Offshore Manufacturing Benefits Large Businesses and Consumers, Hurts SMBs

When manufacturing jobs go offshore, who benefits? Large American businesses and American consumers, that’s who. But not small and medium-sized businesses.

That’s according to a thoughtful article by Jon Markham. He dares to brave protectionist backlash and speak openly about a sensitive subject.

He points out that it is large American corporations like Motorola and Ford — and consumers of their products — who enjoy the benefits of cheap offshore labor, through lower manufacturing costs and lower consumer prices. “American, Japanese and other foreign companies with manufacturing operations in China account for nearly half of the goods being exported by China into the world market. *** It’s not much of an exaggeration to suggest that the largest Chinese company in the world is Wal-Mart, which makes its popular house-brand goods there.”

Chicago economist David Hale observes: “the major complaints from corporate America on China are coming from small or medium-sized companies that don’t have the capital to invest in China or penetrate its market. …if Beijing were to simply improve market access for small companies there would be fewer trade protectionist demands.”

Clearly, SMB manufacturers without access to cheap labor in China and other places may find themselves at an increasing cost structure disadvantage compared to their larger counterparts. This will continue to be a thorny problem for SMBs.

Read more at MSN Money.

Read David Hale’s article about China’s current economic status (if you subscribe to Foreign Affairs).

1 Comment ▼

Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

One Reaction
  1. Yes, this is a big problem. Not all business firms have the money and capability to transfer their operations in other countries. In this regard,I think the government is the one who can help small and medium size businesses. In every country, there are only few big companies but hundreds and thousands of small and medium sized business firms that make up the backbone of the country’s economy.