Staying competitive in the global economy: Moving Up the Value Chain
Offshoring and Employment: Trends and Impacts.
Remember The Travels of the T-Shirt in the Global Economy? As we reported in these pages, this award-winning book tracked the circuitous making and marketing of a T-shirt, from the cotton fields of Texas and a factory in China to a used-clothes bazaar in Africa (“Global yarn”, in No. 251, September 2005, search www.oecdobserver.org).
Global value chains are radically altering how goods and services are produced; as with the T-shirt, parts made in one country are assembled in another and sold in another still. The globalisation of production has changed industrial structures, and in some sectors affected their competitiveness. This has been further influenced by the rapid integration into the world economy of China and India, whose large pool of labour fuels other concerns about offshoring in manufacturing and services. How should OECD countries respond?Staying Competitive in the Global Economy brings together OECD data on the globalisation of value chains, and underlines the role that labour costs can have in influencing the location of production. Labour costs range from just over US$0.60 per hour in China to over $30 an hour in Germany, for example. However, these labour costs are but one dimension; competitiveness in developed countries crucially depends on innovation. And as so much R&D is being offshored to emerging countries too, the report emphasises the importance of effective innovation strategies and explores new approaches to moving up the value chain.A second OECD report, Offshoring and Employment: Trends and Impacts, assesses the positive and negative effects of offshoring, and proposes solutions that might be able to limit the downsides. It shows that offshoring is a relatively minor cause of overall job losses. Citing the European Monitoring Centre on Change in Dublin, it states that offshoring by European firms is responsible for less than 5% of total job losses in Europe, far behind bankruptcies, shut-downs and restructuring. Some sectors have been hit hard, though: textiles, apparel and footwear have been most heavily offshored and have suffered the steepest job losses. How this has affected our T-shirt is another question.
©OECD Observer No 262, July 2007