t compete. And changing the tax code won’t help bring manufacturing back.
This may be a hard statement of fact of today’s situation. But, it is unclear whether it is a viable strategy for the future.
I wonder who the retailer’s representatives think will eventually be buying those products in their stores. Maybe they have succumbed to the post-industrial myth that manufacturing doesn’t matter. They also seem stuck in the industrial mentality that consumer goods must come from cheap mass production factories employing low cost labor. That may be true today for the low end goods – but not necessarily for all consumer goods, especially at the higher value end.
Let me repeat what I have said numerous times before. Manufacturing plays an important role in the I-Cubed Economy. But it is not the same manufacturing in the height of the industrial era. If the Retail Federation represents anyone besides Wal-Mart, they need to understand that the evolution of manufacturing will affect their business. They need to start working with other sectors to help create a balanced economy – and restore some sanity to our international current-account deficit. Otherwise, all those cheap imported goods won’t be cheap (due to the drop in the dollar) or will be left on the shelf with no one able to buy them.