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Prospects brighten for ‘reshoring’ of America

A Cessna employee works inside a jet at the company’s manufacturing plant in Wichita, Kan.


The Boston Consulting Group is leading the way in trumpeting the "reshoring" of factory production in the United States. Surely part of the motivation is to drum up some new clients. If the phone isn't ringing off the hook already, it soon will be.

For a year or so, Boston Consulting has been publishing research under the banner "Made in America, Again." The hypothesis is that the United States is in the early stages of recapturing a significant piece of the manufacturing production that fled to Asia over the previous couple of decades.

One reason: wage rates in the U.S. are depressed, while labour costs in China are rising. Another: the surge in oil prices is making it more expensive to move stuff across oceans. Third: the shale gas boom in the U.S. has dramatically lowered the cost of powering a plant. And finally: U.S. productivity rates are among the best in the world.

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With each report, Boston Consulting is becoming more confident in its analysis. The firm's latest research, which it released to reporters Friday, attempts to quantify the U.S. advantage in manufacturing relative to other developed countries. The number that will get the most attention is this one: five million. As in, the U.S. economy is poised to add between 2.5 million and five million jobs over the next decade as result of increased factory production (700,000 to 1.3 million actual factory workers and the rest from supporting services).

That's an increase from Boston Consulting's previous estimate. The firm predicts U.S. exports of manufactured goods could increase by as much as $90-billion (U.S.) by 2015. "The export manufacturing sector has been the unsung hero of the U.S. economy for the past few years," Harold Sirkin, the lead researcher, said in a news release. "But this is only the beginning."

Mr. Sirkin's team reckons U.S. labour costs will be 20 per cent to 45 per cent lower than those of other developed countries by 2015. Natural gas is at least 50 per cent cheaper in the United States. The overall cost advantage over other developed nations could be 5 per cent to 25 per cent. Boston Consulting predicts the U.S. will capture as much as 7 per cent of the export business of countries such as Germany, Japan, Italy, Britain and France.

The Boston Consulting research should galvanize Canadian policy makers. Canada will struggle to attract assembly plants when its main competitors are the U.S. and Mexico.

However, it could claim a piece of the action by tapping into the supply chains for goods and services that form around these factories. That will require an emphasis on making the border as seamless for business as possible, improving transportation links and aggressively courting new business.

For the federal government, this could require a pivot. The Harper government's trade policy currently is focused on gaining markets almost everywhere but the United States. The government even shuttered some U.S. trade consulates this year. Perhaps that decision was a little hasty.

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More


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