The New Offshoring of Jobs in the Global Economy

1. The New Offshoring of Jobs in the Global Economy Gary Gereffi Duke University ggere@soc.duke.edu “Globalización, Conocimiento y Desarrollo desde la perspectiva mexicana” Universidad Nacional Autónoma de México (UNAM), México, DF, México 15-17 de marzo, 2006

2. Main Topics • Offshore outsourcing: new & old trends • Contemporary global labor market: a typology of jobs • Shifts in labor-intensive jobs: apparel • Shifts in knowledge-intensive jobs: engineering • Development dilemmas: winners & losers

3. Starting Point • Outsourcing – corporate control • move supply of goods and services from “in house” to external supplier • Offshoring – geographic location • move activities from domestic to overseas location • Offshore outsourcing – What’s new? • Types of jobs • New “drivers” of job shifts in global industries • Where jobs are going

4. Global Outsourcing of U.S. Jobs Trends • 1960s & 1970s – basic factory jobs • Shoes, clothes, electronics, toys, appliances • 1980s – routine service work • Call centers, back office jobs (credit cards, banks) • 1990s – advanced business services • Finance, accounting, medical records, software • 2000s – design, brands, innovation

5. An Unprecedented Expansion in Global Capitalism • In 1985, the global economy consisted of 2.5 billion people (N. and S. America, W. Europe, Japan, E. Asian NIEs, Africa) • In 2000 as a result of the collapse of the Soviet Union, India’s turn from autarky, China’s shift toward a market economy, global capitalism consisted of 6 billion people

6. The Global Force Has Doubled since 1990 Source: Richard Freeman, “The real effect of globalization on labor,” Harvard University and NBER.

7. 4 Types of Jobs in Global Economy • Assembly jobs in export industries (EPZs) • “Full package” (or OEM) production jobs, associated with buyer-oriented upgrading • Advanced production jobs that require design (ODM) and marketing (OBM) capabilities, associated with supplier-oriented upgrading • Knowledge-intensive jobs in offshore services

8. 2005 Phase Out of Quotas and the Consolidation of the Apparel Value Chain

9. In 2005, Multi-Fiber Agreement Ends Quota Abolition from 2005 MFA (1974 – 1994) ATC (1995 – 2004) Jan. 1, 1998 Another 17% Integration Jan. 1, 2002 Another 18% Integration Jan. 1, 2005 100% Integration Jan. 1, 1995 16% Integration Source: World Trade Organization.

10. Figure 1 Source: Financial Times, July 19, 2004, p. 11.

11. Figure 2 Source: Financial Times, July 19, 2004, p. 11.

12. North America Central America and the Caribbean Northeast Asia 5 Jamaica 4 Canada Dominican Republic South Korea 3 Macau Guatemala ElSalvador 2 Mexico Hong Kong Costa Rica Taiwan Honduras 1 China Malaysia Philippines Turkey Indonesia Italy Thailand Europe and the Middle East Vietnam Jordan Cambodia Southeast Asia Bangladesh Sri Lanka India Pakistan South Asia Figure 3: Shifts in the Regional Structure of US Apparel Imports from 1996 to 20041 The rings indicate the share of total U.S. imports in U.S. dollars by partner country: 1. 10% +2. 6.0% - 9.9%3. 4.0% - 5.9%4. 2.0% - 3.9%5. 1.0% - 1.9% Total value of U.S. clothing imports was $41.6 billion in 1996 and $72.3 billion in 2004. 1The 2004 position corresponds to the ring where the country’s name is located; the 1996 position, if different, is indicated by a small circle. The arrows represent the magnitude and direction of change over time. Source: Compiled from official statistics of the U.S. Department of Commerce, U.S. imports for consumption, customs value.

13. The rings indicate the share of total Japanese imports in U.S. dollars by partner country: • 1. 25% +2. 10.0% - 24.9%3. 4.0% - 9.9%4. 2.0% - 3.9%5. 1.0% - 1.9% • Total value of Japanese clothing imports was $19.7 billion in 1996 and $21.7 billion in 2004. Figure 4: Shifts in the Regional Structure of Japanese Apparel Imports from 1996 to 20041 Hong Kong 5 Europe Northeast Asia France 4 3 United Kingdom Italy South Korea 2 1 China Indonesia Thailand North America Southeast Asia USA Vietnam Philippines 1The 2004 position corresponds to the ring where the country’s name is located; the 1996 position, if different, is indicated by a small circle. The arrows represent the magnitude and direction of change over time. N.B.: From 1996 to 2004, China’s import share of the Japanese apparel market grew from 59.4% to 80.9%. Source: UN Comtrade, SITC 84 (“Articles of apparel and clothing accessories”).

14. Table 1 Top 7 Apparel Exporters to the United States, 2000-2005*

15. Table 2

16. MAJOR TRENDS IN THE POST-QUOTA WORLD China will benefit most from the end of MFA quotas Consolidation is likely to accelerate • More mega-factories will emerge post-2005 • Retailers will cut down on the number of sourcing countries Remaining factories will have to provide higher level services (logistics, customs clearance, and product design) Time to market considerations will allow regional producers to maintain a role in apparel sourcing Pressures for “ethical sourcing,” corporate codes of conduct, independent monitoring and labor standards will grow

17. The Rise of Engineering Outsourcing in India and China • Economic growth • Massive labor forces • Low labor costs / specific labor polices • A new emphasis on knowledge-intensive jobs • India: IT expertise • China: manufacturing expertise

18. In the Media • “Last year more than 600,000 engineers graduated from institutions of higher education in China. In India, the figure was 350,000. In America, it was about 70,000” • The National Academies, Press Release: “Broad Federal Effort Urgently Needed to Create New, High-Quality Jobs for All Americans in the 21st Century”, 10/12/2005 • “Last year China's schools graduated more than 600,000 engineers and India's schools produced 350,000, compared with 70,000 in America” • The U.S. Department of Education, Press Release: “In Case You Missed It: Let's Get Serious”, 2/7/2006

19. Engineering, Computer Science and Information Technology Degrees Awarded in 2004

20. 2004 Engineering, CS and IT Degrees Awarded Per Capita

21. A Breakdown of the 2004 Economic Structure of the United States, China and India

22. Thank you for your attention!