If you follow the mud-slinging in the presidential campaigns about outsourcing to China, you’d think every company that imports its product is a servant of the dark side; Imperial stormtroopers following Darth Vader in a suit.
The July 16 edition of Bloomberg Businessweek included an article titled In Defense of Outsourcing with a take you don’t often see in the media:
This season’s electioneering leaves the impression that companies are bad if they outsource jobs, and if they’d only stop being bad, the jobs would come back… The presidential campaigns fail to recognize that employment in middle-skill and middle-wage occupations is declining rapidly. If the candidates wanted to be constructive, they would tell voters the hard truth—that most of the mid-level jobs are never coming back. They should talk about their plans to improve math and science education, and how to retrain workers to perform more high-skilled tasks.
You can read the entire article at Bloomberg Businessweek’s website here.
Businessweek also writes that the benefits to outsourcing are less expensive goods and services for U.S. consumers, and that workers in China and India, who now have more disposable income, are buying more U.S. made goods (Apple’s success in China is proof).
The Denver World Trade Center writes that the benefits of importing include growing the bottom line of U.S. companies, increasing competitiveness, and expanding customer choices. In other words, importing keeps U.S. companies in business in the global economy. Successful and profitable companies hire employees, which contributes to the economy. Apple wouldn’t be the world’s most valuable company if they were selling thousand dollar i-phones.
What it comes down to is that we have the freedom to search for the best supplier who can make quality products at competitive prices. If we could do this from a U.S. supplier then I’m sure most of us would because we would all rather support our domestic economy. But today’s reality is that many American companies (a large swathe of which are small businesses) wouldn’t be in business if they were forced to buy only from U.S. suppliers.
Last year I got competitive bids for one of my customers from several U.S. suppliers. Just the cost to make the molds in the U.S. were $70,000.00+, while the Chinese mold cost was around $7,000.00 – ten times less. For a small company just getting off the ground this makes a huge impact on cash reserves. The price per part from the U.S. suppliers was three to four times that of the Chinese quote. This meant that the customer could effectively sell the product for the same price that the U.S. company offered and still make a handsome margin.
The other unfortunate side to this is that the U.S. government (in cooperation with the state governments), who pretend they will “save us” from outsourcing, have done all they can to encourage it by saddling businesses with heavy burdens – and they’re adding more. Once the Obama Administration’s health care bill is in full force, businesses must pay for their employees’ medical insurance. Add this to workman’s comp, liability insurance, corporate taxes, the risk of OSHA going postal on you if you don’t cross every T, social security and medicare taxes for each employee… and, the entitlement attitude that abounds where an incompetent employee can sue their employer and be awarded damages … (I had this happen to me when I owned a machine shop in the 90’s) and you force business owners to think long and hard before setting up manufacturing in the U.S. The president of Intel said that the U.S. is the most expensive place in the world for him to set up a factory. In other words, our government is the problem when it comes to outsourcing, not the people.
Compounding the problem is our culture of entitlement. I have a friend who just returned from the Middle East on a two year missions trip. He told me that one of the adjustments he and his family have had to make is the attitude of entitlement that is so prevalent in our culture; “it feels like no one wants to take responsibility for their actions here,” he said. Many large companies are expected to provide pensions they cannot afford that include paying benefits until a retired employee dies. The U.S. Postal Service is basically bankrupt because of its pension obligations, and General Motors, Ford, the big airlines and other major manufacturer’s woes are well documented. Think of where those companies would be if they had taken half the money they spent on pension funds and invested it on research and development, or, in the case of the post office, upgraded their infrastructure (what if the post office found a way to deliver letters from coast to coast in 2 days as a standard service, or abroad in 2-3… it would surely give them more business.)
If our presidential candidates really wanted to make a difference in the economy they would take a hard look at the burdens government has saddled us with (and will soon add more to), examine our shortfalls in the education system as Businessweek suggested, and then come up with an effective plan.
But so far I’ve heard neither candidate come up with a plan, other than to attack those bad outsourcers. (I haven’t even mentioned our bulging, porked-out national debt, which is sure to require tax increases and spending cuts in the not too far away future to deal with).
Either this is politics at its finest… or they don’t get it. Or both.
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Since 1991, Global Trade Specialists, Inc. has helped companies of all sizes get their products made in China from manufacturers of quality products. We are an American company who works with three trading groups in China with immediate access to thousands of manufacturing companies. We source most products made from metal, plastic, wood, stone, glass or textiles; from prototype to production. Many of our customers are first time importers; we walk you through the entire process.
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July: We’re not in Kansas Anymore
June: Impressions from a Visit to China
May: The U.S. Gets What it Wants, But…
April: Of Beads and Streams
March: The New China Blog
February: It’s All About the Relationship
All material copyright 2012 Global Trade Specialists, Inc.
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