(Feb. 5, 2007) — The news that China's trade surplus with the world rose 74 percent last year, to $177 billion, got me thinking about a factory tour I took a couple of months ago.
While I was in Vietnam, I visited a mold-making operation jointly owned by some Danish and Vietnamese business people. The Danish firm, Phasion Group, set up the factory in Ho Chi Minh City after seeing much of its mold-making work leave Denmark for the Far East, particularly China, about five years ago. What intrigued me was what the plant's Danish manager said about how quickly the plant was progressing.
Initially, the plant only made simple tools, but Phasion spent six months training employees to make intricate molds for Lego plastic toys that the company had been building in Denmark. In another six months, the plant manager told me, the Vietnamese factory was able to make the molds as well and as quickly as they had been made in Denmark.
Meanwhile, in Denmark, the small company retooled to focus on rapid production and better technology. It laid off some workers, hired others with more skills and said it was starting to get new business because it now had a low-cost factory. That stuck with me. It only took one year to move Phasion's most sophisticated work around the world, to a place where a skilled mold maker earns a few hundred U.S. dollars a month. It seemed as if globalization, those ballooning U.S. trade deficits, the future of manufacturing — all of that was staring at me in that factory.
I left there wondering what I should take away about where manufacturing is headed. Some would say it means we're in a “race to the bottom,” an inevitable dropping of wages and environmental protection that means we need to rethink all this globalization.
I'm not sure I agree. I don't see how you can effectively stand in the way of these tectonic shifts.
Business lobbying groups would say the lesson from my Vietnam plant tour is that we need to reduce the burden on business, cut back on health-care costs or pension costs. But their plans sound like they want to shift the risk to the public.
I've been intrigued by some of the writings from the Washington-based Progressive Policy Institute and Tom Friedman's very good book on globalization, The World is Flat. They argue that the U.S. needs a broad commitment to addressing these changes, similar to when we expanded high school and university education in the last century. Things like more access to education, and a bigger safety net with wage insurance and expanded government support for health care. That will cost money, but it seems we need to think broader than we're doing and craft solutions that try to address both the business and the employee challenges.
A bigger government role could actually reduce direct costs for businesses in areas like health care, for example, and leave the U.S. better able to stay ahead in a world of knowledge-hungry Vietnamese mold makers.
Toloken is a Hong Kong-based correspondent for Plastics News.