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BLOG biotech : Feb 3, 2012

Business Criteria, Not Patriotism, Determine Manufacturing Decisions

  • John Sterling
In his State of the Union speech in January, President Barack Obama put out the call for strengthening the U.S. manufacturing industry. Two of his significant comments were “we have a huge opportunity, at this moment, to bring manufacturing back,” and “ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.”

Based on the President’s speech, I interviewed several biotech instrument makers for an article on global manufacturing trends that will appear in the February 15 issue of GEN. From those discussions it seems that, at least for the bioindustry, the President was posing the wrong question (i.e., “Ask yourselves what you can do to bring jobs back to your country…”). In fact, a wide range of biotech equipment is already being made in the U.S.

Regarding the possibility of more manufacturing jobs actually coming back to the U.S., talks with biotech officials led me to conclude that the President either does not really understand or is ignoring the main reasons behind the establishment of regional manufacturing operations.

From my interviews with the biotech instrument manufacturers, two key drivers for building a manufacturing facility became apparent: costs and proximity to important and growing markets. Calls for patriotism don’t enter into the manufacturing equation and, from the business point of view, they shouldn’t, as the discussions with biotech manufacturers revealed.

One of the experts I talked to noted that the business world now operates as a global economy and “our customer base is everywhere, not just in the U.S.” Another biotech professional suggested that the U.S. needs to create new jobs and the way to do this is “to encourage investment in education and in the development of novel products and technologies.”

He also doubted that manufacturing jobs, once they went overseas, would ever come back to the U.S. He said the only way this could possibly happen would be for the U.S. government to impose high import tariffs or offer large tax-cut incentives that “ultimately make domestic manufacturing more profitable.” Whether any of these actions will take place is anyone’s guess.

The take-home message is that all types of manufacturing companies, whether based in the U.S. or elsewhere, will go where their costs are cheapest and they can be near their customers. Sound business considerations and not nationalistic pride ultimately determine where companies set up manufacturing facilities on the global stage.