Sunday, June 15, 2008

Globalization + oil may = relocalization

Several years ago I read an article in the Nation called The Sweat Behind the Shirt exposing the globalized labor practices of a major American clothing manufacturer. Aside from the oppressive working conditions and the incredible profit margin, what struck me was the diagram showing cargo ships (image credit) of materials and shirts criss-crossing the oceans several times, enabling goods to be manufactured overseas at low cost with a final touch in a US territory permitting the company to affix the highly prized "made in USA" label. A recent article on changes in China's economy indicates that such practices may be coming to an end: with both the yuan's value and the price of oil increasing, American companies may bring production "home" (to the US, but also Mexico and Canada). This should be good news, and seems quite logical: manufacturers seek cheap places to produce, but once the standard of living rises and those cheap laborers begin to ask for more, labor costs rise to meet those at home. Yes, you read that correctly. It means that even US labor costs may be the same as Chinese labor costs. Not so in France! The chief executive of a major French brand of kitchen appliances interviewed on my local radio station the other morning said that even with the increased price of oil, it is still cheaper for his company to produce certain parts overseas. Now, take-home pay was definitely lower in France than in the US when I first got here 20 years ago and I imagine it still may be, and the cost of living is definitely higher. The huge difference, then, is the health (including maternity) and unemployment benefits that French workers were awarded after WWII and have been striking (photo credit) to maintain ever since (travel advisory: Sarkozy's reforms are turning this June into a real test of wills, with strikes in several sectors including the trucking industry). All over the globe, of course, jobs are scarce and workers are faced with the non-choice of working for low wages without proper benefits or not working at all. Roumanian workers fed up with conditions at the Renault factory struck recently and the French car manufacturer capitulated because it couldn't afford to pull out of its investment. Depending on the sector then, we may be seeing companies either returning home or improving employment conditions abroad. What about in the US? Are rising oil and foreign labor costs turning it into its own (and perhaps others') cheap labor market?


Marjorie Florestal said...


Thanks for the interesting--and provocative--post! While some production might return to the U.S. because the "perfect storm" of high oil prices, disappearing jobs and a recession economy (yeah, I said: recession!) make labor a bit cheaper, other factors like environmental and employment regulations would still make the U.S. a high-cost labor market for many of the cheaper goods. With the slew of regional free trade agreements the U.S. has signed with the Caribbean and Latin America, I would expect to see production shifting even further to those countries--away from Mexico, whose labor costs are rising, to places like the Dominican Republic and beyond.

Naomi Norberg said...


I thought the report was overly optimistic for US workers in need of jobs--perhaps it's even timed to lower the pressure to have the US pull out of NAFTA? Hadn't thought about environmental regs as a factor, though, which certainly would make the US currently more expensive than China. I'll try to hang on to my naive hope, though, that this moving around the checkerboard as inexpensive labor becomes more expensive means we're moving towards evening out costs and conditions to raise the conditions in poorer nations without lowering them in the richer ones (as is happening in France).