A new study says U.S. exports of products such as chemicals and machinery are expected to grow as the country becomes increasingly cost-competitive, and it cites low outbound transportation costs as one of the nation’s advantages.
Boston Consulting Group (BCG) said that by 2020, a growing U.S. cost advantage in labor and energy could help the U.S. capture $70 billion to $115 billion in annual exports from other nations and create 2.5 million to 5 million jobs through increased exports and reshoring.
On several important international trade routes “transportation costs give U.S.-based manufacturers another significant advantage,” BCG said.
In the report, titled Behind the American Export Surge: The U.S. as One of the Developed World’s Lowest-Cost Manufacturers
, the group wrote that the “ports of Los Angeles, Long Beach, New York, Seattle, and Tacoma all process more than twice as many U.S. imports as exports. Meanwhile, capacity at U.S. ports nearly doubled between 2000 and 2008. As a result, the capacity utilization rate at U.S. ports was only around 54 percent as of 2010 — one of the lowest rates in the world. In Europe, ports in 2010 were operating at 59 percent of capacity. Utilization rates were at 69 percent in Northeast Asia and 76 percent in Southeast Asia.”
This imbalance translates to reduced freight costs for outbound goods on routes from the U.S. to China and other global destinations.
“Although freight costs from the West Coast of the U.S. to Japan are only slightly lower than those from Europe to Japan, U.S. exporters have an advantage because the shipping distance is shorter, meaning they can more quickly get their goods to Japanese buyers," they wrote in the report.
BCG said when adjusted for productivity, U.S. labor costs for many products are projected to be 15 percent to 35 percent lower than those of Western Europe and Japan by 2015. It said 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.
It said cheap energy will also boost U.S. competitiveness in several industries. By 2015, prices for natural gas are projected to be 60-percent to 70-percent lower, and electricity is projected to be 40-percent 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." Exports are likely to increase among chemicals, machinery, transportation equipment, petroleum and coal products, computer and electronic products, electrical equipment and appliances, and primary metals. It noted that these seven sectors account for roughly three-quarters of total global exports.
“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 co-author 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.” - Chris Dupin