The Global Shift of Clothing, Textile and Manufacturing Production to Developing Countries - Coursework Example

The Global Shift of Clothing, Textile and Manufacturing Production to Developing Countries Introduction Over the years, there has been a global shift of clothing, textile and manufacturing production to developing countries. This trend has been witnessed as large firms started to significantly shift manufacturing production to other countries where they could get cheaper labour and hence incur lower production costs. This phenomenon is referred to as new international division of labour (NIDL). The need to increase profitability led many multinational corporations to increase their scope of operations to developing countries, which are regarded as the source of cheaper labour compared to the developed countries. Developing countries have long been integrated into the global capitalist economy, but their primary role has been to supply raw materials for the developed or industrialised countries to use in their manufacturing activities. However, the scenario today is different in that developing countries are now progressively being used as the bases of production by companies whose headquarters are in the developed countries. As well, developing country markets have been opened up to the manufactured goods of the developed countries. This means that countries such as China can be used as bases of manufacturing, but they can also buy goods manufactured in developed countries such the USA or Japan. Today, most clothing, textile and other manufacturing production activities have been shifted to developing countries. This essay argues that this phenomenon is inevitable based on the concept of NIDL and the theory of product life cycle. The essay will present an in-depth analysis of the aforementioned issues and discuss the current effects associated with the shift of manufacturing production operations to developing countries. The shift of global manufacturing and the concept of NIDL Prior to 1960, the state of manufacturing was such that core countries, or the industrialised countries, had the manufacturing capacity and specialised in the manufacture of goods which they exported to other countries (Smith, 2012, p. 243). In contrast, developing or peripheral countries, which had a limited capacity in manufacturing, focused on producing food items and raw materials that were used in the industrialised countries’ manufacturing operations (Smith, 2012, p. 243). The situation that existed implied that the nations that specialised in manufacturing became the leaders in regard to technological innovation and industrial capabilities, which enhanced their ability to create more wealth through innovation. On the contrary, the developing countries that specialised in extraction of raw materials and agricultural production remained disadvantaged in terms of their ability to generate wealth and build modern industries. From the 1960s and the 1970s, there was a rise in the concept of NIDL (Bowles, 2013, p. 93). NIDL is the concept that describes the shift of manufacturing production from developed countries to low cost developing nations in the 1970s and thereafter (Bowles, 2013, p. 93). The new international division of labour can also be defined as the integration of the peripheral countries into the global capitalist marketplace through the establishment of new exports on the basis of the comparative advantages (ability to produce services and goods at a lower cost than other players) that different countries have (Salinas & Moulaert 1983, p. 9). NIDL started with a selective shifting of manufacturing activities from developed countries to developing countries in which operating costs, particularly costs of labour, were significantly lower than in the core countries. Consequently, unlike what prevailed in the past whereby developed countries were dominant in manufacturing due to their better capacities in terms of technology and innovation, today, manufacturing activities are progressively moving to developing countries. This means that in the present day, developing countries are not just specialising in the production of raw materials, they are also being used as bases of manufacturing production. As a result of NIDL, developing countries have become the new source of low-cost labour for firms involved in manufacturing. Interestingly, the manufacturing firms base their manufacturing operations in developing countries but sell their products primarily in the developed country markets (Bowles, 2013, p. 93). As noted by Bowles (2013), “everything from clothing to electronics shifted to developing country production sites in response to lower labour costs” (p. 93). This can be said of companies such as Apple, Adidas and Nike, which have established different bases in countries in Asia to manufacture different components for their products. The idea behind the shift of manufacturing production to developing countries is the need to benefit from economies of scale. To achieve this, manufacturing needs to be concentrated. This can be related to the notion that the very idea of a factory is to bring workers and machinery together in one location (United Nations Industrial Development Organisation, 2009, p. xv). For instance, in order to benefit from the cheaper labour available in Asian countries, firms from developed countries had to bring their factories to the countries in Asia. To benefit from economies of scale, firms that are involved in related activities also need to be located near each other. By being clustered together, factories lower each other’s costs (United Nations Industrial Development Organisation, 2009, p. xv). Hence, related manufacturing production functions have progressively been shifted from developed countries to developing countries in order for firms to maximise the economies of scale. Evidence that the shift is inevitable It can be argued that the shift of global manufacturing is inevitable in relation to the concept of product life cycle (Vernon, 1966). This theory can be used to explain how comparative advantage in a specific area can be transferred from one country to another country in the course of time (Boyes & Melvin, 2013, p. 444). This takes place because goods undergo a product life cycle. At the start, developing and testing activities are needed to conceptualise and come up with the product. Because of this, the earlier development of a product will be carried out by firm that has the capacity to innovate. However, over time, a successful product starts becoming standardised, such that many manufacturers are able to create it. The mature product can be manufactured by companies that carry out little or no research and development, specialising in reproducing products that were developed by other companies (Boyes & Melvin, 2013, p. 444). The theory of product life cycle is linked to comparative advantage in international business in that a new product will initially be manufactured and sold overseas by the country in which it was conceived. As the item is sold in other countries and foreign companies get to understand it better, the technology is copied in other nations by foreign companies that seek to produce an item that can compete with the initial product (Van den Berg, 2015, p. 182). The maturity of the initial product is associated with comparative advantage shifting away from the nation in which the product was first developed if the manufacturing costs in other nations are lower. In the process, the now standardised technology is transferred from the country of origin to other countries that have lower operating costs (Boyes & Melvin, 2013, p. 444). Therefore, based on the theory of product life cycle, the most developed nations are likely to introduce new products by virtue of their capacity in terms of research and development (Van den Berg, 2015, p. 182). As the technology used to manufacture the product becomes standardised, the base of production slowly moves to other countries as a way of reducing production costs. According to Khondoker and Kalirajan (2012), the textile industry offers a good example of an industry that has been shifting away from developed nations into developing countries as predicted by the concept of product life cycle. This can be seen by considering the point that some of today’s developed countries such as Japan, the USA and the UK started their industrialisation journey through the development of the textile industry. In particular, clothing and textile industries emerged in England in the 18th century and around 1850 in the USA. During the 1850s, the textile industry dominated manufacturing in New York, with the city having more than 400 textile entrepreneurs making clothing products. In the 1950s, the textile industry spread to Japan, and by the 1960s, Japan was one of the biggest exporters of clothing to the USA. Later on, manufacturers in the textile industry established factories in several developing countries in Asia, including Hong Kong, South Korea, Singapore and Taiwan. A further shift in manufacturing production saw manufacturers in the textile and clothing industry setting up plants in countries such as China, India, Bangladesh and Vietnam, which have become the new large exporters of textile and clothing products (Khondoker & Kalirajan, 2012, p. 6). Current effects associated with the shift of manufacturing to developing countries The shift of manufacturing production to developing countries is associated with positive and negative effects for both developed countries and developing countries. The positive effects are as follows. For developed countries, the shift of labour-intensive manufacturing to developing countries creates an opportunity to import the labour-intensive manufactures. This enhances economic efficiency through the demand side while freeing labour for knowledge-based industries (Dicken, 2015, p. 334). For instance, advanced economies such as the US can import textiles or components of products manufactured in low-cost developing nations such as India and South Korea and in turn concentrate on knowledge-intensive innovations such as software and more complex chemical and heavy industry products (Odagiri 2006, p. 132; Dicken, 2015, p. 334). For developing countries, growth through relocation of industries and revenues earned from exports leads to higher demand for goods manufactured by developed countries (Dicken, 2015, p. 334). For instance, increased manufacturing operations in China have also led to an increased consumption of products made in developed countries such as the USA. There is also an increase in employment in the countries to which manufacturing production activities are shifted. This is also associated with job quality improvement for skilled workers in the short and medium term. Relocation of manufacturing also promotes flexibility and efficiency of the labour market through increased mobility of workers between countries in which the manufacturing operations are located (Dicken, 2015, p. 334). The negative effects associated with the shift of manufacturing to developing countries are as follows. For developed countries, the shift of labour-intensive manufacturing operations to other countries, coupled with an increase in imports from developing countries, leads to an inevitable loss of jobs and a reduction in the quality of jobs or wages. This causes an increase in inequality between unskilled and skilled workers, and can lead to severe redeployment challenges (Dicken, 2015, p. 334). In regard to developing countries, negative effects of relocating manufacturing operations include the fact that employment creation and improvement of job quality only lasts for a short time and eventually dwindles (Dicken, 2015, p. 334). This because more and more countries emerge which can provide cheaper labour. As a result, many factories located in countries such as India, China and Bangladesh are characterised by sweatshops and other unfavourable working conditions. As well, the shift of manufacturing production to developing countries does not fully alleviate the problem of unemployment in these countries (Dicken, 2011, p. 508). Dicken (2011, p. 508) also notes that despite significant development in some of developing countries, the manufacturing sector has not addressed the problems of underemployment and unemployment in most developing nations. Conclusion In conclusion, the global shift of clothing, textile and manufacturing production to developing countries can be attributed to the need for manufacturing firms to get cheaper labour for their production activities. Thus, the concept of new international division of labour has emerged, whereby firms in developing countries move their manufacturing bases to countries that offer cheaper costs, particularly labour costs. The shift has also been fuelled by the product life cycle theory, which predicts that a new product or technology will be produced by the most developed nations, and when it becomes standardised, its production is taken over by other countries that have a comparative advantage in terms of lower production costs. Therefore, the shift is inevitable. The positive effects of the shift of manufacturing include enabling developed countries to import labour-intensive manufactures, and making them able to focus on knowledge-based production. For developed countries, positive effects of relocating manufacturing include creating employment and improving job quality over some time. There are also negative effects of relocating manufacturing to developing countries. For developed countries, shifting manufacturing to other countries leads to job losses and a reduction in the quality of jobs. For developing countries, relocating manufacturing can lead to creation of problems such as poor work environments as the pressure for employment increases. Also, relocation of manufacturing does not fully address the problems of underemployment and unemployment in developing countries. References Bowles, P. (2013). Capitalism. New York: Routledge. Boyes, W., & Melvin, M. (2013). Microeconomics (9th ed.). Mason, OH: South-Western Cengage Learning. Dicken, P. (2011). Global shift: Mapping the changing contours of the world economy (6th ed.). New York: the Guildford Press. Dicken, P. (2015). Global shift: Mapping the changing contours of the world economy (7th ed.). New York: the Guildford Press. Khondoker, M., & Kalirajan, K. (2012). Determinants of labour-intensive exports by the developing countries: a cross country analysis. ASARC Working Paper 2012/09. Retrieved from https://crawford.anu.edu.au/acde/asarc/pdf/papers/2012/WP2012_09.pdf Odagiri, H. (2006). National innovation system: Reforms to promote. In T. Shibata (ed.), Japan, moving toward a more advanced knowledge economy (pp. 127-146). Washington DC: The World Bank. Salinas, P. W., & Moulaert, F. (1983). Regional political economy: an introduction and overview. In F. Moulaert & P.W. Salinas (eds), Regional analysis and the new international division of labour: Applications of a political economy approach (pp. 1-12). Dordrecht: Kluwer Nijhoff Publishing. Smith, D. A. (2012). Trade, unequal exchange, global community chains: world-system structure and economic development. In S. J. Babones & C. Chase-Dunn (eds), Routledge International Handbook of World-Systems Analysis (pp. 239-244). New York: Routledge. United Nations Industrial Development Organisation. (2009). Industrial development report 2009 – Breaking in and moving up: New industrial challenges for the bottom billion and the middle-income countries. Retrieved from https://books.google.co.ke/books?id=eVsDrogCVm0C&pg=PR14&dq=causes+of+shift+of+manufacturing+to+developing+countries&hl=en&sa=X&redir_esc=y#v=onepage&q=causes%20of%20shift%20of%20manufacturing%20to%20developing%20countries&f=false Van den Berg, H. (2015). International economics: A heterodox approach (2nd ed.). New York: Routledge. Vernon, R. (1966). International investment and international trade in product cycle. Quarterly Journal of Economics, 80(2), 190-207. Read More