WASHINGTON (August 27, 2013) – The Boston Consulting Group today released a new report, The U.S. as One of the Developed World’s Lowest-Cost Manufacturers, which argues that U.S. manufacturing could add at least 2.5 million and as many as 5 million new jobs by 2020, as the long-running trend of U.S. manufacturers outsourcing production to China will be reversed and replaced by a dramatic “reshoring” of manufacturing production back to the United States.
ITIF wagers the Boston Consulting Group $1,000, to be donated to a charity of their choice, that the number of manufacturing jobs added to the U.S. economy by 2020 will be less than even the low end of the BCG estimate, in this case less than 2.5 million jobs.
BCG’s report contends that lower manufacturing costs will be the secret elixir restoring American manufacturing to health, citing slow increases in manufacturing wages and significantly lower energy costs. BCG holds that, by 2015, U.S. manufacturing costs will be 8 to 18 percent lower than those of leading competitors in Germany, France, Japan, and the United Kingdom and argues that “as a result of this increasing competitiveness in manufacturing, America will capture $70 to $115 billion in annual exports from other nations by the end of the decade.”
While BCG is correct that the United States can become an industrial powerhouse again, they are wrong that market forces acting alone will produce such a result. Lower costs alone won’t restore the erosion of an industrial commons that has left America unable to manufacture a range of advanced high-technology products from fabless semiconductor chips to LCD screens and lithium polymer batteries. Nor will lower manufacturing costs address the rampant innovation mercantilists practices of countries like China and India that use tools like localization barriers to trade that force American establishments to manufacture locally if they desire access to foreign markets.
Rather, as ITIF explains in Innovation Economics: The Race for Global Advantage and reports like Fifty Ways to Leave Your Competitiveness Woes Behind: A National Traded Sector Competitiveness Strategy, it will take a coordinated set of policies around the “4Ts” of Technology, Tax, Trade, and Talent to power sustained American industrial renewal. And that won’t happen without a sustained bipartisan commitment to create national competitiveness policies that, among other things, lower corporate taxes and support investments in research and public-private partnerships like the National Network for Manufacturing Innovation.
While ITIF shares BCG’s vision of a revitalized American manufacturing sector that has the potential to support hundreds of thousands of new American jobs, that won’t happen through market forces alone; it will only happen if we make it a concerted policy priority.
The Information Technology and Innovation Foundation (ITIF) is a non-profit, non-partisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues. Learn more at www.itif.org.