Dollar Undermines Manufacturing Base

Today, the Newshour with Jim Lehrer on PBS featured some economists discussing, well, the economy. One of them stated that one good thing to come out of the current crisis was that manufacturing jobs will return to the U.S., and consumers here will purchase locally manufactured goods.
This optimistic view is based on rather flimsy foundations...The forecast should be based on the following:

1. One of the somewhat illogical collateral damages of the current crises is the strength of the U.S. dollar, relative to many currencies including the Euro, the Renminbi and the Indian Rupee. Of course it reflects supply and demand, but the apparent repatriation of dollars by multinationals and the flight to quality are cited as possible reasons. The unwinding of the Yen carry trade has strengthened the Yen against the dollar and the Euro, but this has been the exception. The strengthening of the U.S. dollar makes the U.S. labor force more expensive relative to that of China or India. The weakening of the U.S. dollar by some 50% relative to the RMB might have a significant impact on the labor wage differential, but the dollar strengthening against the RMB does not bode well for U.S. manufacturing.
2. The dramatic, steep plunge in oil prices. A barrel of crude is going at $37, down more than 70% from its peak just a few months ago. High oil prices increase the transportation costs for global supply chains. Oil prices at $120/barrel had some companies looking into North American manufacturing to reduce transportation costs. Current oil prices mean that transportation from Asia-Pacific to U.S. and Europe is less expensive than what it was a few months ago. Clearly this does NOT make manufacturing in Asia Pacific less attractive, and does not drive manufacturing to return to the U.S.

Another important point to note is that the U.S. consumer might have structurally changed his/her lifestyle habits, and "buy, baby, buy" might not be the mantra going forward.
Manufacturing might not return to the U.S., but then again, the mantra is very simple- Innovate or Perish... the meaning of IP....