The US Manufacturing Sector Still Needs Its Global Presence And Reach To Remain Strong

By Malik Singleton | March 21 2013 6:14 AM

US Manufacturing Photo: Reuters Workers at a Texas auto production plant

The U.S. manufacturing recovery is not all dependent on reshoring. U.S. corporations still stand to gain from being global, according to Standard Chartered. A new study from the international bank's research division shows that the United States' manufacturing industry is strongest when expanding at home as well as abroad.

Large U.S. corporations surveyed say that since they've developed multiple factory locations around the world, production levels can be adjusted in various locations to accommodate sourcing strategies. New plants or expanded production lines are more in line with expansion strategies than relocation plans.

While importing relatively low-value-added, low-margin goods, the U.S. exports high-value-added manufacturing products that are used to produce these imports. An example cited in the research says the toys the U.S. imports are likely produced on foreign assembly lines requiring machinery made in the U.S.

"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," the study authors said in "U.S. - Still a Manufacturing Powerhouse."

During the global recession in 2009, U.S. manufacturing output was still as much as the combined output of Japan, Germany, Italy and Canada, despite contracting to a a seven-year low of 1.57 trillion.

The research's focus on labor explains that many multinational U.S. manufacturers see labor cost as one important factor when they consider production locations, according to the study. But transport costs, time to market and flexibility are also important. In the case of China, the wage differential is narrowing in relation to the U.S.

"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 U.S. corporates seeking new markets overseas," according to the study.