How come the manufactures of automobiles, clothes, etc., didn't move their factories over to

[raccoon]

Mexico, Asia, etc., long before they actually did? Was it just because of trade agreements such
as NAFTA? Or were there other reasons?

Por favor, explain like I'm a 5th grader.

(Disclaimer: I am NOT suggesting this would have been a desirable thing. I hate to see the good jobs go overseas. I'm just asking.)

[TreasonousBastard]

1. With or without the agreements it's a gradual process...

low wages aren't the only thing, especially when labor isn't that important in production.

Transportation, capital costs in building a foreign factory (or the availability of foreign factories already existing) taxes, foreign markets, and the ever-present need for paying off certain people in certain areas are just a few things that go into moving production around.

Several of my clients in a business I had a few years ago were in the garment center of NYC and they actually moved their production back to midtown Manhattan to guarantee that they could fill orders fast enough.

It's complicated.

[NCTraveler]

2. I think certain trade agreements made it more feasible to do so.

They still aren't the only reason. It is often based off simple cost analysis. There isn't some big secret behind it. I believe some trade agreements made the possibility of off shoring jobs more cost friendly. It would have happened without trade agreements and without legislation prohibiting or putting strong standards in place for off shoring. Advances in technology have made it easier to do.

[leveymg]

3. Prior to 1980, American and foreign markets were protected by tariffs that favored domestic goods

You should do some research on the General Agreement on Tariffs and Trade (GATT). While the basic agreement goes back to 1947, the US still held onto many of its protectionist barriers. The World Trade Organization (WTO) which enforces the GATT came into existence in 1994. Also, until recently, the US tax code increasingly favored foreign investment and offshoring of profits.

On the financial side, most investment by US banks was until then in US-based corporations which had their production facilities in the US. World War 2 had destroyed a large part of Europe and Asia, and it took them a quarter century or so to reestablish their industrial base. But, once they did, their factories were more modern and efficient, their products generally more innovative, and management less set in their ways. Japanese cars didn't seem engineered to fall apart after 3 years or 50,000 miles, for instance.

Once in place, these trends led to an almost inevitable relative decline in US manufacturing.

[House of Roberts]

4. Research the technology behind containerized shipping.

When these really big cargo ships designed to utilize these modern shipping containers became plentiful, the ability to move freight across oceans cheaply encouraged moving jobs overseas.

Some companies had to wait until the right manufacturing methods were developed, allowing less-skilled labor to do the same jobs, and then US companies might replace a factory with worn-out equipment here, with a factory overseas full of brand new machines. Then, even if they decide to bring the jobs back to the US, they have to wait for that company to get out of date before moving again.

That's just a couple of factors, certainly not all the reasons.

[Kelvin Mace]

5. There is, in my view, one factor that keeps getting missed

in these discussion of outsourcing. Trade deals like NAFTA created the incentive and made it easier, but what has fueled as is fueling the loss of jobs to countries like China is cheap oil. Even at its most expensive point, oil was probably half the cost it should have been to pay for the environmental damage it is doing. Once oil starts going north of $200, the cost of transporting goods from the Pacific Rim skyrockets and regional manufacturing becomes more economical. Right now it is cheaper to make a chair, computer, t-shirt, toaster, etc in China, then ship it all the way back to the U.S. and truck it to Wal-Mart, than it is to make it locally. Once the cost of transporting the goods to market climbs above a certain point, it again becomes cheaper to produce locally.

At some point in the next few decades, when the environmental death spiral we have created becomes impossible to ignore, carbon fuels will be taxed to a point that it will force us back to local and regional manufacturing. Also, there will not be much choice since rising sea levels will swamp existing ports.

Of course, by then, it will be too late.