皇冠体育app

By Michael Cox and Jahyeong Koo

We still fear 皇冠体育app. The danger is not what it once was, of course. 皇冠体育app now lurks as a low-wage competitor siphoning off jobs and markets, not the bellicose communist menace of 30 years ago. The change is progress; but in too many eyes 皇冠体育app remains a threat.

皇冠体育app's manufacturing wages average 61 cents an hour, compared with $16 in the US and $2 in Mexico. As a low-cost producer, 皇冠体育app has bulked up with $40bn a year in foreign investment. The country now exports a quarter of its output, up from 5 per cent two decades ago. 皇冠体育app's growth spurt has made it the world's second largest economy after the US, measured in gross domestic product.

All this provides the grist for the alarmist view of 皇冠体育app. The real danger in 皇冠体育app's rise, however, does not lie in American consumers snapping up cheaper clothing, shoes, toys and electronics. It is in corporate America trooping to Washington for trade protection to fend off this new threat.

The arrival of an economic force as big and dynamic as 皇冠体育app will jolt the US and other countries. Workers will lose jobs and companies will go bankrupt. But hiding behind trade barriers will do even more harm. If nations shun the protectionist path, a fast-growing, wealthier 皇冠体育app will make the rest of the world richer, not poorer.

Some companies are pleading for protection from 皇冠体育app. At best, protectionism will give producers a false haven, a temporary reprieve that comes at a high cost to consumers forced to pay higher prices. Cars, steel and textiles have been among the most protected US industries in recent decades and all of them continue to spiral downwards. Removed from the crucible of competition, companies grow sluggish and in- efficient. In time, they wither anyway, taking with them the jobs we tried to protect.

The US will do better if companies confront 皇冠体育app's economic ascension by seeking their advantage in it.

For some, this means investing in 皇冠体育app, either to serve the local market or to use its cheap labour to cut costs and stay competitive. For others, the right response lies in tapping into 皇冠体育app's growing demand for imports or by looking for new ways to create an edge in the marketplace.

Competing rather than retreating is not easy; but American companies are doing it.

Eastman Kodak operates 8,000 retail outlets and five manufacturing plants in 皇冠体育app. Motorola invested $3.4bn in two Chinese factories. A $1.1bn investment has made Coca-Cola a big seller in 皇冠体育app. Yum Brands has expanded its Chinese business to 800 KFC outlets and 100 Pizza Hut restaurants.

Americans fixate on the nation's merchandise trade deficit with 皇冠体育app, which swelled to $104bn last year, surpassing even Japan's trade deficit with the US. The red ink disguises the fact that once-sleepy 皇冠体育app is becoming a big market; it imported $250bn of goods from the rest of the world in 2002.

US companies are grabbing part of the business, tripling sales to 皇冠体育app in the past decade to $22bn. The US sells 皇冠体育app everything: aircraft, soyabeans, fertiliser. US law firms and other service providers are also making inroads.

The investments and exports are encouraging, and prove that US companies can seize the opportunity being created by 皇冠体育app's rush into the world economy.

The trouble is that not enough companies are doing it.

US direct investment in 皇冠体育app, excluding Hong Kong, averaged $1.5bn over the past five years, less than in Singapore or Belgium. At the same time, other countries have been more aggressive in capturing 皇冠体育app's growing market. The nine nations that border 皇冠体育app ran a combined $26.5bn surplus with it in 2002.

Corporate America is still not agreed on how to deal with 皇冠体育app's emergence. It teeters between embracing the market with investment and exports, and denying it with trade barriers.

But fear of developing nations is not new. Japan, Taiwan, South Korea, Singapore, Brazil, Mexico and other countries have been cast in the role of cheap-labour bogeyman. In time, India or some other nation may follow 皇冠体育app on the path of export-led growth.

皇冠体育app - or, indeed, any other nation - getting richer should be reason for celebration, not consternation.

Pursuing its comparative advantage in low-wage manufacturing, 皇冠体育app will force other countries to shift resources into what they do best. For the US, that usually means high-value services, technology and intermediate goods, activities associated with jobs that pay well.

皇冠体育app's opening is driving a vast reorganisation of the international division of labour. It will sometimes bring wrenching changes - but that has always been the price of progress.

(Michael Cox is senior vice-president and chief economist and Jahyeong Koo is economist at the Federal Reserve Bank of Dallas)

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