US should realize the world is now flat

On Monday, by a unanimous vote, the US Senate passed a bill that seeks to preserve the government's power to slap duties on "subsidized" goods from China and Vietnam.

"By passing this bill, we're backing American workers and businesses in the fight against China's unfair trade practices," Senate Finance Committee Chairman Max Baucus said in a statement. Supporters claim the current duties protect some 80,000 US jobs.

But unfortunately, both the statement and the claim are unjustified.

The United States likes to imply that China is somehow "cheating" Americans out of their jobs, but the reality is different as US companies are all too aware that success depends on levering an advantage from the global workforce.

In a 2011 survey of the US offshoring business, "Organizational Flexibility: The Strategic Differentiator of Global Sourcing Effectiveness", Arie Y. Lewin from Duke University found that the trend for US companies to move part of their business to other countries is continuing, with China and India among the most popular destinations.

But the survey shows that it is no longer just that low-end manufacturing jobs that are transferring overseas but also professional high-end jobs.

Lewin found that more companies are transferring jobs that require higher education and professional skills to other countries, citing access to qualified personnel among the top reasons for moving their operations offshore.

"More functions are moving abroad as the competition for talent intensifies," Lewin said.

The competition to attract and retain talent is becoming increasingly heated as more companies and service providers vie for the same local professionals to meet their clients' growing demand for more sophisticated service solutions, he pointed out.

This is especially true in sectors such as IT infrastructure, application development and maintenance, and innovation processes.

According to Zhang Juwei, deputy director of the Institute of Population and Labor Economics under the Chinese Academy of Social Sciences, China's work force is now attracting overseas enterprises because of its performance-cost ratio rather than just its low cost. "It is the relatively lower cost of higher-quality labor rather than purely the low cost of labor that attracts foreign companies now," he said.

This is because China's labor market does not offer enough positions for graduates; so with supply exceeding demand their starting salaries are not much higher than those without college diplomas, he said.

Lewin's report found that software development and other high-tech industries can save 52 percent of their costs in China, compared with 37 percent in India and an average 36 percent elsewhere.

In comparison, outsourcing manufacturing to China saves only 27 percent, slightly above the average 24 percent, but lower than India's 29 percent.

"China needs to seize the opportunity to redefine its position in the global industrial chain, and attract more professional jobs rather than low-paid manufacturing jobs for its laborers," said Zhang.

Lewin's survey also found that there was a greater preference for captive outsourcing in China than other countries.

"Opening a branch saves more than outsourcing because the company can get all the profit instead of sharing it with agent factories," said Wang Yanzhong, a researcher on labor and social security at the Chinese Academy of Social Sciences.

"But that is only possible when local workers suit the international management style," he added.

In 2009, the Ministry of Education said that the average education of the newly added labor force exceeded 11 years.

Higher education has not only enabled Chinese workers to gain professional skills, it has also made it possible for them to communicate directly with foreigners in English, which is the common language of business.

One of the main reasons cited by US firms in Lewin's survey for a move away from Latin America was the "shortage of qualified, English-speaking service providers".

In fact China's labor force has become increasingly internationalized in recent years, which is becoming one of its key advantages in the global competition for jobs.

The author is a writer with China Daily. E-mail: zhangzhouxiang@chinadaily.com.cn

(China Daily 03/07/2012 page9)