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Did You Know? - Economic Opportunities in the US

October 23, 2020

Did you know this next decade will be full of business opportunities in the US? The perception is often the opposite – catch our newest TrendsTalk episode with ITR President and Speaker Alan Beaulieu to learn what’s in store in the coming years.


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Transcript by Rev

Hi, everyone. I'm Alan Beaulieu from ITR Economics, and I'm very pleased to be able to talk with you today about some realities that I'm not sure everybody's aware of. Yesterday my brother and I did a webinar about supply chain and reshoring. That was a 90-minute webinar. I'm not going to try to cram 90 minutes of information into a trans talk, but there are some things, some takeaways, that I thought you'd like to know. And if you want to know more, you can go to our website and you can find access to the webinar there.

But even without that, did you know that I think we're vastly underrated in this country? For some reason we've begun to doubt ourselves, look down on ourselves. Somehow you get this feeling we've lost and there's just all kinds of places better than us. And that's just not true. This is going to be an amazing decade for you, your business, here in the United States. Now, it's not a guarantee because you still have to run your business well. You still have to manage some cash. You still have to change. You still have to automate. You still have to do all the things that are necessary to make you successful.

But the macroeconomic environment is there for you to benefit from. Let me give you some facts to go along with that, otherwise it's just more air. It's just pumped up political statements. Did you know that according to the Global Resiliency Index, the United States ranks very high in terms of supply chain risk as in having little risk? The higher the number, the less the risk. Now, we're not the best in the world. There are, in fact, six countries that show less risk than the United States. Those include the United Kingdom, Germany, Canada, and Japan, just slightly better than the United States. Not mild, just slightly better.

But the United States gets a risk rating of 85.2, just to put some numerics to it. And most people think that China is this wonderland. And China's an amazing place with lots of things going on. It's a huge market with 1.4 billion people. I get all that. But as far as supply chain risk, this organization rates them down to 61.8, well below the United States. How about Mexico? And you often hear all these businesses moving to Mexico. Not so much, by the way. And the reality is that the supply chain risk there is even greater than it is in China. It's down to 50.5.

And Vietnam's become the popular destination. It's a low-cost base. It suffers from a lack of infrastructure and it's got some other issues, but it is a low-cost labor manufacturing base. And you read about different companies moving there. Their supply chain risk is slightly greater than that of Mexico and well below the United States at 49.1. And don't get me talking about Russia. We don't need to go there. So you're living in a place where there are not all that many risks. Now, there are some things that you can do to minimize that risk. We talked about those.

There are some things that you can do, but I think it begins with an understanding of you're standing in a good place right now. There's a lot of reshoring going on. There are a lot of reasons why people are reshoring into the United States. There's a lot of reason why foreign direct investment is coming to the United States. Foreign direct investment is foreign money coming in to move their business partially at least into the United States measured by dollars, buying control of the US business, doing a joint venture with a US business, or outright buying a US business.

So it's the world's business money saying, "Where do I want to be?" And in 2019 the top recipient of foreign direct investment was the United States. And the year before that it was the United States. I mean, the United States is the destination for business money. Why is it that we think that it's all flowing out? On a net basis, when you look at the outflows and inflows since 1996, which is when I started looking at it, the 12-month moving total of foreign direct investment is positive on a 12-month moving total basis. On a monthly basis you're going to find some months when it goes negative in a long time period.

But on a overall basis, the world has been saying for a long time, "Yeah, we're going to bet on the United States," because we have the world's largest market, because we have a capital market. We have the natural resources. Because we have a system of law that works. And those are stated reasons by people coming into this country. I'm not making those up off the top of my head. That's from a survey that was done. And the United States is a destination. Now, who is investing in the United States? And, again, this goes back to popular myth. The popular myth back decades ago was that Japan was buying the United States.

Before that, it was another nation. And currently it's this thought that China is going to be taking over the United States, that China is the number one economy of the world and all this or that. When you look at the top 15 countries that are investing in the United States, can you guess who number one is? Give it a shot. It's Germany. If you guessed Germany, congratulations to you. It's not China. It's Germany. Who's number two? Japan. Who's number three? Canada? Who's number four? The United Kingdom. Where's China? They're down at number 13. So Germany invested $42.1 billion in 2019 into the United States.

And China invested $4.3 billion. So attempt the way Germany did, way down on the list. So other allies are saying, "You know what? It's a good risk to be in the United States. And where are we investing? And perhaps you relate more to this because we hear a lot about ... And the term used to be Benedict Arnold companies, but there is this thought that businesses are fleeing the United States, that businesses are investing everywhere but the United States. So where does US foreign direct investment go? Interesting question. The number one source in [inaudible 00:06:02] number one destination, excuse me, in 2019, the United Kingdom at $32 billion.

You have to go down to number eight to find China at $7.5 billion. $32 billion versus $7.5, that tells you something, doesn't it? And then Mexico, another popular conversation topic is that businesses are running to Mexico. We invested $4.5 billion in Mexico in 2019, number 11 on the list. It's amazing the perceptions that are out there versus [inaudible 00:06:32]. One last thing, and I would invite you to, again, check this out. You hear that the United States cannot compete on a cost basis. Cost Consulting Group has a 2019 edition of their manufacturing costs index.

You can google that. You can see it on the webinar. The reality is the United States is just slightly more expensive than China, just slightly more expensive than Vietnam, but we are more expensive than Vietnam by more than we are China. We rank 100 on the index, and China's at 97. If you look at South Korea, which is often thought to be a great manufacturing base, and they're a great nation with lots of things to offer, it's the same as us, 100. If you look at India, it's much cheaper than us, but they ranked higher in terms of risks.

When you look at around the world you can say to yourself, "All right, Germany is much more expensive than the United States. France is much more expensive. And the UK is more expensive." Why are we always bashing the United States? I don't know. I don't know. What I do know is that the cost of manufacturing here is globally competitive, or else we would not be the second largest exporting nation in the world when you're talking about goods. Made in the USA. We make it. We sell it. It's a great place to be. Thank you for listening to this trans talk. Go to our website if you want to know more. I'm Alan Beaulieu. I hope you have a great day.


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