Globalization, Brexit and the Rise of Localization

With the passing of Brexit, the British voted for local control of immigration, regulations and the economy – in turn, rejecting globalization. The 2016 U.S. presidential race shows a similar backlash with U.S. manufacturing’s wide support for reshoring and its rejection of the Trans-Pacific Partnership (TPP).

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With the passing of Brexit, the British voted for local control of immigration, regulations and the economy – in turn, rejecting globalization. The 2016 U.S. presidential race shows a similar backlash with U.S. manufacturing’s wide support for reshoring and its rejection of the Trans-Pacific Partnership (TPP). Even before Brexit and the 2016 election race, international trade had plateaued. Globalization’s peak is no surprise given the inherent economic inefficiencies and environmental damage associated with producing goods or rules far from the point of consumption.

In a statement made earlier this year at Davos, AT Kearney, a global management consulting firm, asked“Globalization is Dead: what now?” And in “‘Brexit’ in America: A Warning Shot Against Globalization,”  Jeffrey R. Immelt, G.E.’s chief executive, offered an answer – “A localization strategy.” Mr. Immelt said GE’s goal is to achieve “a local capability inside a global footprint.” Localization – production in the market where the product will be consumed – is a strategy increasingly used by many large companies to shorten supply chains and reduce shipping costs.

On the reshoring front, Harry Moser, president of the Reshoring Initiative, said that offshoring has slowed considerably. “The bleeding of manufacturing jobs to offshore has already stopped,” commented Moser. Data from the Reshoring Initiative shows that new reshoring, including Foreign Direct Investment, balanced new offshoring in 2015 as it did in 2014. In comparison, in 2000-2003 the United States lost net about 200,000 manufacturing jobs per year to offshoring. U.S. companies, retailers and consumers are, collectively, implementing localization, voting with their dollars.

Localization also yields a green benefit. It reduces world environmental impactsthrough reduced carbon emissions fromproducing in developed countries and from much shortertransport. According to Moser, “We have gone from globalization at any cost to our economy, long-term company sustainability and the world environment to recognizing that via localization, a company often can embrace all of these benefits while maintaining or improving profitability.”

The Reshoring Initiative is seeking collaboration and support for development of its Corporate Social Responsibility Estimator (CSRE). The new tool will quantify two key societal impacts of sourcing decisions:  on the environment and on the domestic economy.  By giving corporations a clearer and more accurate understanding of their decisions’ impacts, we will accelerate the reshoring of manufacturing to the United States, yielding a better outcome for the U.S. economy, the planet and the participating companies. 

The Reshoring Initiative wishes the British a successful Brexit and encourages U.S. consumers and companies to buy and produce more in-country. Both countries will find that avoiding globalization for its own sake brings economic strength and stability.