The idea that China is going to overtake the USA in anything important has always been laughable.
As costs climbed in Taiwan two decades ago, Ben Fan moved his lighting factory to take advantage of China’s cheap labor. Now, with Chinese wages on the rise, he’s moving again. “It’s just like what happened in Taiwan,” says Fan, chairman of Neo-Neon Holdings, which sells lamps and lighting fixtures to big retailers including Home Depot (HD), Target (TGT), and Wal-Mart (WMT). “Chinese don’t want to work in factories anymore.”
So Fan is expanding his factory in Vietnam, where wages are $100 a month, one-third what he pays in China. He plans to shift 85 percent of his production across the border, and by December he’ll have 8,000 workers in Vietnam—up from 300 a year ago—and just 5,000 in China, down from 25,000 in 2008.
Over the past two years, millions of jobs have moved to China’s interior or elsewhere in Asia as factory owners try to cut costs. In Guangdong, the mainland’s top exporting province, wages have almost doubled in the past three years, and more than half the factories can’t find enough workers. The number of migrants who traveled to coastal provinces for work fell by 9 percent last year, to 91 million. “This lack of labor will only get worse,” says Willy Lin, chairman of the Textile Council of Hong Kong, a trade association.
Here are the free trade facts.
1. Cheap labor gets things built and manufactured.
2. Capital will flow to finance cheap labor.
3. If you try to prop up local expensive labor, you merely keep that labor artificially and relatively rich at the expense of neighbors who no longer can benefit from cheaper goods. Protectionism makes all of us poorer.
If you read the article above properly, you will notice two important items.
1. To get rid of any bad effects of “globalization,” the only solution is to globalize even faster.
2. America, if it got over its ridiculous education system and union mind-set, could conceivably become the “high-quality” manufacturer of first resort, given its very effective and mature economy. Build it best, not cheapest, and the world will pound a path to our products.