Let’s Work Together

Exporting Blog Series: American Competitiveness

Jun 25th, 2012

Andy Reinke – Among the more frequent questions I’ve fielded since being in the business of exporting American-made goods is: ‘The US exports? Aren’t our goods too expensive to export? Are we really competitive enough to consider exporting a viable option?’

Really?! As if for some reason the world’s largest economy and among the most open markets on Earth could be anything but competitive.

If this blog post does nothing more than dispel the untruth that we, as a nation, are noncompetitive or somehow not up to the challenges of global commerce, I’ll be a happy camper!

I invite my readers to consider:

Our GDP (our national paycheck) is approximately $15 Trillion, and our labor force contributing to our national salary is about 170 million.

No nation on Earth comes close to that level of worker output – no nation makes more goods and services with fewer units of cost than does this nation – not even close.  That’s one of the definitions of competition – per worker output.

Still not convinced?

The Geneva-based World Economic Forum meets annually to assess the world’s most competitive nations. In so doing, it uses a matrix of various economic benchmarks such as each country’s financial strength, banking sector stability and market access to capital, translucency in a nations’ political, judicial and legal systems, level and quality of education, quality of infrastructure, access and use of cutting edge technology, barriers to market entry for entrepreneurs, etc. It is a list in which the US regularly ranks among the top 3 (this year we fell to 5 largely due to the budget impasse in Congress). It should be of interest the nations that at times rank higher than the US include Singapore, Sweden, Switzerland – nations that are far smaller, less complex, homogeneous with far fewer global responsibilities and less international reach than does our country. It also should be of note that our chief economic competitors including Germany, China and Japan, are further down the list and haven’t ranked ahead of the US since the early 90’s, and then only Japan ranked higher.

Our competitiveness is better known and felt outside the US than within our own borders. We tend to associate competitiveness with wage rates only, and while that’s part of the equation, it’s not the entirety.

Referring back to the matrix used by the World Economic Forum to assess  competitiveness, the security of a nation’s financial system, the translucency of its judicial and legal systems, the soundness and dependability of its infrastructure and security, etc., all impact and can add significantly to the cost of a good produced and sold. For the US, these costs are among the lowest on Earth.

Over the past 10 years, our competitive edge has strengthened worldwide, especially when gauged against developing markets where growth has surged like Brazil and China. This partly is due to wage rates in those markets rising far faster than those here at home. Couple that with a rise in oil prices and, hence, transportation costs, and it has a combined effect of further eroding the cost benefit of cheap labor overseas.

There are a number of US manufacturers for whom these macro trends are beginning to impact where in the world they choose to manufacture products, and its having a welcoming effect on the US economy.

A full 60% of Caterpillar’s planned $4 billion in capital expenditures in 2012, will be in the US. Carlisle, an American tire manufacturer, is moving production back from China to Tennessee, and the Big Three US auto makers, fresh from trimming costs and becoming world-competitive again, are taking many of their US facilities out of mothballs. Ford’s van production facilities in the UK and Turkey are moving back to Kentucky, while some of its transmission and pump production in Japan and China respectively, is returning to the US.

I read a few months ago an article in the ‘Indianapolis Star’ which cited a report by Alix Partners comparing product price variation between the US and China. To paraphrase, ‘in 2005, Chinese produced parts arrived at US ports priced an average 22% lower than comparable US products. By the end of 2008, that gap had narrowed to 5.5%.’ I would bet that with the economic slowdown that began in late ’08, particularly in the developed world, which further depressed prices in the developed West, and with continued fast growth in the developing markets, that gap has continued to narrow markedly.

Lastly, I participated in an export seminar in Fort Wayne a few days ago and one of my talking points focused on this topic of American competitiveness. I sat down ready to listen to the next speaker when the gentleman to my left, a businessman from Nyloncraft, a sizeable Mishawaka-based, world-class injection molding firm, let me know he agreed with my comments, and why. His firm had sourced from China a unique, rather complex pipe that was used in one of their processes. In an effort to improve lead time, they found another supplier….in the US….better lead time AND less expensive…. in neighboring South Bend.

So don’t fret my fellow Hoosiers, this state and nation are most certainly competitive.

Andy Reinke is the President of Foreign Targets, Inc. (FTI)  an export management company creating and managing proactive export programs for small and medium sized manufacturing firms.  This is achieved by utilizing a proven methodology:  FTI’s Core-8 Steps to Export Management. Read more about export in the ISBDC’s Exporting Your Products and Services FAQ Page.