The Fabricator - November 2013

Some of the biggest gains in U.S. exports, caused by a widening U.S. production cost advantage over leading European nations and Japan, are likely to be seen in machinery and transportation equipment, according to a new report by The Boston Consulting Group (BCG), a Chicago-based global management consulting firm and adviser on business strategy.

The report, titled “Behind the American Export Surge:
The U.S. as One of the Developed World’s Lowest-Cost
Manufacturers,” updates and elaborates on BCG research
released last September, in which the firm predicted that
higher exports as well as reshoring from China and else-
where 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 unemployment rate, currently

7. 4 percent, by as much as 2 to 3 percentage points. The
report’s projections are based on an
analysis of labor, energy, and logis-
tics cost trends in the U.S., Germany,
France, Italy, the U.K., and Japan, all of
which are major exporters of manu-
factured 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 part-
ner and a co-author of the report.
“Now, as the economics of global
manufacturing changes, the pen-
dulum is finally starting to swing
back. In the years ahead it could be
America’s turn to be on the receiv-
ing end of production shifts, as more
companies use the U.S. as a low-cost
export platform.”
Labor costs will be especially im-
portant sources of competitive ad-
vantage in U.S. manufacturing. Ad-
justed for productivity, U.S. labor
costs are projected to be 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 about 17 percent lower in
the U.S. than in Europe, and 3 percent
lower in the U.S. than in Japan.
Cheap energy also will boost U.S.
competitiveness in several indus-
tries. By 2015 prices for natural 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: machinery, transportation equipment, chemicals, 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 co-author of the re-

Machinery, transportation equipment to see big export gains, report says

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