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What Does Explosive Growth in the Asian Sector Mean for Everyone Else?

Image via Flickr by Roberto Verzo

For years, companies in the U.S. and Europe have turned to cheap labor forces in Asia to manufacture products. At the time, this was beneficial to the companies, which saved money and could offer cheaper products, and to the workers, who had access to jobs and job training that led to greater wealth and prosperity. Now, countries like China and India have an educated workforce with disposable incomes, and they’re no longer content to make stuff for the West while those foreign companies take the lion’s share of the profits.

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The Asian Market is Changing

As China, India, and other Asian markets emerge with their own companies producing wealth, they’re switching from a status of primary exporters to importers of goods. Not only have Western companies lost the workforce they depended on to produce, they’re missing potential sales until they can produce products to ship to the emerging middle class in Asia. Some of these companies kept manufacturing facilities in the U.S., and it’s merely a matter of vamping up efforts to make production quotas. Others, however, closed up shop in the U.S. and now have to start over from scratch.

Industries Most Affected by the Changes

This shift is changing business operations for most industries. Oil and power generation is in huge demand as Asian companies need greater resources to fuel their new businesses and industries. Much of the clothing sold by European and U.S. retailers is produced in Asia, and this is likely to drive up prices for these commodities. Many electronics companies are shifting their labor force from Asia back to the U.S., along with locksmiths, light bulb manufacturers, automotive manufacturing companies, and many others. Virtually no aspect of global trade will go unaffected by this shift in the labor force.

What These Changes Mean to the West

Manufacturing in the U.S. is now almost as affordable as making the products with U.S. labor forces. This trend could bring jobs back to the U.S. from Asia, which might help the economy finally begin to bounce back from the throes of recession. The loss of cheap labor, however, could drive prices of goods up further.  Western companies have already started to scale back on their projects involving Asian expansion. But many companies are looking to undeveloped nations, primarily in Asia, South America, and Africa, to fill the void of cheap labor.

Other Markets Ready to Rise

Indonesia, Vietnam, Bangladesh, Brazil, Ethiopia and other undeveloped nations have seen the wealth and prosperity gained by their neighbors from providing cheap labor to developed countries in the West. These nations are in much the same situation as China and India before the trend toward outsourcing. They lack the skills and training to become competitors in the global marketplace, but have almost limitless potential.

The downside to moving production to these regions is the lack of a trained labor force and infrastructure. Training workers is expensive, and until the manufacturing facilities have adequate power, roads to transport goods, security, and other necessary infrastructure is in place, it’s difficult to start the process. Most likely, Western companies will be split on the decision, some opting to bring manufacturing back to the U.S., while others work towards training workers and building the infrastructure to make the cheap labor in these undeveloped nations accessible to the global marketplace.

No one knows for sure what the future holds, but the face of manufacturing is certainly changing. [/show_to]

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