I met Mark, president of a company that builds instrument panels, on a recent flight where he told me that even he has difficulty competing with China. (Who else?) The labor-cost disparity is almost inconsequently. The often-cited figures of $0.50/hour for Chinese labor versus $8/hour on the low end here could be made up in higher quality and faster turn-around. But other restrictions slapped on U.S. manufacturers are far worse.
For example, the paint booth at Mark’s plant cost some $500,000 in part because of equipment needed to burn paint fumes. China has no such requirements and factories can pour noxious fumes into the air at will, in part “Because it’s different air,” says Mark sarcastically.
What about tariffs, I asked. Why not just tax products coming from China? Apparently that violates some free-trade agreement and the World Trade Organization would howl in protest.
According to Mark, the next Chinese assault on the U.S. is focused on the computer-service industry. To help hit their target, the Chinese education infrastructure is amassing an army of linguists to teach English. This must be a bit unnerving for the people of India who make their livelihood in the service industry.
My solution to problems with China is to form trade policies that encourage the growth of their middle-income group. One estimate is that there are some 300 million in this middle class. Increasing the size of the group will pull wages up and eventually reduce the wage disparity between our countries. As the Chinese middle class enjoys their new prosperity, they will demand better health care that will put a demand on more sophisticated medical products hopefully made in the U.S.
That’s what I think. What do you think?