Just because foreign sources can manufacturer something cheaper does not mean it is a healthy choice. In January of 2009 the USA exported 4 billion dollars worth of goods to China. We imported 24 billion.
By using very cheap labor a country can rapidly expand their domestic economy. The country receiving the goods will quickly become accustom to the low prices. Their own domestic companies will either relocate to take advantage of this or succumb to the pressure.
Open markets should benefit both nations involved in the trade. In a perfect world the foreign country would be able to afford more of the higher cost items produced by the USA and other western nations. Unfortunately it does not seem to be working that way
In the long term, 1 or 2 decades, as more and more industries relocate the effect will be a lower standard of living in the importing country and the removal of completion for the exporting nation.
Well actually think of it from a Business point of view, Would you pay workers £6 an hour (Roughly the Minimum Wage In Britain for people 21 or over, Around £5 for those aged 18-20 people like me and about £4.50 for those between 16-17) or would you pay people the equivalent of lets say £1 an hour if the currency was converted to another Countries currency.
I think I would know what to choose, but then again it does depend on what sort of manufacturing you think about, if you think of High Tech Manufacturing like Spacecraft and Electronic Technology it is financially viable to leave that in a well developed economy where you know the money will flood in for those sort of goods which also means you save on paying import tax, but if you think of things like a child's toy which need to be cheap or at a reasonable price are not going to make big profits if you used workers in a well developed economy where wages are higher so you are going to want to use the cheaper labour abroad, and that I think is steadily moving towards Cars as well?
It's just a thing to accept that is how economies grow, Britain was a massive exporting nation in the 1700's and 1800's because we had a massive manufacturing base as part of the Industrial Revolution as soon as that had developed we like other advanced economies moved onto the Services Sector (Tertiary Sector).
I'm assuming most people know how an Economy grows in terms of Sectors, The Primary Sector is normally the biggest in a Third World Country the Primary Sector being Agriculture (Only 1% of Britain's GDP is Agriculture now), When you start getting developing Economies like China and Brazil they have massive reliance on the Manufacturing and Export Sector (Secondary Sector and 23% of the British Economy) which provides them with lots of money so they can improve the countries infrastructure steadily they move there reliance off Manufacturing and move towards Services just as most advanced economies have like the UK, US, Japan etc which have Service Sectors at 75%, 80%, 73% of GDP respectively.
Now you may think that is surprising that Japan has a Service Sector that size when you think that it is a Massive Exporting Nation, it's just how Advanced Economies are and as they become less and less reliant of low cost manufacturing they move onto the higher cost/higher returns manufacturing that is Electronic Technology and Car Manufacturing, China, Brazil and other Developing Economies will be like the UK, US and Japan in the future and probably most others eventually, That will mean that these low cost goods we get now will steadily get more expensive in a few hundred years (Although this is just me guessing so I'm not sure).
Britain in 2007 exported $442 Billion with 15% of this from USA, 11% from Germany and 10% from France, and imported $621 Billion with 14% of that from Germany, 8.5% from USA and 7.3% each from China and the Netherlands. Of those exports over 80% of that Money came from our Manufacturing Base.
So we had a $170 Billion Trade Deficit, USA probably had one even bigger, eventually as these countries with Trade Surpluses (Developing Countries like China) spend there Money to improve their Economy these Trade Deficits will even out because as there Economy Advances and more people come above the poverty line they will want the High Tech Goods Countries like the UK, USA and Japan can produce i.e. Cars and Electronic Goods.
How long this will take in China is another matter but from what I have heard there Human Rights record is slightly better, so anyway that may seem boring for everyone but that's just how Economies work and eventually everything works out even if it doesn't look likely to happen EDIT: Sorted my Quote out now
Edited by woodyblade, 29 March 2009 - 07:03 AM.