Canadian Manufacturing

Rising U.S. exports, reshoring could create up to 5 million jobs by 2020: report

U.S. will have export cost advantage of five to 25 per cent over Germany, Italy, France, U.K., Japan



CHICAGO—Manufactured exports—a bright spot of the U.S. economy in recent years—are set to surge, according to a consulting and strategy firm, and could create millions of jobs.

Combined with jobs created as a result of reshoring, higher U.S. exports could add 2.5- to five-million jobs by the end of the decade, as manufacturers shift production from leading European countries and Japan to take advantage of substantially lower costs in the U.S., according to new research by The Boston Consulting Group (BCG).

BCG projects that by around 2015, the U.S. will have an export cost advantage of five to 25 per cent over Germany, Italy, France, the United Kingdom and Japan in a range of industries.

Among the biggest drivers of this advantage, BCG says, will be the costs of labour, natural gas and electricity.

As a result, the U.S. could capture two to four per cent of exports from the four European countries and three to seven per cent from Japan by the end of the current decade.

The firm says this would translate into as much as $90-billion in additional U.S. exports per year.

When the increase in U.S. exports to the rest of the world is included, annual gains could reach $130-billion.

BCG forecasts that the biggest U.S. export gains will be in chemicals, machinery, transportation equipment and electrical equipment and appliances.

“The export manufacturing sector has been the unsung hero of the U.S. economy for the past few years,” BCG senior partner and research co-author Harold L. Sirkin said in a statement. “The U.S. is becoming one of the lowest-cost producers of the developed world, and companies in Europe and Japan are taking notice.”

The analysis is part of BCG’s ongoing Made in America, Again series on the changing global economics that are starting to favour manufacturing in the U.S.

Although the reshoring trend is still in its early stages, several large foreign manufacturers have already announced plans to use the U.S. as an export base for other markets.

BCG says Toyota, for example, has announced it will export Camry sedans assembled in Kentucky and Sienna minivans made in Indiana to South Korea, while Honda and Nissan both say they expect to boost exports of vehicles made in their U.S. plants to the rest of the world.

Siemens is building gas turbines in North Carolina to ship to Saudi Arabia for construction of a four-gigawatt power plant.

Rolls-Royce recently opened a new aircraft engine parts manufacturing facility in Virginia citing lower labour costs, productivity and dollarization.

BCG estimates that average manufacturing costs in 2015 will be eight per cent lower in the U.S. than in the U.K., 15 per cent lower than in both Germany and France, 21 per cent lower than in Japan, and 23 per cent lower than in Italy.

Average manufacturing costs in China will still be seven per cent lower than those of the U.S. in 2015, the firm says, but those costs do not include transportation, duties and other expenses.

Labor and energy costs will be especially important sources of U.S. competitive advantage in manufacturing.

Adjusted for differences in worker productivity, which is considerably higher in the U.S., average labour costs of the other large developed economies will be 20 to 45 per cent higher than those of the U.S.

Only a decade ago, the same U.S. worker cost only 12 per cent less than the average factory worker in Europe.

Inexpensive natural gas will also boost U.S. competitiveness, according to BCG.

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