Behind the American Export Surge
Export manufacturing has recently become the unsung hero of the U.S. economy. Despite all the public focus on the U.S. trade deficit, little attention has been paid to the fact that the country’s exports have been growing more than seven times faster than GDP since 2005. As a share of the U.S. economy, in fact, exports are at their highest point in 50 years.
But this is likely to be just the beginning. We project that the U.S., as a result of its increasing competitiveness in manufacturing, will capture $70 billion to $115 billion in annual exports from other nations by the end of the decade. About two-thirds of these export gains could come from production shifts to the U.S. from leading European nations and Japan. By 2020, higher U.S. exports, combined with production work that will likely be “reshored” from China, could create 2.5 million to 5 million American factory and service jobs associated with increased manufacturing.
Our perspective is based on shifts in cost structures that increasingly favor U.S. manufacturing. In the first two reports in our Made in America, Again series, we explained how China’s once overwhelming production-cost advantage over the U.S. is rapidly eroding because of higher wages and other factors—and how these trends are likely to boost U.S. manufacturing in specific industries. Below, we focus on America’s increasing cost-competitiveness in manufacturing compared with leading advanced economies that are major exporters.
Our analysis suggests that the U.S. is steadily becoming one of the lowest-cost countries for manufacturing in the developed world. We estimate that by 2015, average manufacturing costs in the five major advanced export economies that we studied—Germany, Japan, France, Italy, and the U.K.—will be 8 to 18 percent higher than in the U.S. Among the biggest drivers of this advantage will be the costs of labor (adjusted for productivity), natural gas, and electricity. As a result, we estimate that the U.S. could capture up to 5 percent of total exports from these developed countries by the end of the decade. The shift will be supported by a significant U.S. advantage in shipping costs in important trade routes compared with other major manufacturing economies.
These shifting cost dynamics are likely to have a significant impact on world trade. China and the major developed economies account for around 75 percent of global exports. And the U.S. export surge will be felt across a wide range of U.S. industries.
The most profound impact will likely be on industrial groups that account for the bulk of global trade, such as transportation equipment, chemicals, machinery, and computer and electronic products. Production gains will come in several forms. In some cases, companies will increasingly use the U.S. as a low-cost export base for the rest of the world. In other cases, U.S. production will displace imports as both U.S. and foreign companies relocate the manufacturing of goods sold in the U.S. that otherwise would have been made offshore.
The full impact of the shifting cost advantage will take several years to be felt in terms of new production capacity. And the magnitude of the job gains will depend heavily on the degree to which the U.S. can continue to enhance its global competitiveness. One of the biggest challenges facing U.S. manufacturers is the supply of skilled labor. As we explained in a previous publication, however, our analysis shows that, in the short term, any U.S. manufacturing skills gap is unlikely to be significant enough to curtail a U.S. manufacturing resurgence. Rather, such shortages are more of a long-term risk if action is not taken soon to train and recruit new skilled workers.
Companies should, of course, continue to maintain diversified manufacturing operations around the world. But at the same time, they must be aware that the structural changes in production cost structures represent a potential paradigm shift for global manufacturing that warrants immediate attention.
The Pendulum Swings Back
For much of the past four decades, manufacturing work has been migrating from the world’s high-cost to its low-cost economies. Generally, this has meant a transfer of factory jobs of all kinds from the U.S. to abroad.
The pendulum finally is starting to swing back—and in the years ahead, it could be America’s turn to be on the receiving end of production shifts in many industries. In previous reports, we cited a number of examples of companies that have shifted production to the U.S. from China and other low-cost nations. These companies range from big multinationals like Ford and NCR to smaller U.S. makers of everything from kitchenware and plastic coolers to headphones. More recently, computer giant Lenovo opened a plant to assemble Think-brand laptops, notebooks, and tablets in North Carolina. Toshiba Industrial has moved production of its hybrid-electric vehicle motors from Japan to Houston. Airbus has broken ground on a $600 million assembly line in Mobile, Alabama, for its A320 family of jetliners; the facility will create up to 1,000 high-skilled jobs. Flextronics, one of the world’s largest electronics-manufacturing-services companies, has announced that it will invest $32 million in a product innovation center in Silicon Valley. The company’s CEO was quoted in the Wall Street Journal as saying that Flextronics may need to add 1 million square feet of manufacturing capacity in the U.S. over the next five years, depending on economic conditions.
There also is early evidence that foreign manufacturers are starting to move production to or expand production capacity in the U.S. for export around the world.
- Toyota has announced that it is exporting Camry sedans assembled in Kentucky and Sienna minivans made in Indiana to South Korea. The company has also suggested that it may ship U.S.-made cars to China and Russia. In press reports, the president of Toyota Motor North America was quoted as saying, “This is just the beginning of a new era of North America being a source of supply to many other parts of the world.”
- Honda is adding shifts at its plants in Indiana and Ohio to increase exports. The company has said it expects to double its exports of U.S.-made vehicles in the next few years.
- Siemens announced it will build gas turbines in North Carolina that will be used to construct a large power plant in Saudi Arabia.
- Yamaha has transferred production of all-terrain vehicles from overseas facilities to Newman, Georgia, where it directly employs 1,250 factory workers. Yamaha has also opened a second assembly plant in Newman to produce future Side-by-Side products, including a three-person vehicle called the Viking, for worldwide distribution. Yamaha says it could add another 300 jobs in Georgia over the next three to five years.
- In 2011, Rolls-Royce began making engine discs for aircraft at Crosspointe, a world-class manufacturing facility in Prince George County, Virginia. The company said that some parts made in Virginia would be shipped to Europe and Asia to be assembled in jet engine factories. In coming years, Rolls-Royce plans to invest over $500 million in Crosspointe, generating more than 600 jobs, to serve the global economy.
- Michelin of France announced that it will invest $750 million to build a new factory and expand another one in South Carol
ina
to make large tires for earth movers used in the mining and construction industries. The Financial Times reported that at least 80 percent of the additional output will be exported.
While the impact of this trend on U.S. jobs is currently modest, we expect a significant increase in such announcements starting around 2015, as the economic case for reshoring to the U.S. grows stronger—and as companies adjust their global manufacturing footprints accordingly.
The U.S. as a Low-Cost Country
The U.S. now has a distinct production-cost advantage compared with other developed economies that are leading manufacturers. We estimate that due to three factors alone—labor, natural gas, and electricity—average manufacturing costs in the U.K. will be 8 percent higher than in the U.S. by 2015. Costs will be 10 percent higher in Japan, 16 percent higher in Germany and in France, and 18 percent higher in Italy. (See Exhibit 1.) There are three key drivers of this cost advantage.
Labor
The U.S. labor market is currently more attractive than that of all other major manufacturers among the developed economies. This is especially true when factory wages are adjusted for output per worker, which is considerably higher in the U.S. than in Europe and Japan. Only 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. The productivity gap between these nations and the U.S. has widened considerably over the past ten years. We project that by 2015, average labor costs will be around 16 percent lower in the U.S. than in the U.K., 18 percent lower than in Japan, 34 percent lower than in Germany, and 35 percent lower than in France and Italy. (See Exhibit 2.)
An added advantage of the U.S. labor market is its relative flexibility. The Fraser Institute ranks the U.S. as the world’s third-most-favorable economy in terms of labor market regulation. In contrast, Japan and the U.K. rank 14 and 15, Italy ranks 72, France ranks 94, and Germany ranks 112.
A major reason for this high ranking is that it is far easier and less costly in the U.S. than in most other advanced economies to adjust the size of the workforce in response to business conditions. In Germany, for example, we estimate government-mandated costs of approximately $8 million to shutter an average, 200-worker plant and more than $40 million to close a 1,000-worker plant. These costs are associated with the need to comply with rules governing severance pay and the advance notice that must be given to long-term employees. However, the actual cost of shutting a German factory can be significantly higher. German law mandates that workers may remain on the job, at full pay, for anywhere from a few months to more than a year, depending on how long they have been employed by the company, while layoff terms are being negotiated and after notification of a layoff has been received. Specific union contracts, asset write-downs, requirements to retrain workers, and other factors can also add to exit costs. These are major considerations when European companies decide where to make new long-term investments in manufacturing capacity.
Energy
Rapid technological progress in hydraulic fracturing is making it more economically feasible to unlock vast U.S. natural gas and oil deposits from shale. Since 2003, U.S. production of shale gas increased more than tenfold. This has helped push down the U.S. wholesale price of natural gas by 51 percent since 2005. By 2020, recovery costs from shale are expected to be half what they were in 2005—giving the U.S. a much larger supply of inexpensive natural gas. By 2035, U.S. shale-gas production is projected to double again, to 12 trillion cubic feet.
Most public attention to this development has focused on the implications for U.S. energy security. Less appreciated is the fact that cheap domestic sources of natural gas translate into a significant competitive advantage for a number of U.S.-based industries. Natural gas costs anywhere from 2.6 to 3.8 times higher in Europe and Japan than in the U.S. (See Exhibit 3.) The American advantage will likely grow further in the future: the most recent estimates suggest that the U.S. has more than 350 trillion cubic feet of proven shale-gas reserves, plus another 1,600 trillion cubic feet of potential shale-gas resources. That is more than four times the reserves of Western Europe. Japan’s reserves of both shale and conventional gas are negligible.
There are two important implications for industry. First, natural gas is a key feedstock for chemicals and plastics and is a significant cost in the manufacture of primary metals, paper, synthetic textiles, and nonmetallic mineral products. Second, gas-fired power plants are an important source of electricity in the U.S. So cheap natural gas will contribute to keeping power costs lower for U.S.-based industry. Industrial electricity prices are currently 61 percent higher in France, 92 percent higher in the U.K., 107 percent higher in Germany, 135 percent higher in Japan, and 287 percent higher in Italy. Lower electricity rates add a further cost advantage of several percentage points to energy-intensive U.S.-based industries such as metals and paper.
Shipping Rates
Our calculations of manufacturing costs in the U.S. and other developed economies did not factor in a projection for shipping expenses. On several important international trade routes, however, transportation costs give U.S.-based manufacturers another significant advantage. The large trade deficits that the U.S. has run up in the past decade have had a perverse impact on the shipping industry. Containers have been arriving in U.S. ports filled with imported products—and sometimes departing empty. 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.
The imbalanced trade flow has translated into low outbound-freight costs on a number of important trade routes. In late 2011 and early 2012, it cost an average of $3,900 per 40-foot equivalent unit (FEU), or around 72 cubic meters of container space, to ship goods from Yokohama to Rotterdam. The comparable shipping rate from New York City was $1,400. 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. Because so many shipping containers from the U.S. to China are returning empty, freight costs from the U.S. to China are particularly cheap—just $850 per FEU. That compares with $700 per FEU from neighboring Japan. As a result, Japan’s proximity to China will not necessarily be enough to offset the U.S. advantage in lower overall production costs for many products that are not time sensitive.
One event that c
ould sign
ificantly change the cost balance, of course, is a sharp depreciation of the euro against the U.S. dollar. The dollar did indeed increase in value from around $1.60 per euro in early 2008 to around $1.20 per euro in mid-2012 as a result of the global financial crisis. But the dollar would have to appreciate even more dramatically—to below $1 per euro—for Germany, France, and Italy to approach cost parity with the U.S. by 2015. We will continue to monitor this and other cost factors as we continue our research on the competitiveness of the major manufacturing economies.
Many may assume that most of the production displaced from these developed economies will shift to China rather than to the U.S. But for reasons we explained in an earlier report in this series (Made in America, Again: Why Manufacturing Will Return to the U.S., BCG Focus, August 2011), wages have been rising so rapidly in China that its cost advantage over the U.S. by 2015 is projected to be only around 5 percent for many goods exported to North America. When logistics, shipping costs, and the many risks of operating extended global supply chains are factored in, it will be more economical to make many goods now imported from China in the U.S. if they are consumed in the U.S.
The Impact on U.S. Exports
The U.S. export sector is already a little-noticed bright spot in the U.S. economy. Since 2005, export growth has averaged nearly 8 percent per year—despite the global recession of 2008 to 2009. Exports of U.S. goods, excluding food and beverages, now account for around 10 percent of U.S. GDP, the largest share in five decades. In the 1960s, when the U.S. was the world’s dominant manufacturer, exports accounted for only around 4 percent of GDP. What’s more, while the share of global exports by Western Europe and Japan declined between 2005 and 2010, U.S. exports have held steady at around 11 percent.
This momentum is likely to accelerate. Because of lower costs, we project that by the end of the decade, the U.S. could capture $20 billion to $55 billion in annual exports from the four Western European nations we studied, which would represent 2 to 5 percent of those nations’ total exports. In addition, we estimate that the U.S. could capture $5 billion to $12 billion in Japanese exports by that time, or 1 to 2 percent of Japan’s total current exports.
The Impact on U.S. Jobs
We estimate that the increase in U.S. exports and in the domestic production of goods that otherwise would have been imported will create between 600,000 and 1.2 million direct factory jobs. Another 1.9 million to 3.5 million jobs could be created indirectly in related services such as retail, transportation, and logistics. (See Exhibit 4.) We base these estimates on average output per worker and the multiplier effect in each industry category. In the transportation equipment sector, for example, every $140,000 in additional output on average creates one new job. A boost in U.S. production of $3 billion to $9 billion, therefore, would create 20,000 to 65,000 factory jobs. Each transportation-equipment production job, in turn, creates 3.6 jobs indirectly in other areas of the economy. That translates into an overall job increase of 110,000 to 290,000 in the U.S. transportation-equipment industry as a result of increased exports and reshored production.
If our projection of 2.5 to 5 million new U.S. jobs is accurate, the U.S. unemployment rate could drop by 2 to 3 percentage points. That would push the U.S. rate toward the “frictional” level, meaning the unemployment that normally occurs in an economy as workers change jobs.
Where the Gains Will Come
The gains in U.S. exports are likely to be felt across a wide range of industries. The U.S. is particularly well positioned compared with the five developed economies to increase exports in seven industrial categories: transportation equipment, chemicals, petroleum and coal products, computer and electronic products, machinery, electrical equipment, and primary metals. (See Exhibit 5.) These seven groups of industries accounted for roughly 75 percent ($12.6 trillion) of total global exports in 2011. Let’s look at three of them a little more closely.
Transportation Equipment
This industrial category includes cars, trucks, buses, and aircraft. We project that in 2015, the U.S. will have an 11 percent cost advantage over Germany, which exported $319 billion in transportation equipment in 2011, and a 6 percent advantage over Japan, which exported $191 billion. The lower cost of labor accounts for virtually the entire U.S. cost advantage in this category. When adjusted for productivity, Japanese labor costs in transportation equipment manufacturing will be 22 percent higher than those of the U.S. German, French, and Italian labor costs will be 50 percent higher.China will still have an average production-cost advantage of around 6 percent in 2015 for transportation equipment. When shipping and other costs are accounted for, however, it will make more economic sense for such products to be made in the U.S. if they are consumed in the U.S.We project that by 2015, the U.S. will gain $3 billion to $9 billion in exports of transportation equipment from Western Europe and Japan.
Chemicals
The low cost of natural gas in the U.S. will become a particularly significant factor in the production of chemicals, where natural gas is often an important feedstock. Production costs in Germany, a leading chemical exporter, are projected to be 29 percent higher than in the U.S. in 2015. Chemical production costs are projected to be 17 percent higher in the U.K., 27 percent higher in Italy and Japan, and 28 percent higher in France.
A breakdown of the cost structures in each country shows why. Although the cost of German labor will be more than 50 percent higher, for example, the biggest impact will be from differences in natural gas prices, which will be more than three and a half times higher in Germany than in the U.S. Put another way, while natural gas will account for 8 percent of the total production cost of U.S.-made chemicals, it will account for 29 percent of costs in Germany. In the case of Japan, natural gas costs in chemical manufacturing will be nearly four times higher than in the U.S. in 2015. A further consideration is electricity rates, since chemical production is power intensive. We estimate that lower electricity rates will give the U.S. an additional cost advantage, ranging from 1 percentage point over the U.K., France, and Germany to 4 percentage points over Italy.
The U.S. will have a significant cost advantage over China in chemical production in 2015 as well. We project that costs in China’s Yangtze River Delta region will be 16 percent higher, with natural gas prices more than offsetting any advantage that China will have in labor costs.
We project that by 2015, the U.S. will gain $7 billion to $12 billion in chemical exports from Western Europe and Japan.
Machinery
This broad category includes everything from construction and industrial machinery to engines and air conditioners. The U.S. will have a manufacturing cost advantage in machinery of around 7 percent over Japan, where machinery is a $143 billion export industry. Machinery production costs will be around 14 percen
t high
er in Germany, which exported $216 billion in machinery in 2011, 14 percent higher in France, and 15 percent higher in Italy. Labor, a major cost in machinery manufacturing, is the big differentiator.
Projected total costs for machinery production will be around 8 percent lower in China in 2015. But when other costs are considered, it will likely be more cost-effective to produce much of the machinery that is sold in the U.S. in the U.S.
We project that by 2015, the U.S. will gain $3 billion to $12 billion in machinery exports from Western Europe and Japan.
The Key Messages for Manufacturers
Such core U.S. cost advantages as cheap energy and labor adjusted for productivity are likely to persist for at least the next five to ten years. As a result, the steady emergence of the U.S. as one of the lowest-cost countries of the developed world is a trend that is likely to have major implications for manufacturers around the world in a wide range of product categories across a wide range of industries. In the near term, the new math of manufacturing requires that many companies reassess their global production strategy.
We have long advised companies to maintain a diversified global manufacturing footprint in order to have the flexibility to respond to unanticipated changes and to expand or reduce production quickly in response to the competitive needs of specific markets. This advice continues to hold true. We also advise companies to carefully consider the total cost of ownership over the lifetime of the investment when deciding where to build new production capacity.
The shifting cost dynamics, however, suggest that more companies should consider the U.S. as a manufacturing option for global markets. A number of leading manufacturers based in Europe and Asia have already begun to use the U.S. as a major export platform or have announced plans to do so. Others are relocating offshore production to the U.S. of goods to be consumed in North America. We believe that these companies are the early movers in what is likely to become a more widespread trend by 2020.
Companies that fail to take into account these cost shifts when making long-term investments could find themselves at a competitive disadvantage. Improving U.S. cost-competitiveness compared with developed economies, combined with rising costs in such offshore-manufacturing havens as China, represent what we believe is a paradigm shift that could usher in an American manufacturing renaissance.
Authors and Acknowledgments
To Contact the Authors
Harold L. Sirkin
Senior Partner & Managing Director
Chicago
Michael Zinser
Partner & Managing Director
ChicagoJustin Rose
Partner & Managing Director
Chicago
AcknowledgmentsThis report would not have been possible without the efforts of Justin Baier, Brianne Blakey, Collin Galster, Matt Gamber, Louis Hobson, Frank Roberts, Daniel Spindelndreier, and Steven Won of The Boston Consulting Group project team. The authors also would like to thank Alexandra Corriveau, Madeleine Desmond, David Fondiller, Beth Gillett, and Mike Petkewich for their guidance and interaction with the media, Pete Engardio for writing assistance, and Katherine Andrews, Angela DiBattista, Gina Goldstein, and Sara Strassenreiter for editing, design, and production.
Private Sector Adds 130,000 Jobs in October
in Uncategorized/by MAM TeamService industries added the most jobs, but still fewer than last month at 107,000 compared with 130,000 in September. Trade, transportation, and utilities businesses had the biggest October jobs growth within the service sector.
October jobs performance among private employers was “well below the average of the last 12 months,” ADP President and CEO Carlos Rodriguez said in a company statement.
He added that large businesses fared better than small businesses in terms of payroll growth between September and October.
Mark Zandi, Moody’s Analytics chief economist, warned that if private sector jobs growth doesn’t recover, the country could face an increase in unemployment.
“The government shutdown and debt limit brinksmanship hurt the already softening job market in October,” he said in an ADP release. “Any further weakening would signal rising unemployment.”
Owens Corning To Establish Manufacturing Facility In Gastonia, N.C.
in Uncategorized/by MAM Team“Gastonia provides a great foundation for our new glass nonwoven facility with its location near the Charlotte and Research Triangle regions, where there are particular concentrations of skills needed for this business; its proximity to key customers; and its attractive business environment,” said Arnaud Genis, group president, Owens Corning’s Composite Solutions Business. “The Gastonia operation will support growing customer demand for glass non-woven products serving the global building materials market, complementing our existing facilities in Europe and North America, and enhancing Owens Corning’s leadership position in the provision of glass nonwoven technologies.”
The company reports its glass fiber materials are used in more than 40,000 end-use composites applications in the global transportation, industrial and construction industries.
OLYMPIC TEAM USA UNIFORMS GET MADE IN USA LABEL
in Uncategorized/by MAM TeamRalph Lauren Corp., which has been making most of the athletes’ clothes since 2008 when it took over from Canadian clothier Roots, got the message.
“We have worked incredibly hard as a company to go across America to find the best partners to help us produce the Olympic uniforms at the highest quality for the best athletes in the world,” said David Lauren, the company’s executive vice president of advertising, marketing and corporate communications.
They used more than 40 vendors, from ranchers in the rural West to yarn spinners in Pennsylvania to sewers in New York’s Garment District for the closing ceremony outfits unveiled Tuesday. The ensemble includes a navy peacoat with a red stripe, a classic ski sweater with a reindeer motif and a hand-sewn American flag, and a tasseled chunky-knit hat.
(Individual clothes for competition are made by different, mostly athletic-gear brands, depending on the sport, technical aspects and sponsorship deals. Those outfits didn’t seem part of the earlier overseas outcry, but some companies, such as The North Face, which is making the freeskiing uniforms, have committed to U.S. manufacturing, too.)
Figure skater Evan Lysacek, who won gold in Vancouver in 2010, said the ceremonial uniforms make the athletes stand a little prouder.
“As an athlete, the clothing means even more than you’d think. The training, the sacrifices, the lifestyle, which is not glamorous and can be grueling and trying at times, all seem to come together in the moment when you realize you are part of the Olympic team,” he said. “The moment you put on those first pieces of the American team clothes, you feel like it’s real.”
Moving production to the U.S., though, was a lesson in the state of American manufacturing. It was hard to come by facilities that could create the quantity and quality needed for the Olympic uniforms and the versions that will be sold to the public, David Lauren said. As a result, there are fewer pieces in the collection for 2014.
During the London flap, he said, “what no one wanted to look at was the true complexity of making Olympic uniforms. We would have done it here if we could, but it was so much more complicated than people realized. Lots of places said they could help us make them, but when we called them, they couldn’t. It was grandstanding by a lot of companies. But we have since found manufacturers, and there are many more out there and we will keep reaching out.”
Jeanne Carver of rural Maupin, Ore., couldn’t quite believe the call that came 18 months ago.
Imperial Stock Ranch, founded in 1871 and now run by Carver and her husband, Dan, was at a make-or-break time, especially for its sheep business. They kept hearing that apparel manufacturing was going offshore and they wouldn’t ship U.S. wool overseas, Carver said. Then the phone rang in the summer of 2012.
“I thought the phone was the tinkling of sheep bells!” Carver said. But it was the product development director for the Ralph Lauren knitwear division. “I literally said to him, ‘You are kidding me!'”
When Robert Cramer told her he was looking for yarn for Team USA sweaters and asked for a tour, “The two things that went through my head were, ‘Oh my god, what will I wear? And what am I going to feed fashion people from New York?!'”
(She went with her “clean” cowboy boots and a menu that included lasagna made with ground beef from the ranch.)
The fact that these were for Olympic uniforms was “icing on the cake.” She was just so appreciative that a big company was paying attention to domestic ranchers and farmers, wool dyers and sewers.
The athletes are happy to see more Americans represented, too, says Lysacek.
“What I hear from the athletes on this topic is that we go out in the Olympic Games and in every competition, we represent the United States of America. I might not know every citizen, but I represent them,” he said. “The more people who are tied into the Olympic story, the closer to home each story hits.”
The U.S. as One of the Developed World’s Lowest-Cost Manufacturers
in Manufacturing/by MAM TeamExport manufacturing has recently become the unsung hero of the U.S. economy. Despite all the public focus on the U.S. trade deficit, little attention has been paid to the fact that the country’s exports have been growing more than seven times faster than GDP since 2005. As a share of the U.S. economy, in fact, exports are at their highest point in 50 years.
But this is likely to be just the beginning. We project that the U.S., as a result of its increasing competitiveness in manufacturing, will capture $70 billion to $115 billion in annual exports from other nations by the end of the decade. About two-thirds of these export gains could come from production shifts to the U.S. from leading European nations and Japan. By 2020, higher U.S. exports, combined with production work that will likely be “reshored” from China, could create 2.5 million to 5 million American factory and service jobs associated with increased manufacturing.
Our perspective is based on shifts in cost structures that increasingly favor U.S. manufacturing. In the first two reports in our Made in America, Again series, we explained how China’s once overwhelming production-cost advantage over the U.S. is rapidly eroding because of higher wages and other factors—and how these trends are likely to boost U.S. manufacturing in specific industries. Below, we focus on America’s increasing cost-competitiveness in manufacturing compared with leading advanced economies that are major exporters.
Our analysis suggests that the U.S. is steadily becoming one of the lowest-cost countries for manufacturing in the developed world. We estimate that by 2015, average manufacturing costs in the five major advanced export economies that we studied—Germany, Japan, France, Italy, and the U.K.—will be 8 to 18 percent higher than in the U.S. Among the biggest drivers of this advantage will be the costs of labor (adjusted for productivity), natural gas, and electricity. As a result, we estimate that the U.S. could capture up to 5 percent of total exports from these developed countries by the end of the decade. The shift will be supported by a significant U.S. advantage in shipping costs in important trade routes compared with other major manufacturing economies.
These shifting cost dynamics are likely to have a significant impact on world trade. China and the major developed economies account for around 75 percent of global exports. And the U.S. export surge will be felt across a wide range of U.S. industries.
The most profound impact will likely be on industrial groups that account for the bulk of global trade, such as transportation equipment, chemicals, machinery, and computer and electronic products. Production gains will come in several forms. In some cases, companies will increasingly use the U.S. as a low-cost export base for the rest of the world. In other cases, U.S. production will displace imports as both U.S. and foreign companies relocate the manufacturing of goods sold in the U.S. that otherwise would have been made offshore.
The full impact of the shifting cost advantage will take several years to be felt in terms of new production capacity. And the magnitude of the job gains will depend heavily on the degree to which the U.S. can continue to enhance its global competitiveness. One of the biggest challenges facing U.S. manufacturers is the supply of skilled labor. As we explained in a previous publication, however, our analysis shows that, in the short term, any U.S. manufacturing skills gap is unlikely to be significant enough to curtail a U.S. manufacturing resurgence. Rather, such shortages are more of a long-term risk if action is not taken soon to train and recruit new skilled workers.
Companies should, of course, continue to maintain diversified manufacturing operations around the world. But at the same time, they must be aware that the structural changes in production cost structures represent a potential paradigm shift for global manufacturing that warrants immediate attention.
The Pendulum Swings Back
For much of the past four decades, manufacturing work has been migrating from the world’s high-cost to its low-cost economies. Generally, this has meant a transfer of factory jobs of all kinds from the U.S. to abroad.
The pendulum finally is starting to swing back—and in the years ahead, it could be America’s turn to be on the receiving end of production shifts in many industries. In previous reports, we cited a number of examples of companies that have shifted production to the U.S. from China and other low-cost nations. These companies range from big multinationals like Ford and NCR to smaller U.S. makers of everything from kitchenware and plastic coolers to headphones. More recently, computer giant Lenovo opened a plant to assemble Think-brand laptops, notebooks, and tablets in North Carolina. Toshiba Industrial has moved production of its hybrid-electric vehicle motors from Japan to Houston. Airbus has broken ground on a $600 million assembly line in Mobile, Alabama, for its A320 family of jetliners; the facility will create up to 1,000 high-skilled jobs. Flextronics, one of the world’s largest electronics-manufacturing-services companies, has announced that it will invest $32 million in a product innovation center in Silicon Valley. The company’s CEO was quoted in the Wall Street Journal as saying that Flextronics may need to add 1 million square feet of manufacturing capacity in the U.S. over the next five years, depending on economic conditions.
There also is early evidence that foreign manufacturers are starting to move production to or expand production capacity in the U.S. for export around the world.
ina
to make large tires for earth movers used in the mining and construction industries. The Financial Times reported that at least 80 percent of the additional output will be exported.
While the impact of this trend on U.S. jobs is currently modest, we expect a significant increase in such announcements starting around 2015, as the economic case for reshoring to the U.S. grows stronger—and as companies adjust their global manufacturing footprints accordingly.
The U.S. as a Low-Cost Country
The U.S. now has a distinct production-cost advantage compared with other developed economies that are leading manufacturers. We estimate that due to three factors alone—labor, natural gas, and electricity—average manufacturing costs in the U.K. will be 8 percent higher than in the U.S. by 2015. Costs will be 10 percent higher in Japan, 16 percent higher in Germany and in France, and 18 percent higher in Italy. (See Exhibit 1.) There are three key drivers of this cost advantage.
The U.S. labor market is currently more attractive than that of all other major manufacturers among the developed economies. This is especially true when factory wages are adjusted for output per worker, which is considerably higher in the U.S. than in Europe and Japan. Only 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. The productivity gap between these nations and the U.S. has widened considerably over the past ten years. We project that by 2015, average labor costs will be around 16 percent lower in the U.S. than in the U.K., 18 percent lower than in Japan, 34 percent lower than in Germany, and 35 percent lower than in France and Italy. (See Exhibit 2.)
An added advantage of the U.S. labor market is its relative flexibility. The Fraser Institute ranks the U.S. as the world’s third-most-favorable economy in terms of labor market regulation. In contrast, Japan and the U.K. rank 14 and 15, Italy ranks 72, France ranks 94, and Germany ranks 112.
A major reason for this high ranking is that it is far easier and less costly in the U.S. than in most other advanced economies to adjust the size of the workforce in response to business conditions. In Germany, for example, we estimate government-mandated costs of approximately $8 million to shutter an average, 200-worker plant and more than $40 million to close a 1,000-worker plant. These costs are associated with the need to comply with rules governing severance pay and the advance notice that must be given to long-term employees. However, the actual cost of shutting a German factory can be significantly higher. German law mandates that workers may remain on the job, at full pay, for anywhere from a few months to more than a year, depending on how long they have been employed by the company, while layoff terms are being negotiated and after notification of a layoff has been received. Specific union contracts, asset write-downs, requirements to retrain workers, and other factors can also add to exit costs. These are major considerations when European companies decide where to make new long-term investments in manufacturing capacity.
Energy
Rapid technological progress in hydraulic fracturing is making it more economically feasible to unlock vast U.S. natural gas and oil deposits from shale. Since 2003, U.S. production of shale gas increased more than tenfold. This has helped push down the U.S. wholesale price of natural gas by 51 percent since 2005. By 2020, recovery costs from shale are expected to be half what they were in 2005—giving the U.S. a much larger supply of inexpensive natural gas. By 2035, U.S. shale-gas production is projected to double again, to 12 trillion cubic feet.
Most public attention to this development has focused on the implications for U.S. energy security. Less appreciated is the fact that cheap domestic sources of natural gas translate into a significant competitive advantage for a number of U.S.-based industries. Natural gas costs anywhere from 2.6 to 3.8 times higher in Europe and Japan than in the U.S. (See Exhibit 3.) The American advantage will likely grow further in the future: the most recent estimates suggest that the U.S. has more than 350 trillion cubic feet of proven shale-gas reserves, plus another 1,600 trillion cubic feet of potential shale-gas resources. That is more than four times the reserves of Western Europe. Japan’s reserves of both shale and conventional gas are negligible.
There are two important implications for industry. First, natural gas is a key feedstock for chemicals and plastics and is a significant cost in the manufacture of primary metals, paper, synthetic textiles, and nonmetallic mineral products. Second, gas-fired power plants are an important source of electricity in the U.S. So cheap natural gas will contribute to keeping power costs lower for U.S.-based industry. Industrial electricity prices are currently 61 percent higher in France, 92 percent higher in the U.K., 107 percent higher in Germany, 135 percent higher in Japan, and 287 percent higher in Italy. Lower electricity rates add a further cost advantage of several percentage points to energy-intensive U.S.-based industries such as metals and paper.
Shipping Rates
Our calculations of manufacturing costs in the U.S. and other developed economies did not factor in a projection for shipping expenses. On several important international trade routes, however, transportation costs give U.S.-based manufacturers another significant advantage. The large trade deficits that the U.S. has run up in the past decade have had a perverse impact on the shipping industry. Containers have been arriving in U.S. ports filled with imported products—and sometimes departing empty. 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.
The imbalanced trade flow has translated into low outbound-freight costs on a number of important trade routes. In late 2011 and early 2012, it cost an average of $3,900 per 40-foot equivalent unit (FEU), or around 72 cubic meters of container space, to ship goods from Yokohama to Rotterdam. The comparable shipping rate from New York City was $1,400. 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. Because so many shipping containers from the U.S. to China are returning empty, freight costs from the U.S. to China are particularly cheap—just $850 per FEU. That compares with $700 per FEU from neighboring Japan. As a result, Japan’s proximity to China will not necessarily be enough to offset the U.S. advantage in lower overall production costs for many products that are not time sensitive.
One event that c
ould sign
ificantly change the cost balance, of course, is a sharp depreciation of the euro against the U.S. dollar. The dollar did indeed increase in value from around $1.60 per euro in early 2008 to around $1.20 per euro in mid-2012 as a result of the global financial crisis. But the dollar would have to appreciate even more dramatically—to below $1 per euro—for Germany, France, and Italy to approach cost parity with the U.S. by 2015. We will continue to monitor this and other cost factors as we continue our research on the competitiveness of the major manufacturing economies.
Many may assume that most of the production displaced from these developed economies will shift to China rather than to the U.S. But for reasons we explained in an earlier report in this series (Made in America, Again: Why Manufacturing Will Return to the U.S., BCG Focus, August 2011), wages have been rising so rapidly in China that its cost advantage over the U.S. by 2015 is projected to be only around 5 percent for many goods exported to North America. When logistics, shipping costs, and the many risks of operating extended global supply chains are factored in, it will be more economical to make many goods now imported from China in the U.S. if they are consumed in the U.S.
The Impact on U.S. Exports
The U.S. export sector is already a little-noticed bright spot in the U.S. economy. Since 2005, export growth has averaged nearly 8 percent per year—despite the global recession of 2008 to 2009. Exports of U.S. goods, excluding food and beverages, now account for around 10 percent of U.S. GDP, the largest share in five decades. In the 1960s, when the U.S. was the world’s dominant manufacturer, exports accounted for only around 4 percent of GDP. What’s more, while the share of global exports by Western Europe and Japan declined between 2005 and 2010, U.S. exports have held steady at around 11 percent.
This momentum is likely to accelerate. Because of lower costs, we project that by the end of the decade, the U.S. could capture $20 billion to $55 billion in annual exports from the four Western European nations we studied, which would represent 2 to 5 percent of those nations’ total exports. In addition, we estimate that the U.S. could capture $5 billion to $12 billion in Japanese exports by that time, or 1 to 2 percent of Japan’s total current exports.
The Impact on U.S. Jobs
We estimate that the increase in U.S. exports and in the domestic production of goods that otherwise would have been imported will create between 600,000 and 1.2 million direct factory jobs. Another 1.9 million to 3.5 million jobs could be created indirectly in related services such as retail, transportation, and logistics. (See Exhibit 4.) We base these estimates on average output per worker and the multiplier effect in each industry category. In the transportation equipment sector, for example, every $140,000 in additional output on average creates one new job. A boost in U.S. production of $3 billion to $9 billion, therefore, would create 20,000 to 65,000 factory jobs. Each transportation-equipment production job, in turn, creates 3.6 jobs indirectly in other areas of the economy. That translates into an overall job increase of 110,000 to 290,000 in the U.S. transportation-equipment industry as a result of increased exports and reshored production.
If our projection of 2.5 to 5 million new U.S. jobs is accurate, the U.S. unemployment rate could drop by 2 to 3 percentage points. That would push the U.S. rate toward the “frictional” level, meaning the unemployment that normally occurs in an economy as workers change jobs.
Where the Gains Will Come
The gains in U.S. exports are likely to be felt across a wide range of industries. The U.S. is particularly well positioned compared with the five developed economies to increase exports in seven industrial categories: transportation equipment, chemicals, petroleum and coal products, computer and electronic products, machinery, electrical equipment, and primary metals. (See Exhibit 5.) These seven groups of industries accounted for roughly 75 percent ($12.6 trillion) of total global exports in 2011. Let’s look at three of them a little more closely.
This industrial category includes cars, trucks, buses, and aircraft. We project that in 2015, the U.S. will have an 11 percent cost advantage over Germany, which exported $319 billion in transportation equipment in 2011, and a 6 percent advantage over Japan, which exported $191 billion. The lower cost of labor accounts for virtually the entire U.S. cost advantage in this category. When adjusted for productivity, Japanese labor costs in transportation equipment manufacturing will be 22 percent higher than those of the U.S. German, French, and Italian labor costs will be 50 percent higher.China will still have an average production-cost advantage of around 6 percent in 2015 for transportation equipment. When shipping and other costs are accounted for, however, it will make more economic sense for such products to be made in the U.S. if they are consumed in the U.S.We project that by 2015, the U.S. will gain $3 billion to $9 billion in exports of transportation equipment from Western Europe and Japan.
Chemicals
The low cost of natural gas in the U.S. will become a particularly significant factor in the production of chemicals, where natural gas is often an important feedstock. Production costs in Germany, a leading chemical exporter, are projected to be 29 percent higher than in the U.S. in 2015. Chemical production costs are projected to be 17 percent higher in the U.K., 27 percent higher in Italy and Japan, and 28 percent higher in France.
A breakdown of the cost structures in each country shows why. Although the cost of German labor will be more than 50 percent higher, for example, the biggest impact will be from differences in natural gas prices, which will be more than three and a half times higher in Germany than in the U.S. Put another way, while natural gas will account for 8 percent of the total production cost of U.S.-made chemicals, it will account for 29 percent of costs in Germany. In the case of Japan, natural gas costs in chemical manufacturing will be nearly four times higher than in the U.S. in 2015. A further consideration is electricity rates, since chemical production is power intensive. We estimate that lower electricity rates will give the U.S. an additional cost advantage, ranging from 1 percentage point over the U.K., France, and Germany to 4 percentage points over Italy.
The U.S. will have a significant cost advantage over China in chemical production in 2015 as well. We project that costs in China’s Yangtze River Delta region will be 16 percent higher, with natural gas prices more than offsetting any advantage that China will have in labor costs.
We project that by 2015, the U.S. will gain $7 billion to $12 billion in chemical exports from Western Europe and Japan.
Machinery
This broad category includes everything from construction and industrial machinery to engines and air conditioners. The U.S. will have a manufacturing cost advantage in machinery of around 7 percent over Japan, where machinery is a $143 billion export industry. Machinery production costs will be around 14 percen
t high
er in Germany, which exported $216 billion in machinery in 2011, 14 percent higher in France, and 15 percent higher in Italy. Labor, a major cost in machinery manufacturing, is the big differentiator.
Projected total costs for machinery production will be around 8 percent lower in China in 2015. But when other costs are considered, it will likely be more cost-effective to produce much of the machinery that is sold in the U.S. in the U.S.
We project that by 2015, the U.S. will gain $3 billion to $12 billion in machinery exports from Western Europe and Japan.
The Key Messages for Manufacturers
Such core U.S. cost advantages as cheap energy and labor adjusted for productivity are likely to persist for at least the next five to ten years. As a result, the steady emergence of the U.S. as one of the lowest-cost countries of the developed world is a trend that is likely to have major implications for manufacturers around the world in a wide range of product categories across a wide range of industries. In the near term, the new math of manufacturing requires that many companies reassess their global production strategy.
We have long advised companies to maintain a diversified global manufacturing footprint in order to have the flexibility to respond to unanticipated changes and to expand or reduce production quickly in response to the competitive needs of specific markets. This advice continues to hold true. We also advise companies to carefully consider the total cost of ownership over the lifetime of the investment when deciding where to build new production capacity.
The shifting cost dynamics, however, suggest that more companies should consider the U.S. as a manufacturing option for global markets. A number of leading manufacturers based in Europe and Asia have already begun to use the U.S. as a major export platform or have announced plans to do so. Others are relocating offshore production to the U.S. of goods to be consumed in North America. We believe that these companies are the early movers in what is likely to become a more widespread trend by 2020.
Companies that fail to take into account these cost shifts when making long-term investments could find themselves at a competitive disadvantage. Improving U.S. cost-competitiveness compared with developed economies, combined with rising costs in such offshore-manufacturing havens as China, represent what we believe is a paradigm shift that could usher in an American manufacturing renaissance.
To Contact the Authors
Harold L. Sirkin
Senior Partner & Managing Director
Chicago
Michael Zinser
Partner & Managing Director
ChicagoJustin Rose
Partner & Managing Director
Chicago
AcknowledgmentsThis report would not have been possible without the efforts of Justin Baier, Brianne Blakey, Collin Galster, Matt Gamber, Louis Hobson, Frank Roberts, Daniel Spindelndreier, and Steven Won of The Boston Consulting Group project team. The authors also would like to thank Alexandra Corriveau, Madeleine Desmond, David Fondiller, Beth Gillett, and Mike Petkewich for their guidance and interaction with the media, Pete Engardio for writing assistance, and Katherine Andrews, Angela DiBattista, Gina Goldstein, and Sara Strassenreiter for editing, design, and production.
Made In The U.S.A. Should Boost The Dollar
in Uncategorized/by MAM TeamBut what does this spending shift, also called import substitution, have to do with the direction of the U.S. dollar? The answer lies in the combination of the external balance, or trade balance, and the internal balance, or unemployment rate. Those two balances, trade balance and unemployment rate, are “the two most fundamental variables for any currency,” said Woo in an interview.
As domestic demand increases, that spending can either focus on domestic or imported goods and services. A focus on domestic goods, as is currently the case, would lead to a decline in the unemployment rate, according to the note.
And here’s the tie-in to the Federal Reserve, which currently keeps interest rates low. The Fed has set an unemployment threshold (not trigger, as officials like to remind us) of 6.5% unemployment for a change in interest rates.
So the shift in spending habits, or import substitution, which is creating jobs and driving the unemployment rate lower, will eventually lead the Fed to hike interest rates and push the dollar higher. “Ultimately, for the dollar to strengthen, we need the Fed to hike rates,” Woo said.
Chinese Treats Are Mysteriously Killing American Pets
in Uncategorized/by MAM TeamDespite the growing number of reports, though, the FDA has been unable to identify the root cause. That’s not for a lack of effort. The agency said it had conducted more than 1,200 tests of Chinese jerky in recent years, visited the treats’ manufacturers, and reached out to foreign experts and leading academics for help.
Still, the spate of illnesses remains “one of the most elusive and mysterious outbreaks we’ve encountered,” Bernadette Dunham, head of the FDA’s Center for Veterinary Medicine, said in a statement.
The FDA has been raising red flags about the safety of Chinese-produced snacks for some time.
Back in 2007, the FDA launched an investigation into dog treats pulled from Walmart stores. And in January, two of the largest retailers of pet jerky — Nestle Purina Petcare and Del Monte Corp. — pulled select products from shelves after they were found to contain residual traces of banned antibiotics.
However, the FDA said at the time that there was “no evidence that raises health concerns,” and that the products were “highly unlikely” to be related to the mounting death reports. (The antibiotics in question are outlawed in the U.S., but widely used abroad, including in the European Union.) And while the rate of illnesses has fallen since that recall, the FDA theorizes that the drop was likely the result of a decreased demand for treats overall, and not the result of deadly meat leaving the market.
The rise in pet illnesses correlates to a massive spike in the volume of pet food imported from China. In 2003, the U.S. imported 1.1 million pounds of cat and dog food from China; that figure leapt to 85.8 million pounds in 2011.
Several federal lawmakers last year asked the FDA to issue a blanket recall of Chinese jerky treats, questioning why it had yet to do so despite thousands of reported illnesses. Former Rep. Dennis Kucinich (D-Ohio) labeled the products “death treats,” while Rep. Jerry McNerney (D-Calif.) wrote to the Chinese government asking it to consider a moratorium on production until the FDA could determine whether the products “contain tainted material.”
Given the booming business, though, China’s government declined the request, instead casting blame on the FDA.
“From the perspective of the Chinese side, there might be something wrong with the FDA’s investigation guidance,” Beijing wrote.
For its part, the FDA has said such a recall would be impractical given the government’s limited understanding of the cause of the illnesses. Instead, the agency has now called on veterinarians and pet owners to help them out and report any new suspected cases as soon as possible.
Why Are Jerky Treats Making Pets Sick?
in Uncategorized/by MAM TeamTo date, FDA’s Center for Veterinary Medicine (CVM) has conducted more than 1,200 tests, visited jerky pet treat manufacturers in China and collaborated with colleagues in academia, industry, state labs and foreign governments. Yet the exact cause of the illnesses remains elusive.
To gather even more information, FDA is reaching out to licensed veterinarians and pet owners across the country. “This is one of the most elusive and mysterious outbreaks we’ve encountered,” says CVM Director Bernadette Dunham, DVM, Ph.D. “Our beloved four-legged companions deserve our best effort, and we are giving it.”
In a letter addressing U.S. licensed veterinarians, FDA lists what information is needed for labs testing treats and investigating illness and death associated with the treats. In some cases, veterinarians will be asked to provide blood, urine and tissue samples from their patients for further analysis. FDA will request written permission from pet owners and will cover the costs, including shipping, of any tests it requests.
Meanwhile, a consumer fact sheet will accompany the letter to veterinarians so they can alert consumers to the problem and remind them that treats are not essential to a balanced diet. The fact sheet also explains to consumers how they can help FDA’s investigation by reporting potential jerky pet treat-related illnesses online or by calling the FDA Consumer Complaint Coordinator for their state.
What to Look Out For
Within hours of eating treats sold as jerky tenders or strips made of chicken, duck, sweet potatoes and/or dried fruit, some pets have exhibited decreased appetite, decreased activity, vomiting, diarrhea (sometimes with blood or mucus), increased water consumption, and/or increased urination.
Severe cases have involved kidney failure, gastrointestinal bleeding, and a rare kidney disorder. About 60 percent of cases involved gastrointestinal illness, and about 30 percent involved kidney and urinary systems.
The remaining cases reported various symptoms, such as collapse, convulsions or skin issues.
Most of the jerky treats implicated have been made in China. Manufacturers of pet foods are not required by U.S. law to state the country of origin for each ingredient in their products.
A number of jerky pet treat products were removed from the market in January 2013 after a New York State lab reported finding evidence of up to six drugs in certain jerky pet treats made in China. While the levels of these drugs were very low and it’s unlikely that they caused the illnesses, FDA noted a decrease in reports of jerky-suspected illnesses after the products were removed from the market. FDA believes that the number of reports may have declined simply because fewer jerky treats were available.
Meanwhile, the agency urges pet owners to be cautious about providing jerky treats. If you do provide them and your pet becomes sick, stop the treats immediately, consider seeing your veterinarian, and save any remaining treats and the packaging for possible testing.
What FDA Is Doing
More than 1,200 jerky pet treat samples have been tested since 2011 for a variety of chemical and microbiological contaminants, from antibiotics to metals, pesticides and Salmonella. DNA testing has also been conducted, along with tests for nutritional composition.
In addition to continuing to test jerky pet treat samples within FDA labs, the agency is working with the Veterinary Laboratory Investigation and Response Network (Vet-LIRN), an FDA-coordinated network of government and veterinary diagnostic laboratories across the U.S. and Canada. (A summary of the tests is available on Vet-LIRN’s webpage.)
Inspections of the facilities in China that manufacture jerky products associated with some of the highest numbers of pet illness reports did not identify the cause of illness. However, they did identify additional paths of investigation, such as the supply chain of some ingredients in the treats. Although FDA inspectors have found no evidence identifying the cause of the spate of illnesses, they did find that one firm used falsified receiving documents for glycerin, a jerky ingredient. Chinese authorities informed FDA that they had seized products at the firm and suspended its exports.
To identify the root cause of this problem, FDA is meeting regularly with regulators in China to share findings. The agency also plans to host Chinese scientists at its veterinary research facility to increase scientific cooperation.
FDA has also reached out to U.S. pet food firms seeking further collaboration on scientific issues and data sharing, and has contracted with diagnostic labs.
“Our fervent hope as animal lovers,” says Dunham, “is that we will soon find the cause of—and put a stop to—these illnesses.”
This article appears on FDA’s Consumer Updates page, which features the latest on all FDA-regulated products.
Oct. 22, 2013
John Ratzenberger’s American Made TV Show Kicks off Campaign in FundAnything
in News/by MAM TeamA video release on the show and campaign
“From the things we need, to the things we want, to the things we dream about— we’re going to show you the best of our country’s home grown products,” says Ratzenberger. “But more importantly, we’ll highlight the remarkable men and women who use their skills and ingenuity to create goods they can proudly call made in the USA.”
The show will also empower viewers with a direct and easy path on where to buy the products profiled. The series will be produced with RealityTVStar.com, which Ratzenberger co-founded.
“We chose to crowd fund the initial few episodes for strategic reasons,” said RealityTVStar.com CEO, Jeffrey Solomon. “Crowd funding is an excellent way to mobilize fans and promote our American made corporate partners before the show launches. It’s also an excellent way to allow the public to be a part of the show before its release on TV.”
Crowd funding has grown into an extremely successful method to fund creative projects without the bureaucracy of corporate mandates. Ratzenberger’s campaign will give donors a chance to be on the show; join John at a VIP events; receive products profiled, and many more opportunities only available to donors. He has already signed on 30+ American-made companies and industry groups.
Those interested in participating in John’s FundAnything campaign can visit http://www.Fundanything.com/americanmade for more details. Individuals can also see these companies/industry groups on the TV series Facebook page at http://www.facebook.com/americanmadewithjohn.
Ratzenberger’s career includes 40 feature films and dozens of television shows including the highly successful ‘John Ratzenberger’s Made in America,’ which ran 5 seasons on the Travel Channel from 2004 to 2008. John is currently a regular on FX’s ‘Legit,’ and has recently appeared on Fox’s ‘Bones,’ CBS’s ‘CSI,’ Lifetime’s ‘Drop Dead Diva,’ and TNT’s ‘Franklin & Bash.’ He is also in production for the newest Pixar film ‘Inside Out.’
About Reality TV Star
RealityTVStar.com is a reality TV production company that uses technology to improve the process of developing, casting and producing reality TV shows. RealityTVStar.com offers fans the ability to upload “slice of life,” casting, and “home” video clips, for the chance to be discovered by the RealityTVStar.com team of producers.
Manufacture New York Provides Production Facilities to Independent Designers
in Uncategorized/by MAM TeamThis represents a minor hiccup for Ms. Bland, 30, who has been rallying support and financing for an idea she said, “came to me fully formed, almost as a dream.” The garment district space will be dwarfed by the 160,000-square-foot clothing design and production center she is planning to open in 2014, in an industrial lot, Industry City, in Sunset Park, Brooklyn, that also houses artists’ studios, a microbrewery and the fashion label Rag & Bone (one of whose investors, the Theory chief executive Andrew Rosen, has also been of late carrying out plans to encourage local manufacturing with the Council of Fashion Designers of America).
Ms. Bland pointed out that New York’s garment manufacturing industry has seen a 90 percent decrease in jobs since the early 1990s and said the main motivation behind Manufacture New York “is to provide talented, hard-working designers with the resources they need to make a living doing what they love.” She said both facilities were “a culmination of my entire career in fashion, both as a corporate and an independent designer.”
“I was sick of hearing about small labels going bust,” she said, “and also very aware of the difficulties in keeping an ethical global supply chain.”
Jessica Lapidos of Tilly and William, a unisex label, was one of the first of some 40-odd designers who have already signed up, pleased by the promise of technology “typically accessible solely to big businesses,” she said, like pattern-making software, photo-studio space and sales representation. “They’re responding to the challenges of being a designer from every angle,” she said.
Ms. Bland said she would be able to accommodate up to 70 designers, charging them a monthly membership fee of $275 for access to design space alongside high-quality production facilities. “We want to unite the two,” she said, adding with a note of sarcasm, “How radical!”
Ms. Bland, who has worked on the design floor at labels including Tommy Hilfiger and Ralph Lauren, indeed sounds like a woman radicalized. “Outsourcing production overseas used to seem like a magic solution when it came to producing affordable product for a thrifty, trend-driven consumer,” she said. “But what are the actual costs?”
She described a Chinese factory she visited while working for Triple Five Soul, a streetwear label. “It was by no means a sweatshop, and was compliant with all the regulations on working conditions,” Ms. Bland said; still, teenage laborers lived in barrack-like dormitory accommodations and regularly worked 12-hour shifts.
The collapse of Rana Plaza in Bangladesh last April, causing more than 1,000 deaths, made addressing the issue seem even more urgent.
The daughter of two public schoolteachers, Ms. Bland was born in Washington. She attended the Savannah College of Art and Design and moved to Manhattan in 2003 to pursue a design career, before settling in Williamsburg two years later. She was quickly inspired by the flourishing creative entrepreneurialism there to set up her own label, Brooklyn Royalty, in 2006. “I had already grown tired of designing quality merchandise extolling the virtues of New York City, only to have it produced overseas,” she said. “But the reality is, it’s become almost impossible to produce a line here.”
Still, in what was then her day job at Ralph Lauren, “it seemed crazy to me that the only way to see the end product of my designs was to go into the store and buy it,” Ms. Bland said, adding that while there aren’t enough corporate jobs available to design-school graduates, “the vast majority of what we’re taught is geared toward us working for somebody else.” (She conceded that she had drawn many of her ideas from powerful conglomerates like Jones Group and LVMH, “who share vast resources among many brands, from marketing to sales, sourcing and production.”)
Business mentoring (“all the stuff you should have learned in fashion school and didn’t,” Ms. Bland said) will also be available to designers in the Manufacture New York stable, and she is planning to help arrange paid apprenticeships with designers like Nanette Lepore and Ralph Rucci who have expressed their support for the program.
Heather Blond, another designer who has joined Manufacture New York, said she had done so as much out of practicality as principle. “As an ‘emerging designer,’ my quantities are still very low, so I don’t get to take advantage of the low overseas prices,” she said. “Add on the freight and duty costs and producing in China isn’t cost-saving anymore.”
Ms. Bland said design talent was being vetted on experience over aesthetic. “They need to have at least established a brand, with some sales and a proven customer base,” she said. “That way they’ll have a strong enough foundation for us to build on and help them take it to the next level.”
But unlike the CFDA’s recently established incubator fund, which seems to be aimed at more established names, Manufacture New York is committed to providing support at a grass-roots level, she said, adding: “And if a more built-out designer comes to me wanting to reshore their product, I’m happy to help with that, too.”
Her staff of eight includes a chief operating officer and chief financial officer, Nelis Parts, a former adviser on mergers and acquisitions in the investment banking division of Goldman Sachs; and a director of designer relations, Seth Friedermann, previously the managing editor of ModaCycle, an online fashion magazine.
Their first crowd-financing effort was put on hold when Ms. Bland downed tools on the project to focus on helping Restore Red Hook after Hurricane Sandy (“I raised $5,000 making T-shirts,” she said), but an Indiegogo.com campaign has since netted more than $40,000.
A further $20,000 came from the fiscal sponsor Fractured Atlas, through which they are accepting tax-deductible donations, while the majority of these funds have been spent leasing and building out the space at Industry City. “We have been soliciting offers for donated production equipment since October last year,” Ms. Bland said. “As beautiful as shiny new equipment is, we also want to show that with proper maintenance, good industrial equipment lasts for decades.”
More recently, Ms. Bland has been soliciting grants from city officials. “We’re working closely with people like Congresswoman Nydia Velázquez,” she said. “Most of what we’re pursuing right now is 2014 money, but there’s a lot available for incubators and domestic manufacturing.”
A newly forged partnership with Johnny’s Fashion Studio on 38th Street, a sample development and apparel-manufacturing firm with a client list that includes He
lmu
t Lang, Theory and Alexander Wang, was another coup. “Johnny Kim has been in business in the garment center for 30 years, and shares our vision for educating independent designers and reshoring production in the United States,” she said. (Johnny’s currently outsources larger production runs to China, Vietnam and Korea.)
And two blocks south at the Pilot Program, business is bustling, if not yet exactly booming. “We staged a full runway show during Fashion Week, have been running classes and producing samples in-house,” Ms. Bland said proudly. And where there may still be a way to go before the project is complete, she said, “we’re used to working from the ground up, helping people as much as we can with the resources we’ve got.”
ABOUT MANUFACTURE NY
Manufacture New York is an innovative, inclusive fashion incubator and vertically-integrated facility startup that has opened a Pilot Program in the Garment Center. They are dedicated to providing emerging designers with the resources + skills to streamline their production process and transform local manufacturing into the most affordable, innovative option for all.
They are also a diverse community of 50+ creatives who are already sharing resources + working together to make this project a reality.
Their headquarters will include a fully-equipped sampling room, manufacturing facilities, classroom space (open to the public), private studios for rent and a state-of-the art computer lab complete with the industry’s latest software for design + production. They will also offer a dedicated area for experimentation with environmentally-friendly fabric washes, dyeing, finishes and special textile applications.
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Bringing Manufacturing Back To The U.S. via The Robot
in Uncategorized/by MAM Team“Our people have really taken to Baxter,” said Allen. “He’s non-threatening. He’s helping them do their job.”
Baxter is designed to work safely alongside humans. Six facial expressions communicate status to human partners — a raised eyebrow signals confusion if something’s not right on the line. But most of time, Baxter works alone.
“And the best part I like is that Baxter doesn’t have a mouth,” said Allen. “So Baxter doesn’t talk.”
Slow but steady, Baxter toils on 24/7 without breaks or benefits. He costs only $22,000. And even with power and programming costs, Baxter is a $3-an-hour worker.
“He doesn’t necessarily replace anyone,” said Allen. “In fact, we need to hire skilled people to maintain and program those pieces of equipment. They just enable jobs to be performed more efficiently and therefore less expensively.”
Baxter is part of the new factory floor: a cutting-edge mix of people and technology that has helped to reduce production costs enough to bring manufacturing back from China.
“So we’re seeing now,” said Hal Sirkin of Boston Consulting Group, “is companies bring jobs back to the U.S. Not just because of patriotism but because of pure economics. The wages are rising in China, the U.S. is getting more competitive. The average American worker is at least 3 times as productive as the average Chinese worker.”
For Rodon and its sister company K’nex, that means 25 new jobs in three years. “We’re adding equipment, people and possibly breaking ground next door,” said Allen.
Sirkin said: “Had the automation not been put in place for a lot of these companies, we would have no jobs coming back to the U.S.”
Three to 5 million jobs are expected to be returning to the U.S. by the end of the decade.