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Originally Posted by raytri
it's probably mathematically impossible for that to happen, though.
China's cost advantage rests on one thing: its labor is *so* cheap that it makes economic sense to build things there, despite the increased shipping and other logistical costs -- like having to manage a multilingual, multicultural, multi-measuring-system, multi-legal-system manufacturing process.
Let's say shipping accounts for 30% of the wholesale cost of a good. That means Chinese wages only have to reach 70% of ours in order for their cost advantage to disappear.
Can China hold down labor costs? It'd be hard. All that money pouring into the country is entering the Chinese economy and getting spent on stuff. Living standards are going to rise, whether the government wants them to or not -- and, in fact, it wants them to. Otherwise, what would be the point of engaging in trade pacts?
Moreover, labor costs are only part of the issue. As standards of living rise, so do expectations. For example, China became an industrial giant, in part, by wreaking enormous environmental destruction. As people become more affluent, the environment becomes more important to them -- they no longer wish to breath smog and drink sewage. They require more environmental regulations for industry and power plants. So producing further growth becomes more expensive, adding to per-unit costs.
I don't know where the break-even point is, but in the end their standard of living won't rise as much as you might think, and ours won't fall as much as you might think.
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Look at the arithmetic of being dependent on foreign oil. Now imagine being dependent on foreign food, clothing, and nearly every other tangible product. Our current economy, culture, taxation, and educational system relies on us shedding the responsibility of producing these products. We are banking our future in the U.S. on everyone sitting in ivory towers creating new phenomenons and then convincing the world that they need them when often, they do not.
As mentioned, the world's main energy sources aren't located here. Transporting goods is much more affordable to foreign countries. Just another reason that in the future more tangible products will enter this country than will exit. And to make matters worse, foreign workers will continue to improve their standard of living which does include education; and they will acquire more of the high tech jobs we covet so much.
More investigation into the math of "free trade" reveals that our trade partners have more workers than we do and resulting from our declining birth rate it will continue to make us disproportionated in the number of jobs. Once our standard of living is "equal" they definitely will have the upper hand in determining our markets.
Will not all factory jobs etc leave this country? Our youngest generations are certainly not aspiring to enter these careers. Except for the Mexican illegal immigrants of course.
I'm not advocating full-on protectionism but something has to be done to give more value to manual labor in this country otherwise we are to be at the will of foreign countries for our most basic needs.