Dramatic shifts are happening in global manufacturing, shifts that would have been unbelievable just a few years ago. It is now cheaper to produce goods in Mexico than in China and about 25% more expensive to manufacture products in Brazil than in the U.S., according to a new report from The Boston Consulting Group.
"The conventional wisdom that China and Asia are low cost and South America is low cost and Europe and the U.S. are high cost is no longer true," says Hal Sirkin, a co-author of the report and a senior partner at BCG.
BCG analyzed the 25 top exporting economies according to key drivers of manufacturing and created an index to show their competitive rankings. Among the results: the competitive edge for China over the U.S., which was historically about 20 points, has narrowed to just five.
"The gap is closing and, when you add the transportation costs, it makes a lot more sense for a lot of products to be made in the U.S. than in China," Sirkin tells The Daily Ticker. He says at least 300 companies have moved manufacturing operations back to the U.S. from overseas, a move known as "re-shoring," because "it just makes economic sense."
The U.S. workforce is among the most productive in the world, with relatively flat wages, and has easily available energy resources, Sirkin explains in the video above.
As a result, says Sirkin, foreign companies like Volkswagen (VLKAY) and Siemens (SI) have opened plants in the U.S. and Siemens is even exporting some of the products it makes here. "We're seeing exports from the U.S. rise dramatically."
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