Historically, countries such as Latin America, Eastern Europe, and most of Asia have been viewed as low-cost manufacturing regions while the U.S., Western Europe, and Japan have been viewed as having high manufacturing costs. But this understanding now appears to have changed. Boston Consulting Group’s (BCG) article entitled The Shifting Economics of Global Manufacturing, How Cost Competitiveness Is Changing Worldwide provides discusses how global manufacturing is rapidly changing. The report argues that manufacturing competitiveness is no longer concentrated in a single region or country. For example, East and South Asian countries joined by North American, western European, and eastern European countries are at the top of the rankings. The gap between China and the U.S. in overall manufacturing cost before transportation is less than five points. The report therefore highlights a significant reordering or shift in global manufacturing competitiveness amongst the world’s top twenty-five export economies over a ten year period where Mexico and the United States showed the most improved competitiveness versus all others, while Australia and Brazil experienced the greatest declines. BCG analyzed the manufacturing costs of the world’s twenty-five leading manufacturing economies against four key variables including manufacturing wages, labor productivity, energy costs and exchange rates. The twenty-five economies account for nearly ninety percent of global exports of manufactured goods.
The rapid changes in wages, labor productivity, energy costs, and exchange rates drove the changes in relative manufacturing-cost structures. Of these, wages most differentiated manufacturing economies. These changes led to four categories of relative competitiveness wherein most manufacturing-centric economies fall. The first category is Under Pressure, which include