In the aftermath of supply-chain issues caused by the Covid-19 pandemic, there is a renewed interest – more so in politics than in actual business — in “onshoring”: i.e., returning aspects of manufacturing and production to the United States. The latest example from the latter is Bath & Body Works (BBW), a specialty-retail company based outside Columbus, Ohio.

The decision by BBW to relocate its manufacturing to the U.S. may make sense for its non-durable products in its particular consumer goods market. In a recent Wall Street Journal article, “A Soap Maker Cracks the Code to ‘Made in America,’” Austen Hufford describes how BBW achieves greater productive efficiency (lowers costs) by vertically integrating its supply chain near its headquarters and distribution center.

Before BBW moved its manufacturing facilities from China, the process to create foaming hand soap took three months and over 13,000 miles to reach the company’s Ohio distribution center, Hufford reports. After moving all steps of production to plants in New Albany, Ohio, “getting a bottle to distribution is down to 21 days and a few miles.”

What’s indisputable is that having “to contend with planning officials, high labor and construction costs and even endangered bats” made the shift stateside more costly than it should have been. Hufford provides an example of what that was like:

Jeff Stouffer worked for Bath & Body Works in new product launches and later joined a supplier that made perfumes and filled bottles, which opened up a new factory at the campus around 2015. He and other executives met with city and business park officials more than a dozen times to discuss the aesthetics of the relatively small factory, negotiating over everything from the color of the walls to the size of the company’s sign. It was like a homeowners’ association on steroids, he said.

“They are very rigid about what it looks like,” he said.

In his piece, Hufford provides ample evidence of the governmental impediments to American manufacturing; he also identifies public investment as one source of an ongoing factory-building boom. Some policy-makers are excited about subsidizing domestic manufacturing. A better plan is to remove those regulations currently impeding it.

Eliminating obstacles as absurd as those described by Stouffer would begin to reduce the property, personnel, and regulatory costs that needlessly drive manufacturers away from the U.S. Subsidizing reshoring, on the other hand, provides firms with soft budget constraints that generate moral hazard, reducing the incentive to innovate and the pressure to produce efficiently. If we pursue the former, we might have the foundations for an actual onshoring boom: one that is profitable and productive. If we opt for the latter, we’ll have lethargic firms that are inefficient, less innovative, and ultimately propped up by taxpayers.