U.S. niche markets will generate most exports
August 26, 2013
Some of the biggest gains in U.S. exports due to a widening U.S. production-cost advantage over leading European nations and Japan are likely to be seen in chemicals, machinery, and transportation equipment, according to a new report by The Boston Consulting Group (BCG). The report, titled Behind the American Export Surge: The U.S. as One of the Developed World’s Lowest-Cost Manufacturers.
The report updates and elaborates on BCG research released last September, in which the firm predicted that higher exports as well as reshoring from China and elsewhere could add 2.5 million to 5 million manufacturing and related service jobs by the end of this decade. That, in turn, could reduce the unemployent rate, currently 7.4 percent, by as much s two to three percentagepoits. The report’s projections are based on an analysis of labor, energy, and logistics cost trends in the U.S., Germany, France, Italy, the U.K., and Japan, all of which are major exporters of manufactured goods.
“Over the past 40 years, factory jobs of all kinds have migrated from high-cost to low-cost countries,” said Harold L. Sirkin, a BCG senior partner and a coauthor of the report. “Now, as the economics of global manufacturing changes, the pendulum is finally starting to swing back. In the years ahead, it could be America’s turn to be on the receiving end of production shifts, as more companies use the U.S. as a low-cost export platform.”
Labor costs will be especially important sources of competitive advantage in U.S. manufacturing. Adjusted for productivity, U.S.labor costs are projected to b 15 to 35 percent lower than those of Western Europe and Japan by 2015 for many products. Only a decade ago, average productivity-adjusted factory labor costs were around 17 percent lower in the U.S. than in Europe, and only 3 percent lower in the U.S. than in Japan.
Cheap energy will also boost U.S. competitiveness in several industries.By 2015, prices for natura gas are projected to be 60 to 70 percent lower, and electricity is projected to be 40 to 70 percent cheaper in the U.S. than in Europe and Japan.
Compared with other developed economies, the U.S. is particularly well positioned to increase exports in seven industrial categories, according to the report. In addition to chemicals, machinery, and transportation equipment, they are petroleum and coal products, computer and electronic products, electrical equipment and appliances, and primary metals. These seven sectors account for roughly three-quarters of total global exports. The job gains would come directly through added factory work and indirectly through supporting services, such as construction, transportation, and retail.
“It will take several more years for the full impact of improved U.S. competitiveness to translate into significantly more jobs and higher industrial output,” said Michael Zinser, a BCG partner who leads the firm’s manufacturing practice in the Americas and a coauthor of the report. “But we already are seeing early evidence. Foreign companies such as Toyota, Airbus, Yamaha, Siemens, and Rolls-Royce are starting to move more production to the U.S. for export around the world.”
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