Monday, May 2, 2011

Made in China - Arthur C. Mead

by Bianca Murillo


The author Arthur C. Mead taught Economics at Boston College, Simmons College in Boston and worked at the National Bureau of Economic Research before coming to University of Rhode Island where he teaches now. Mead's research interests are in the areas of regional economic performance, demographics, and the economics of higher education. He teaches a course by the same name of this piece, “Made in China”, among other courses. His approach is both historical and theoretical, using historical economic and social facts as a basis for a theoretical analysis.

Mead begins by discussing the nature of the apparel industry. Mead asserts, “Apparel is a comparatively small industry with 3.9 percent of world trade in manufactures…but it has an importance for exceeding its size…Apparel is important because it’s mobile, and such it functions…as a leading indicator” (419). Mead argues that the apparel industry is on the move and to understand the changes one must look at the force behind those changes, which he argues is China. Mead goes on to argue that in order to understand China's implications and power one must look at China's past which is inextricably linked with their future and therefore the future of the apparel industry.

The Past and Present
Mead argues that three decisions altered China's economic history and relationship with the world.

1)In the 15th century when China chose to isolate itself from the world which allowed for a foundation to be laid for the communist revolution and eventually establishing Mao Zedong as leader of China in 1949 (419)
2)Mao's decision to choose isolation from the world as a development strategy (419)
3)Deng Xiaping's decision to open China to the world in 1978 with four special Economic Zones modeled after Japan's economic miracles (420)

As a result of number 3 the world's labor supply grew by 1/3 and China's exports began flooding the market (420). The impact by China on the apparel industry was however muted by two complex developments in international trade policy: quotas and regional trade preferences (421). The effect of these developments can be seen US apparel employment falling 49% in the 1990's and in the movement of apparel productions to poorer nations (421).

The Future
The apparel industry received two shocks: China's entry into the WTO (World Trade Organization) in 2001 and the end of the MFA (Multi-Fiber Agreement) in 2005 (422). This lead to a wave of low price imports that quickly changed the market as it was known. The US and EU quickly moved to analyze and restrict these influxes. Apparel imports from China were up a staggering 221% in 2005, while the average apparel price fell 18% (422). These changes led to even more widespread effects in other countries as well. Mead asserts that the winners given all of these industry trends are China, India and Pakistan, with a few other countries reaping benefits as well.

Ultimately, Mead is wary of China's endurance and the extent to which China can maintain it's competitive advantages and sustain them for the long term. He argues that china has a virtually endless supply of labor, but just not in the ideal locations which will result in a movement of operations inland which comes with it's own effects (423-24).

Mead concludes with the notion that China’s power has been noticed before and heed should have been taken when Napoleon warned, “Let China sleep. For when China wakes, it will shake the world” (424). In Mead's opinion, China has awoken, and it has shaken the world.

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