My comment:
(a) The report is based on
Tim Leunig, Stop Thinking of 'Reshoring' Jobs From China. It Just Won't Happen. If Chinese wages do rise, low-cost producers will leave China. They will not, however, return to high-wage economies. Financial Times, Oct 31, 2011 (op-ed). http://www.ft.com/cms/s/0/bd30c0 ... 7-00144feabdc0.html
(i) Nick Clegg is is the Leader of the Liberal Democrats, and deputy prime minister of United Kingdom.
(ii) The last two paragraphs of the BBC report says:
(iii) The corresponding statements in Mr Leunig's article are
"Chinese wages will rise, but the potential supply of low-cost Chinese labour remains elestic. If China runs out of workers willing to work for $2, low-cost producers will leave China. They will not, however, return to high-wage economies. Instead they will move to India, Bangladesh and ultimately Africa. This is history repeating itself. At the start of the 20th century, British lost its textile industry to Japan. As wages rose, those jobs left Japan, but they did not return to Britain. They went first to Hong Kong, then to Korea, and now to China. Simple products will never be produced in developed countries in any quantity again.
(iv) The FT article then asserts, "Electronics is different. Here Chinese wages are well above $2, because producers want to attract the best and most reliable workers. * * * High wages at Ford then [at the age of Henry Ford]. and in Chinese electronic companies today, are a symbol of competitive success, not competitive failure.
(v) The FT article next remarks that productivity of Chinese labor has risen, commensurate with wage hikes ("Chinese wages can rise without becoming unproductive so long as Chinese productivity keeps pace with wages. This has happened in the last 20 years, with productivity rising by 10 per cent a year on average").
(vi) The critical point of argument by Mr Leunig is next:
"That said, Chinese labour productivity is still very low by Western standards. World Bank figures show that the average American industrial worker produces as much as 12 Chinese industrial worker. This means that even were reshoring to happen, it would not be a one-for-one job exchange. * * * The Chinese electronics sector currently employs 3m people. If the US won back a 10th of Chinese output, China would lose 300,000 jobs, but the US would gain fewer than 40,000 new jobs [which, when translating into statistics, means US] unemployment would fall by just 2.75 percentage points. Productivity [in the West] is high and still rising faster than in the service sector.
"This means that manufacturing employment will continue to fall, in Britain, the US and even in China, where it has already fallen by more than a fifth since 1996. Output has risen in all three countries, but productivity has risen faster, so that employment has fallen. There is no reason to think the next decade will be anty different. Rapid productivity growth in manufacturing means that all countries must ensure that their economies deliver enough service sector jobs to return society to full employment.
The end.
(b) There is no need to read the rest of the FT article.
(c) I question Mr Leunig's assertion that manufacturing "will move to India, Bangladesh and ultimately Africa."
US used to renew annually "most favored nation"--in 1998 US changed the term to normal trade relations (NTR)--for China, which US made permanent. At the time of national debate, I explored if there were alternatives (then and in the future) for basic manufacturing. I concluded there was none, based on infrastructure, literacy, discipline, political stability, low crimes, and sufficient (population) size of a potential replacement.
I also doubt low production cost is the sole consideration.
(i) The West has retained the high-end of textile (indeed fashion, including handbags and watches (which few could have predicted would survive in a digital age). Italy is just one example.
(ii) China does not respect intellectual property rights, so few high-tech manufacturers are willing to make things in China.
(iii) In some industries (semiconductor for instance), labor cost is minimal.
(d) China has failed, since the founding of People's Republic, to grasp the import of service sector--even light industry--dooming its population to chronic un- or under-employment. China embraced light industry (say textile, lighter) after it has become highly automated, and employed not many.
(e) I am unsure of the statistic offered by Mr Leunig that "in China, where it [manufacturing employment] has already fallen by more than a fifth since 1996." Otherwise I would say his data are correct. Nonetheless, I do not quite trust a "economic historian" which Mr Leunig is, having been burned by Prof Niall Ferguson, Department of History, Harvard University. http://history.fas.harvard.edu/people/faculty/ferguson.php
Then again, even economists (as compared to historians) concedes they do not do a good job in prognostics, economics not being a hard science.