ACE Tool: New Data Aids US Business Investment Decisions

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Assess Costs Everywhere
Created on June 29, 2016
 

The Department of Commerce's Assess Costs Everywhere tool (ACE) highlights the hidden costs and risks that manufacturers need to consider when deciding where to locate their operations or supply chains in the United States. 

Since launching ACE in April 2013, the Department's Office of the Chief Economist has periodically updated the data and research underlying its analysis of 10 costs and risks.  This week, coinciding with the third SelectUSA Investment Summit, we are announcing a new set of updates to the tool. The Summit brings together global companies, U.S. economic development agencies, and other parties working to encourage and facilitate investment in the United States—people who have done the calculus that ACE promotes and find that investing in the United States pays off.

In addition to newly updated data points on labor costs and exchange rates,  major updates to ACE include:

  • A new version of the Cost Differential Frontier (or CDF) called the "Cost Premium Frontier" (or CPF): The CDF is a calculator developed by economists at the University of Lausanne to help manufacturers determine the hidden risk-based costs  of producing far from customers. It allows companies to calculate the extra money they need to save from offshoring to make up for lost profits from running out of product or overstocking. The CPF, on the other hand, reverses this logic, helping companies understand how much value they can gain by moving their production from a faraway locale to be closer to their customers.

  • Revolution in natural gas prices: Natural gas prices have fallen dramatically in the United States as a result of increased domestic production from shale. Compared to U.S. prices, those in northern European or Asian spot markets are more than twice as expensive.

  • Business-friendly oil production: In addition to large declines in natural gas prices, the United States has seen a spike in the production of domestic crude oil, becoming a net exporter of petroleum products. While oil prices are set in global markets and do not vary much from country to country, access to a steady supply of domestic oil and low prices for oil products (like gasoline) make the United States an attractive location for manufacturing.

By Adji Fatou Diagne, Pathways Economist and Ryan Noonan, Economist, Office of the Chief Economist

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