Report says US manufacturing needs to remain global to stay strong

 

A report by international bank, Standard Chartered says that if the US manufacturing sector wishes to remain strong, it should maintain its presence overseas.

The International Business Times points out that one of the advantages of expanding globally is that companies with off-shore factories can adjust production levels to accommodate changing sourcing strategies.

The report points out that most of the goods imported to the US are relatively low-value-added, low-margin products such as toys, clothing and apparel. And, at the same time, the US exports high-value-added manufacturing products that are used to produce these imports.

As the report says – "The relatively low-value-added toys, apparel and plastics that the U.S. imports from China contain inputs from high-tech machinery, aircraft and chemicals that the U.S. has exported to China."

Labour cost is, of course, one of the crucial factors to be considered when deciding on production location. However, the report says, issues such as transport costs, time to market and flexibility also need to be factored into the decision.

Also, the gap between labour costs in the US and China is steadily decreasing.

“Emerging markets like China and India are no longer focusing solely on developed-market demand; they are now major markets themselves and are bright spots for US corporates seeking new markets overseas," the study says.

Recent good news for the US manufacturing industry included a report that US manufacturing is set to outperform GDP growth in 2013, 2014.