On New Year’s Eve, I received a publication titled “The Complete Guide: Outsourcing Your Production to China.”
At first I thought it was geared toward the big guys – Boeing, Microsoft and Hewlett Packard, but surprisingly, it is aimed at small- and medium-sized manufacturers. China and other foreign competitors are focusing on companies that make products and employ between 100 and 1,000 workers – and we have plenty of them in Washington.
While Americans complain about China’s low wages, the Chinese believe that countries like Vietnam and India are undercutting them! So China is now focusing on making its workers more productive and efficient. Sound familiar? That is the core of our strategy to maintain a competitive advantage.
Chinese leaders also believe they can provide better trained workers for tanneries and leather products, woodwork and textile factories, and they’re working to get smaller specialized producers from the United States and the European Union to move there. They also want the cutting edge innovations and design work in the high-tech sector as well, where the United States traditionally leads the world.
The bottom line is that China and many other developing countries need jobs and economic growth. In a recent meeting, China’s ambassador to the United States, Yang Jiechi, told me that China has 10,000,000 people entering the work force every year, and the country is doing everything it can to provide them with good jobs. To accomplish that and employ 1.3-billion people and lift more than 40-million people out of poverty, China must grow its economy an average of 7 to 8 percent each year.
They are determined to do just that.
Like so many nations hungry for a higher standard of living, China has identified bottlenecks to growth and, like many of our foreign competitors, is tackling them with record speed.
For example, while it can take years for an American business to navigate a maze of federal, state and local regulations in order to get a permit, that same process takes just days or weeks in China. As a result, notes Yang Jiechi, the country has attracted $57.5 billion in direct U.S. investments and $44 billion in joint ventures.
Abundant and affordable energy is a problem for both China and the United States. In the Northwest, where we once had plentiful low-cost electricity, that competitive advantage is eroding. Despite growing demand, generating and transmission capacity is stagnant. While we argue over renewal versus conventional energy sources, China is building clean coal, hydro and nuclear plants to provide power for its residents and industries.
While many Americans complain that facilities in developing countries can’t match our high pollution control standards, many of those countries have different priorities: create the jobs and industrial base first and then spend money to clean up to our higher standards. Whether we agree with this strategy or not, it is a reality.
Too often we in Washington ignore our predicament and go merrily along figuring that business can continue to absorb more regulations, higher power rates, new taxes, more unemployment and workers’ comp premiums and added costs for health care and liability insurance. The truth is, margins are too thin for employers today and they have reached their limit.
Washington legislators need to realize our state is the eighth highest cost state in the country in which to do business. That’s before we compare ourselves with lower cost foreign competitors.
In 2005, lawmakers should avoid dumping more costs onto employers and focus instead on ways to make our job providers more competitive. The shocking truth is that unless we act to improve things, it won’t be just the big guys who will be recruited away, but the small and medium producers as well, along with the jobs they provide.
Don C. Brunell is president of the Association of Washington Business.