Insourcing  - the movement of wood manufacturing and other industrial production to the U.S., is gaining momentum.

Advantage America includes lowest cost energy sources (amazingly cheap  natural gas), stable currency (no Euro zone here) and abundant natural resources. Especially so for the wood industry.

As well, U.S. workers are among the most productive in the world - increasingly reliant on automated systems that minimize labor, but also place greater demands on the intellectual agility of workers.

It's my contention that there is something else working to our advantage here: the fundamental integrity of operating social values.

Yes, we are cut throat capitalists. Yes, we have business crooks. But the fabric of values that underlies contractual agreements - a deal is a deal - is honored as standard business practice. And uniform enforcement through courts and regulatory groups keeps us honest, and the playing field level. For U.S. businesses, or any business, honesty is the best policy - for businesses large and small. It's simple, easy to remember, and you never get tripped up in your story with customers.

That's not the case everywhere, as businesses that transferred assets and intellectual property to China learned  - to their regret. The values there are different: intellectual property was historically seen as communal property.

Understandings implicit in dealings within most of the world's markets are not viewed the same way in China, which is working to the detriment of businesses there. It's a case study of why our market principles work, and what happens without them.

The scandal at China's flooring and forest products firm Sino-Forest contaminated a  stock offering by VIPshop, another China-based firm seeking to go public - its stock fell soon after its offering. Investors recalled a $500 million loss suffered by Paulson & Co. on its Sino-Forest investment. 

China's legal and business traditions limit the ability of firms to succeed without breaking the formal rules. Implicit agreements embodied in contracts are not understood -  which can lead to unfortunate events such as sub-subcontracting to unspecified multiple vendors, one of whom may use mercury-laced paints, etc., creating liabilities.

While the U.S. furniture industry willingly transferred its production across the Pacific in years past, we're now seeing a reversal of fortune - to our benefit.

Ethan Allen and La-Z-Boy are among the latest wood industry businesses reporting success in exporting to China. La-Z-Boy struck a deal with China retailer and manufacturer Kuka that will include export of its U.S. produced motion furniture.  Ethan Allen, which manufactures in Asia and Honduras, produces 70 percent of its furniture in the U.S., and now exports a significant portion of that to China, according to a March 6 investor presentation by its chairman. 

 

As wood manufacturing and other industries return to the U.S., honesty and integrity in contractual relations as a value system is proving its worth.

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