Sat, Apr 26, 2014 - Page 15 News List

US manufacturers have grown more competitive: study

EXPORT COUNTRIES:Rising wages and higher energy costs have eroded China’s competitive edge against the US, the Boston Consulting Group said

AP, WASHINGTON

US manufacturers have grown more competitive over the past decade compared with factories in China, Brazil and most of the world’s other major economies, a new private study said yesterday.

The study by the Boston Consulting Group found that rising wages and higher energy costs have diminished China’s long-standing edge over the US. So has a boom in US shale gas production, which has reduced US natural gas prices and slowed the cost of electricity.

Only seven of the 25 biggest exporting countries covered in the study had lower manufacturing costs than the US did this year, the report showed. And since 2004, US manufacturers have improved their competitiveness compared with every major exporter except India, Mexico and the Netherlands.

In 2004, for example, manufacturing in China cost 14 percent less than manufacturing in the US. By this year, the China advantage had narrowed to 5 percent. If the trends continue, Boston Consulting found, US manufacturing would be less expensive than China’s by 2018.

Over the past decade, labor costs, adjusted to reflect productivity gains, shot up 187 percent at factories in China, compared with 27 percent in the US. The value of China’s currency has risen more than 30 percent against the US dollar over the past decade.

The higher Chinese currency made goods produced in China and sold abroad comparatively more expensive, while foreign goods became comparatively more affordable in China.

Chinese electricity costs rose 66 percent, more than double the US’ 30 percent increase. The start of large-scale US shale gas production in 2005 has helped contain electricity bills in the US, and neighboring Canada and Mexico.

China also has reserves for shale gas, but it will need years to develop them.

“This is not something you can turn on overnight,” said Justin Rose, a partner at Boston Consulting and co-author of the study.

Brazil has lost even more ground than China. In 2004, manufacturing was 3 percent cheaper in Brazil than in the US. By this year, Brazil was 23 percent more expensive. Brazilian factories did not improve efficiency enough to offset rising energy and labor costs.

The countries where manufacturing was cheaper than in the US are Indonesia, India, Mexico, Thailand, China, Taiwan and Russia.

Australia was the most expensive country for manufacturing. Its costs were 30 percent higher than those in the US.

The survey does not include transportation costs, which vary depending on where goods are shipped. Several countries also face obstacles not captured by Boston Consulting’s manufacturing cost index — from corruption to inefficient government bureaucracies.

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