This is one of the most rewarding interviews we can recall doing in a long time. Harry Moser is a highly intelligent man and he did something very unusual for us in the world of policy: he made change happen in the real world.

Moser has an impressive resume, with a bachelor's and master's in mechanical engineering from MIT and and MBA from the University of Chicago (back when university degrees meant something). He did his professional career in the world of high-end machine tool manufacturing ending up as the leader of GF AgieCharmilles, a $100 million machine tool company.

But what brought him to our attention is that after retiring, he created the Reshoring Initiative, a non-profit dedicated to helping companies reshore manufacturing in the USA from low-wage countries. We really really like non-profits in the policy space that don't just put out white papers, as good and important as those are. Instead, the Reshoring Initiative produces data and software tools that helps make an economic case to manufacturing businesses for why they should reshore their production in the US.

As you can imagine, Moser has a unique perspective, with a head in the world of policy and economic theory, but his feet planted firmly in the real world. Interviewing him about the Reshoring Initiative and manufacturing and trade policy was a privilege and fascinating. If you have any interest in this set of issues, we highly recommend reading the whole thing.

Key Points

• The Reshoring Initiative is a non-profit that produces data and software that helps convince American businesses that it makes financial sense for them to reshore manufacturing. 

• Their main tool, the TCO Estimator, helps companies estimate the total cost of ownership of goods made overseas, and in many cases when every element of that cost is computed accurately, it turns out US goods are much more competitive than appears at first glance.

• The average China cost of a good is 65-70% of the US cost but in many cases it is 80 or even 90%, where reshoring makes a lot of economic sense.

• The US manufacturing cost is 20% higher than even developed peers like Europe or Japan. 

• US manufacturing costs of electric vehicles are 50 to 60% too high to be competitive with China. 

• The cost to build a chip factory in the US is 20 to 40% higher than anywhere else, and the operating cost, once it’s built, is 10 to 20% higher than anywhere else.

• The most effective way to make US manufacturing competitive is acting on the currency, and tariffs.

• The biggest contributor to highest US costs is the dollar’s status as a reserve currency, which makes it 20% overvalued. The answer is the Market Access Charge, which would be a small fee paid on foreign deposits (not investments) which would increase over time until the US dollar is at parity with other currencies. 

• According to studies by the Reshoring Initiative, reducing the value of the dollar by 20% would only lead to a one-time increase in the price level of 1 or 2%. 

• The best way to do a tariff is through a value-added tax (VAT) because, unlike a direct tariff, it wouldn’t lead to retaliation since US peers all already have a VAT. 

• “My belief on tariffs is that they should be on everything. They should apply to all countries, and they should be there forever.”

• Ending the US goods trade deficit requires not only making costs competitive, but 3 or 4 million more workers, who currently don’t exist and aren’t properly trained. To restore manufacturing vitality, it’s vital to adopt the German/Swiss model of apprenticeships for skilled workers.

The Full Interview

(The interview was conducted over videoconference, transcribed, and lightly edited for clarity.)

PolicySphere: What gave you the idea of starting the Reshoring Initiative?

Harry Moser: I grew up in Elizabeth, New Jersey, right across the river from New York, and the biggest thing in town was the Singer Sewing Machine Company, which in its heyday was the largest factory in the world. 3 million square feet, 5000 workers. This was back in 1900 or 1920, before the huge factories of today. My grandfather was a farmer. My dad ran about a third of the factory. I worked there summers. 

And I drove past 20 years ago, and it was all gone. As far as I can tell, nothing that Singer produces now is made anywhere in the country. Everything is imported from low wage, low income countries. 

During my career, I sold CNC machine tools and foundry equipment. Industry after industry, company after company I wanted to sell to got wiped out by imports. And so I've lived through the decline of U.S. manufacturing, caused largely by imports from low wage countries. 

It's somewhat of our own fault. Sometimes our companies weren't as forward-looking as they could have been. Sometimes labor didn't participate. The government made mistakes. But nevertheless, entire industries were wiped out. 

Eventually I retired. I had been running a $100 million a year company. After I retired from that, I said, well, let's do what needs to be done. And I founded the Reshoring Initiative.

PolicySphere: What we found fascinating about the Reshoring Initiative is that usually, when people want to do something like this, they say, let’s start a think tank, let’s write some white papers and then go to Congress and show them the white paper and hope they do something with it. Instead, you had a very different approach, an approach that’s much more rooted in the real world, of building these data-driven and software-driven tools to essentially convince manufacturers to reshore manufacturing. To actually drive change in the real world. So: why did you choose that approach? Why do you think it's a good approach? We assume you think it's a good approach because you stuck with it.

Harry Moser: Well, yes, that's a good answer. But also because it worked. So I'll summarize what we do. 

First, we document the trend. In 2010, when we started, the total number of jobs created by reshoring and FDI foreign direct investment was about 11,000. And in 2023, it was 287,000. So 25 times as much. Of course, we're not the sole cause. Hundreds of billions of dollars of IRA money helped. But we had a significant role in making that happen. And so we document it. 

And then we talk–we push that data out in podcasts, webinars, presentations, articles, so that the average company can see that it's happening. And the best way to convince them that they should consider it is to see that other people are doing it and succeeding, right? 

So, first we document, then we promote, and then we enable it. We have the tools to help the companies actually do it. 

The main tool we provide is the TCO Estimator. TCO stands for Total Cost of Ownership. Most companies look only at the FOB (“Free on Board”) or Ex-Works price. And usually the FOB cost would be, say, 10 to get it from here and 7 to get it from China. In that case, China's a pretty easy decision. But when you add in the import duties, and the freight, and the carrying cost of inventory, and 25 other costs and risks, it turns out the total cost is roughly equal. And so we provide our TCO Estimator, which is a software tool, for them to use and calculate their TCO. 

We also have a tool called the Import Substitution Program. The way this works is that if we're working with a company and they're really good at making something–some kind of widget, whether it be pumps, valves, shafts, or whatever–we can tell them who the biggest importers are of the kind of product that they're really good at making. And then we train them to use the TCO Estimator and go to that importer and convince the importer that the importer will be more profitable if it buys from them. 

So we provide the leads, you might say, the tools to help them get more business and thereby help me achieve my objective, which is to balance the goods trade deficit, which would require about 40% increase in U.S. manufacturing, about 5 or 6 million workers who at the moment do not exist.

PolicySphere: Okay, so can you please explain the concept of TCO a little bit more? What is in it, and why is it so important? 

Harry Moser: One analogue from public policy might be the green rules about refrigerators and air conditioners that force greater efficiency. The argument there is that you might have a slightly higher one time cost, but the lifetime cost of having that refrigerator or air conditioner is lower because it's more efficient; therefore, when you put all that together, the total cost is lower. 

Our concept is similar, but applied to a company that's deciding from what source to get its products and components. 

Our TCO Estimator is free. The user just answers a series of questions. He puts in the FOB price, and then answers other questions about things like the duty, the freight cost to get the component here, the carrying cost of inventory, and so on. And he gets an estimate of the total cost of ownership of the good he’s considering importing.

Why is that relevant? Because when you have, let's say, a two-month delivery time in comparison to a two-week delivery time, a company will have to stock twice as much, to prepare for variations in demand. And so therefore, if you have a local supplier, that means you may cut your inventory by half. 

We had one company; they reshored aluminum die-cast housing, and they reduced their inventory by 94% because they found a local domestic version of the product. Obviously that's an extreme example, but 50% is a very reasonable estimate, and lowering your inventory costs by 50% can pay for an awful lot of reshoring.

So we add in all these things. We have a new version that we’re working on right now. And, for our government friends, it includes ESG. I don't know how to quantify G for governance, but for E, emissions, we have calculated the emissions for a product made in other countries, but specifically China. And, especially if the product is fairly electricity-intensive, like aluminum die castings, steel, and so on, the emissions are reduced 25 to 50% by producing here instead of producing there and shipping here. That's huge. I mean, companies struggle to achieve their ESG ratings, and the simplest thing they could do to achieve them would be to use the TCO Estimator, calculate which products make sense to reshore and which are electricity-intensive. 

On S, which is social, we say that our obligation is to the US social, to employment and the economy here. And so this new version of the TCO Estimator will ask them what's the annual dollar value of your incremental production, and of the components you'll be sourcing in the supply chain because you brought back the assembly. So the total dollar value of incremental US production per year. And then we divide that by 200,000 which is the average revenue per worker in manufacturing. So say there's $1 million brought back; divide that by 200,000; that’s 5 workers. We then multiply that times $75,000, because that's the average incentive that was awarded last year to manufacturing companies to build a factory in a community, whether city, state, or federal. So 5 times 75 is $375,000, and that is your one time social benefit. And then we spread that out over five years worth of production here. And maybe it turns out to be $0.50 per piece or something like that. And so it turns out that there’s a negative cost, because this is reducing the effective cost. 

To be clear, the company has a choice. Do you believe in ESG? If you don’t, the ESG analysis just gives you 0. But if they believe in it, we calculate the ESG benefit in terms of dollars.

Another thing we’ve added to the TCO Estimator is geopolitics. A survey by Chief Executive magazine done about a year ago said that the number one driver of reshoring is geopolitical risk.

Do you think there’s a significant chance of something happening over Taiwan in the next five years? (Laughter.)

So about six months ago, we came out with a geopolitical risk map, which shows the probability of a US company being cut off from any other country. We do every country, but the focus is China.

If there’s a war over Taiwan, things will be cut off for years, right? So, as a company, I have to look at what I’m getting from China and Taiwan. And what are my suppliers getting from China and Taiwan? And if I couldn’t get those things, how long would it take me to find another supplier?

If I started today, it wouldn’t be too long, maybe three months or something like that. But if I wait until the day after the war starts? 

If I’m a machine shop and a company calls me and says, “Hey, Harry, you know that work you always wanted to do for me? Well, here’s your opportunity. And how long is it going to take? Two months like you said before?” I say, “No, now it’s probably two years, because you’re the ten-thousandth call I'm getting this morning.” Right? 

So then we ask: how much revenue are you going to lose before you believe you can get your components from somewhere again? How much margin are you going to lose? What’s the probability of that happening? Then we can calculate the expected value of that loss. And from there we can figure out how much more you should be willing to pay for a reliably sourced domestic product, as insurance against the possibility of this scenario happening.

That’s something else we’re adding into the new version of the TCO Estimator. 

We’re also adding the Trump Section 301 tariffs, which affects maybe a third of what comes in from China, or 25%, which is enough to almost always make the US supplier win.

PolicySphere: Let’s play Devil’s Advocate. Let's say I run a company making industrial parts in the Midwest. And you come and you pitch me this. And I tell you, “Harry, this is wonderful. But, you know, a lot of these costs that you're talking about are theoretical, and my cash balance isn't theoretical. And so you know, at the end of the day, with the cash I have in the bank, it's still cheaper to buy from China.” Do you hear that a lot? And if so, what do you tell them?

Harry Moser: When you do the TCO Estimator, it breaks down the costs into several categories. 

The first one is price. 

Then, other hard costs like inventory, freight and duty and toll tariffs. Those are real cash costs, just as real as the price. 

And then you have risks. Like the risk of war over time. That's a risk. Is it going to hit this year or is it going to hit next year? Is it never going to happen? Nobody knows, right? But you still have to calculate that somehow.

And then you have ESG and all those softer types of things. 

And then the software adds it all up together to come up with the total cost.

But the user can tell the software, “I only care about the hard costs and I don't care about anything else.” Or you can say, “I care about hard costs and risks, but I don’t care about the ESG stuff.”

So they can decide how much of what we’ve calculated they want to accept. 

And then, we would suggest that they start with the products that are going to be the hardest to replace, and to find those where the China cost is, say, 80% of the US cost.

On average, the China cost is maybe 65 or 70% of the US cost. But there’s a normal distribution. So there’s a large range of products where the China cost–or the Indonesian cost, or the Brazilian cost, or whatever–is 80 or 90% of the US cost.

Even in the short term, would you pay 10% more to be almost sure that you’re going to save 20%? 

So, we don’t say: start with the cheapest thing. We don’t say “Start with t-shirts,” right? The product which has almost no material cost, and lots of labor, and we can’t find anybody here to make them. 

Instead, you start with things like injection molding. There is one advantage of injection molding, which is that the raw material, the resin, is as cheap here as almost anywhere in the world, because we’ve got fracking. The natural gas that comes out of fracking is used to create polyethylene and polypropylene, which is then used to make the resin. So our resin cost is low relative to the rest of the world. Unlike, say, steel, where we tend to be 10-30% higher than most places in the world because of tariffs and other things like that. 

And in plastic injection molding, one operator can operate maybe three injection molding machines, which are just pumping out parts with not a lot of hand work done to them, so the labor cost differential isn’t very big. 

The bottomline is it’s possible to go through the list of things that are being imported, and pick the ones where it makes the most sense, intuitively, to think about reshoring. And then, you check the costs in both locations, you do the TCO calculation, and then you’ll find that, even in this month’s or next month’s P&L, there’s no sacrifice. It may even be positive for you, even in that short time window. 

PolicySphere: Okay. That makes a lot of sense. Let’s ask some broader questions. Why do you think the term “industrial policy" has become a dirty word?

Harry Moser: I think actually it’s a cleaner word today than it was ten years ago.

PolicySphere: That's true. 

Harry Moser: I would say it’s controversial, rather than dirty, at this point.

I think the reason is that the Republicans have been, you know, laissez-faire, and following the gospel of Milton Friedman–whom I admire intensely, by the way–and felt that the market should determine everything and any deviation from the market is an inefficiency that eventually will harm the company, the worker, or the country. That's been the Republican viewpoint. 

The Democrats have been against things like tariffs, because they will tend to raise the price level in the US, and lower income people will feel that more than higher income people. And the Democrats tended to have that lower income constituency. 

And then there’s economists. The vast majority of university economists, company economists, trade association economists, and so on, and quite consistently, are against it–and I used to be against tariffs too. 

But now, I would say to them: “Okay, you’ve been against tariffs. You’ve been against doing anything to level the playing field. Maybe let's go back a step. Why does the US even have a $1.1 trillion per year goods trade deficit? Because the US manufacturing cost is 20, 30, 40% higher than it is in most other countries. Okay. And why is that? Two things.” 

First, I believe the number one issue is currency. Most people agree the dollar is 20-30% overvalued because we're the reserve currency. Companies, countries, and people want to store their money here because it's a safe place. And when they take yen or yuan and buy dollars, that forces up the value of the dollar. This makes the US a great place to be a bank, because the money comes to you, but a crappy place to own a factory, because your costs are too high. 

So we have to level that playing field. 

And there are methodologies to do that, such as the Market Access Charge (MAC) by Dr. John Hansen. It's been a bill by Senator Baldwin and others. (NB: the Competitive Dollar for Jobs and Prosperity Act has also been cosponsored by Senator Hawley.) It would apply at a fee, like a quarter or half of a percent, to cash that's coming in. That is to say, cash that is coming just to sit here, not to buy factories, not to employ people, just to sit here in the bank. The idea is to keep raising that fee until the dollar comes back down to a level where manufacturing is once again competitive.

Because we’ve got two choices. Either you have to find some way to reduce the wages of U.S. workers relative to foreign workers, both expressed in dollars. Right now, we’re 3 times higher than China and about 20% higher than other developed countries like Europe, Japan, Korea and so on. So you would have to cut people's wages by 20 or 30%. That’s not going to happen, right? Especially when the dockworkers are getting 61.5% raise. (Laughter.)

But if you reduce the value of the dollar, then, expressed in the same currency, you dramatically reduce the gap in wages.

It would be a little more expensive to take a vacation outside the country. We and others have done the analysis, and you would have a one time increase in the price level of maybe 1 or 2%. It’s not going to go up 3% a year, compounding forever. One time, a 1 or 2% increase. And if doing that lets you get millions of manufacturing jobs back, and become much more self-sufficient, and build up the industry that’s necessary for defense… 

But even the most liberal economists are vehemently against it, because it's not free market, and it would raise prices.

PolicySphere: Our next question is about the CHIPS Act. But what we really want to ask is what’s called “picking winners and losers.” Saying “Hey, Samsung, I’m going to pay you however many billions of dollars to come build a factory here.” A much more direct approach where the government is deciding, we’re going to build this widget, at this location. Everybody agrees that there's a lot of times where it doesn't work, but maybe sometimes it does work.

Harry Moser: Okay. Well, historically it generally has not worked. Solyndra and other cases like that where hundreds of millions were poured down the drain. The company eventually went bankrupt. Why did the company eventually go bankrupt? Because the manufacturing costs here are too high for it to be profitable! 

That said, specifically in terms of chips, and I think EV batteries, the US had fallen so far behind that we needed to jumpstart the industry.

So we need to pour significant money in. But the amount that we’re having to pour in is huge. Like, on EV batteries: the tax credit per car is $7,500, and then on the resale of the car, an additional $4,000, so I think $11,500 in total, which is about a third of the manufacturing cost of the car, including everything. You shouldn’t have to subsidize a third of the cost of the product, you know. But they probably felt they had to, because if you compare our manufacturing costs of EVs to these BYD cars coming out of China, we’re 50 to 60% too high. 

When it comes to chips, I agree that we had to do something. But I think we're doing way too much. All the articles I read about it say that the manufacturing cost of a chip factory here in the US is anywhere from 20 to 40% higher than, than anywhere else. Construction costs, labor costs, you know, whatever. And that the operating cost of the chip factory, once it's built, is 10 to 20% higher. So it costs more to build a factory and then it costs more to operate. 

And then, every other country is doing the same thing. So the production of chips over the next 2 or 3 years is going to rise rapidly. And we already have excess chip production today, which is why Intel and other chip stocks have gone down so much. So there's not enough demand now, and we’re dramatically increasing supply. So I predict that 2 or 3 years from now, when all these chip foundries come on stream, there's going to be huge excess supply, right? And US chips are going to be 20% more expensive than foreign chips. We don't assemble very much using chips because we don't do much electronic assembly. That all gets done in China and Taiwan. So we’re going to depend on the Chinese to buy our overpriced chips, to make the electronic assembly, and then to ship the product back to us. This when they want to use their own chips, because they just spent $100 billion to build the factories.

So I believe, therefore, if you're going to spend the money on the chip foundries, you need to level the playing field so that companies will decide to do their electronic assembly here. Things like electronic medical devices, infotainment systems, servers, and so on. If we level the playing field, they’ll make those things here, and therefore we'll have a domestic market for our chips.

The bottomline with both EV batteries and chips is that it’s clear that the US has a significant manufacturing cost problem, and we have believed that the right solution is currency or tariffs. 

And we think that for tariffs the right solution is probably a value-added tax. And so we would suggest doing that instead of Trump’s 10% tariff on everything. Because if we do a 10% tariff on everything, every other country is going to retaliate. Whereas if we put on a VAT, they all already have 15 and 20% VAT, so they’ve got no grounds to retaliate. And yet it would tax, say, 15% of everything coming in, and then subsidize our exports of products in the amount of the VAT. 

And I think then you have to take the money and you have to do smart things with it. You have to subsidize Social Security so I’ll keep getting Social Security and you’ll get it. You have to somehow pass some of the money on to lower-income people so that they're not suffering from that slightly higher cost.

My belief on tariffs is that they should be on everything. They should apply to all countries, and they should be there forever. Because otherwise, if we just do China, then China ships the product through Vietnam or Mexico. And if you only do it on a certain category, like steel, our price of steel goes up, which helps our steel factories, but hurts users of steel, which include a lot of US manufacturing companies. Now their raw material cost is higher than their Chinese or German competitors, and they can't make up for that.

Therefore, if you’re going to do tariffs, you should tariff everything and all countries forever.

PolicySphere: Ok, but geopolitically that's not very realistic, right? You can’t justify putting the same tariff on historic US allies and adversaries like China. 

Harry Moser: Then create a value-added tax. That gets around that geopolitical concern. 

PolicySphere: Fair enough. An alternative to a VAT is what’s known as a border adjustment tax, or BAT. You’ve also proposed a BAT, historically. Can you explain what that is and why you think it’s a good idea?

Harry Moser: It’s more or less like a VAT, but only applied to imports and not the total value-added within the country. In effect, it's a tariff applied to everything. I'd rather have a VAT, because of the geopolitical concerns, and because it helps with exports. But if all you could get was the BAT, I’d sign on.

PolicySphere: This is more of an economics question, but you must have your view on this. The other economic argument against tariffs is that if you put up a tariff, the currency levels adjust, and so you end up right where you began.

Harry Moser: I mean, I'm sure you can find all the theories you want to prove anything.

PolicySphere: True.

Harry Moser: As I said, I think you need to do something about both the tariffs and the currency. So if you used that market access charge to reduce the value of the currency, you would keep the adjustment you’re describing from happening. So you would have to do both of them in conjunction. 

PolicySphere: If you could tell policymakers in Washington one thing, what would it be? 

Harry Moser: I’m going to tell them more than one thing! 

To me, the number one priority is having a skilled workforce.

We want to increase US manufacturing by 40%. And even with a lot of productivity improvements and automation, that’s going to require 3 or 4 million more workers. And we don’t have them. And so the number one priority is, higher quantity, higher quality.

Over in Germany you get really smart kids in the good solid middle of the IQ distribution going into things like toolmaker and precision machinist apprenticeships. Here we tend to get the kids who sort of didn't quite make it in the academic field and couldn't go to college. To be clear, there's some brilliant people there. But on average, we haven't recruited the people we should. I believe it’s because society and the government push college for everyone. If the government would treat training and the career opportunities that training offers as well as they treat degrees, then I think the kids would perhaps see that they can get a pretty good deal where they pay no college tuition, don’t do all that drinking, start working at 18, have the company pay for your associate’s degree, and end up making, on average, as much or more than a college graduate. And you can fix your car. (Laughter.) You know, you become a pretty handy, self-reliant kind of guy. That sounds pretty good. If the government would treat that alternative as equally valid as college, then that would help. So skilled workforce issue is number one. Because without it you can't move ahead. 

And then, separately, some combination of either lower currency or tariffs. 

And then, keeping immediate expensing on capital investments. Not raising the corporate income tax. You know, a series of things like that that would help us become relatively more competitive.

PolicySphere: We end interviews with two traditional questions. So the first question is, what's the most important issue that nobody's talking about? It can be anything.

Harry Moser: I'd say the deficit. The debt. We’re at levels that almost all economists have proven eventually reduces growth. People like Ray Dalio have studied it and say it's the precursor to the decline of a civilization. So I would say: debt and an unwillingness to do some combination of reducing expenditure and increasing taxes to overcome that deficit and debt.

PolicySphere: And the last question is, who's the smartest person we should interview next?

Harry Moser: Oh, man. Can I tell you a little story about that? 

PolicySphere: Sure.

Harry Moser: So the best job I had was 25 years running this machine tool company. The headhunter who called me for the job said, “Harry Roy Kuhn, whom you used to work for, suggested I call you, and he says you're the smartest person he knows.” I said, “That shows you the crowd that Roy travels in.” (Laughter.)

You should try Jeff Ferry, who’s the Chief Economist at the Coalition for a Prosperous America. He can do in detail what I do in general on this subject.

PolicySphere: Sounds great. Thank you very much for your time.

SEE ALSO: The PolicySphere Manifesto →