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Assignment Questions

The Impact of Globalization on the US Manufacturing

Below please find the outline submitted for the paper. Please include all points mentioned and any other you may find in your research (statistics etc.). Use parenthetical citations unless a direct quote. The university is extremely critical with citation please use freely.

Globalization and the Impact on US Manufacturing

I. Introduction

A decade ago, the debate about manufacturing leaving the U.S. focused on the jobs being pulled into Mexico. Today, it is more urgent than ever, but its source is no longer just south of the border. Open up the business section of any newspaper – or perhaps read your own employer’s latest press release – and you will quite likely learn about manufacturing relocating to Brazil, China, India, Bulgaria or Malaysia.
Economy.com, an economic consulting firm in West Chester, Pa., estimates 1.3 million manufacturing jobs have been moved abroad since the beginning of 1992 — the bulk coming in the last three years. Most of those jobs have gone to Mexico and East Asia.

II. Describe the events in the world economy of the past 20 years.

A. Encouraging and liberalizing international trade between countries

1. Organizations have been established to regulate global commerce, such as the WTO.

2. Numerous treaties and alliances have been signed between countries to ease trade and reduce barriers, such as NAFTA

3. The relative importance of international trade in the world economy had greatly increased: from 5.5 percent in l950 to 17.2 percent in 2000

B. Developing countries economy

1. In 1950 the United States was THE economic power, and by the mid 1970s Europe and Japan were clearly established as major global players, by 2000, emerging Asia—especially China and India, but also a number of other countries—had become a significant economic force in the international economy.

2. Most of the transition economies of the former Soviet Union and Eastern Europe are realizing above-average rates of economic growth and integrating into the worldeconomy.

C. A third major change has been the rapid increase in integration of global financial markets.

1. In 1952, only seven countries (U.S., Canada, and five Latin American countries) had free exchange rate regimes for current account transactions as set out in Article VIII. Today, 164 countries have accepted Article VIII obligations, while capital account transactions are much freer than they were.

III. How technology has contributed to the globalization of markets and productions.

A. It is generally agreed that the technological revolution of the past few decades has had major contribution to the globalization of markets and productions.

1. The technological innovations have supported the unification of international markets as it eased communications and the data sharing process between players on the economic stage.
2. Ricardo’s theory of Comparative Advantages has also been implemented in the technological sector in the meaning that countries began to trade technological appliances as to increase the efficiency of their operations and reduce costs.

IV. Why US manufacturing companies are moving their facilities to China, Mexico and developing countries.

A. Lower Labor Costs

1. Many of the factory jobs are being cut as companies respond to a sharp rise in global competition. Unable to raise prices — and often forced to cut them — companies must find any way they can to reduce costs and hang onto profits.
2. Jobs are increasingly being moved abroad as companies take advantage of lower labor costs and position themselves to sell products to a growing — and promising — market abroad.

B. Restrictive and counter-productive government regulations

1. The area of environmental compliance, encourage many companies to look outside the U.S.

C. Lower material and natural resource costs

1. Natural resources have become insufficient and corporations are moving their operations to less developed countries as to get increased access to the natural resources
2. Lower costs of materials, generally a direct result of suppliers having lower-cost structures, as well, is another driving force

V. What are some possible solutions to mending US Manufacturing?

A. Dollar relief
1. There are both short-term and long-term policy options for the problems posed by the U.S. trade deficits that resulted from the overvalued dollar. In the short term, the U.S. dollar should fall against a broader range of currencies, especially those that are currently pegged to the dollar (China, Malaysia, and Taiwan). In the long-term, the United States should adopt exchange rate policies that keep large trade deficits from recurring.

B. Trade policy relief

1. Enforceable labor and environmental standards codified in trade agreements would keep U.S. manufacturing firms and workers from being undermined by trading partner countries that gain advantages through the exploitation of their human and natural resources

C. Rebuilding labor capacity in manufacturing

1. Investments in workers’ skills can result in substantial positive externalities (spillovers) for the economy at large. Policy initiatives aimed at upgrading workers’ skills—especially initiatives targeted at production workers, a group that often goes lacking in terms of employer-provided training—would have a significant effect on filling new manufacturing job opportunities.

D. Lean Manufacturing

1. A manufacturer that can reduce direct labor costs by 50 percent slashes the potential benefit of lower-cost labor by half as well. Reducing defects cuts the need for generally labor-intensive rework, further reducing the attraction of low-cost labor. In many industries, the cost of direct labor is less than 15 percent even prior to lean efforts. As this number is reduced, there becomes less and less incentive to drive decisions primarily on this component of total cost.

2. Lean technology can also impact other factors that drive manufacturers overseas. For example, the high cost of dealing with hazardous waste products has forced some manufacturers overseas where environmental controls are less restrictive.

References

Bivens, Josh., Scott, Robert., & Weller, Christian. (2003, September). Mending Manufacturing. Economic Policy Institute.

Freeman, C., 1989, New technology and Catching Up, The European Journal of Development Research, Vol. 1, No. 1, pp. 85-99.

Haces, T.G., Nicolas, D.H., 1996, Economic Change and the Need for a New Federalism: Lessons from Mexico’s Northern States, American Review of Canadian Studies, Vol. 26.
Hagenbaugh , Barbara. (2002, December 12). U.S. manufacturing jobs fading away fast. USA Today.
Hill, Charles W.L. (Ed.). (2007). International Business: Competing in the Global Marketplace (6th ed.). New York: McGraw-Hill Irwin.
Rink, Jack. (2006, February 02). Lean Manufacturing Can Save American Manufacturing. Maintenance World.

Singh, A., 1994, Global Economic Changes, Skills and International Competitiveness, International Labor Review, Vol. 133.

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