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back to index backAMERItalk February,  2017


Honing US Manufacturing’s Competitive Edge

Judging from the recent political furor over US factory jobs going to Mexico, one might get the impression that the US is facing another exodus of manufacturers. In fact, the opposite is true. Offshoring has dropped dramatically, particularly with regard to the world’s biggest workshop: China.

True, we still read about companies relocating some of their manufacturing to China to gain greater access to that nation’s immense domestic market. But reports are scarce about runaway shops that set up operations in that country to take advantage of its ultracheap labor and then export the manufactured goods—such as auto parts, furniture, machinery, and electronic equipment—back to the US. Indeed, the reshoring of factory work from China and other major trading partners has contributed to the increase in direct manufacturing jobs of 400,000 and to the rise in support jobs of 1.2 million since 2010. Reshoring has also preserved many other jobs that would have been offshored.

The main reason for this change is economics. As The Boston Consulting Group has documented, the cost competitiveness of US manufacturing has been improving significantly over the past decade, compared with many of its biggest trading partners—most notably China. (See Made in America, Again: Why Manufacturing Will Return to the US, BCG Focus, August 2011, and The Shifting Economics of Global Manufacturing: How Cost Competitiveness Is Changing Worldwide, BCG report, August 2014.)

In terms of direct costs, in fact, the US playing field is essentially level with Yangtze River Delta, China’s chief production zone. Despite the recent weakening of the yuan, and factoring in the differences in productivity and energy costs, China’s manufacturing cost advantage over the US shrank from 14% in 2004 to an insignificant 1% in 2016, according to our analysis of data collected for the BCG Global Manufacturing Cost- Competitiveness Index. (See the exhibit.) When indirect costs for shipping, inventory, and other expenses are included, it is now less costly to manufacture a wide variety of goods in the US if that is where they will be consumed.

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Source: BCG - GAI





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