Competing With China

Up to this point I have, over the past three-plus years, silently read the numerous letters written to the editor of C&EN bellyaching about the “outsourcing” of U.S. jobs overseas. The authors of these letters stand behind a common misconception that the jobs are merely going to locations with cheaper labor. This gross oversimplification is, at best, only partially true.

China is the recipient of the majority of these “outsourced” chemistry jobs, and the true motivations for this far eclipse just the economics of employee compensation. First, China is an enormous emerging market, far larger in potential than the West. Second, it is virtually impossible to import finished products into China. Companies are moving chemical research and manufacturing into China to better position themselves to fully develop and capture sizable portions of the huge and emerging Chinese market. It will be far easier and far cheaper for these companies to export products from China into the West than it would be to attempt the reverse.

In order for the lost jobs to return to U.S. soil, a number of things must come into alignment: U.S. corporate tax structure must change; U.S. import/export laws must change; China’s market must become fully developed; China must change its import/export laws for the benefit of foreign nations; and, as has been pointed out previously, employee compensation must become more competitive. If you are one of the people writing letters to editors and waiting for these changes to occur, I sincerely wish you the best of luck. Personally, I’ll be taking a different path.

By Michael C. Matelich
San Diego