However, locally sourced labor and goods most certainly can compete with shipping by sea.
That's exactly what's happening: a lot of goods are being returned to US manufacture right now. Companies are starting with their emerging products and building the R&D and facilities to do it here, instead of offshoring the 'expensive' production part to China. For instance, go and try to find a new household appliance - you'll be hard pressed to find a GE or Whirlpool appliance which isn't "Made in the USA" now. We're seeing this happen with small bin electronics and inexpensive tools, too. Why?
Competition. They've been able to slash their product costs markedly by doing so. We're not talking just the cost of shipping, we're also talking about product defects and overall quality, turnaround on even minor R&D revisions, and so on.
If China can turn the current "time to market" of a product revision from about 2-3 months (after all is said and done) down to a month to a month and a half (at least for select customers and/or producers), the cost of rail over sea shipping would be marginal to the big picture of retaining American income.