America’s Export Surge Is Just Beginning

Photograph by Tim Rue/Bloomberg

Despite all the attention the trade deficit receives each month, little heed has been paid to the rapid expansion of U.S. exports, which have been growing nearly three times faster than gross domestic product since 2005. As a share of the U.S. economy, exports are at their highest point in 50 years.

Rather than slow down any time soon, our research indicates this export boom is likely to continue. Combined with manufacturing “reshored” from China, the increased exports could create 2.5 million to 5 million U.S. jobs by 2020.

We’re optimistic because the U.S. is steadily becoming one of the lowest-cost countries for manufacturing in the developed world. By around 2015, total U.S. manufacturing costs will be 8 percent lower than in the U.K., 15 percent lower than in Germany and France, and 21 percent lower than Japan’s. At the same time, rapidly rising wages and other costs are eroding China’s once-formidable advantage.

Our new research, part of BCG’s ongoing study of the changing global economics of manufacturing, focuses on U.S. cost-competiveness trends vs. those in Western Europe and Japan. Together, the U.S., Western Europe, and Japan account for around 60 percent of global manufactured exports.

Most of the future export gains—up to $90 billion per year, we estimate—are likely to come from production shifts from leading European nations and Japan to the U.S. Among the biggest drivers of the U.S. advantage will be the costs of labor, natural gas, and electricity. By the end of the decade, the U.S. could capture 2 percent to 4 percent of exports from France, Germany, Italy, and the U.K. and 3 percent to 7 percent of exports from Japan.

It will be several years before the full impact of the cost shifts are reflected in increased U.S. output. But recent announcements by several large foreign manufacturers that they plan to use the U.S. as an export base for other markets give us confidence in our forecasts.

We expect many more such announcements in the coming years, because the U.S. cost advantage is becoming more compelling. Average labor costs in the other big developed economies will be 20 percent to 45 percent higher than those in the U.S. in 2015 when adjusted for differences in worker productivity, which is considerably higher in the U.S. than in Europe and Japan. Only a decade ago, the difference in labor costs between the average U.S. factory worker and European factory worker was just 12 percent.

Inexpensive natural gas also will boost U.S. competitiveness. And logistics and transportation costs will further favor the U.S. as a global export base.

For most of the past four decades, manufacturing of all kinds has been migrating from high-cost nations to low-cost nations. Mainly, that has meant factory jobs going abroad from the U.S. We believe the pendulum is starting to swing the other way. In the years ahead, it will be America’s turn to be on the receiving end.

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