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'India and China are a large and growing part of the American economy'

September 13, 2007

Recently, there have been many stories in the media about the condition under which toys are manufactured in China. The stories came out when millions of defective toys were recalled.

People naturally got scared of defective toys because you give these toys to your children, and people everywhere are fanatical about protecting their children. What is surprising to Americans is not that the goods are made in China, but how many of them are made there. In 2000, 30 percent of world's toys were made in China. Five years later, the percentage went up to 75 percent. Now, it could be higher, probably 80 percent. That is a very significant and very fast change.

Because it is so fast, people in America have not realised how many of their manufactured goods come from China. Americans should look hard at the bigger picture and try to understand what the profound changes, including jobs going offshore, mean to them and how they should address the churning labour market.

They should understand that the world is becoming more closely linked together. India and China are a large and growing part of the American economy and a growing part of what Americans buy and use everyday, whether it is a product or a service. And that requires Americans to make changes if they want to compete in the global job market.

America has been the world's hegemonic power since the end of the Cold War and a lot of geopolitical sshifts are now underway that will likely eventually change that. But the economic shifts are also huge. And America really hasn't had it on its radar screen. And for Americans to compete in the global economy, they must change and better prepare for the competition. It seems to me American workers got a free pass in the last 50 years because India was effectively closed to the world and China was, too.

And now both India and China are coming online, competing in the job market with the rest of the world. And Americans face stiffer competition in the job markets as a result. If you think of it we did not have a global job market and now we do. Today, multinational companies, primarily American and European and some Japanese and Koreans, are really taking advantage of it.

There are a handful of Indian companies such as Infosys and Wipro and Tata who are becoming very, very global. And a few Chinese companies are expanding -- I won't call them global -- into Africa and Latin America. Americans and Europeans must come to terms with the realisation that now that India and China are open for business, Westerners can no longer expect to be paid ten times more than everyone else for the same work.

But surely the Indian companies could expand too.

Photograph: Shoppers at a Manhattan toy store August 14, 2007, the day Mattel Inc announced it was recalling more than 18 million Chinese-made toys worldwide, including nine million in the United States, citing injuries to at least three children who swallowed small magnets that had broken loose. If swallowed, the magnets could attract each other and cause intestinal perforation, infection or blockage, which can be fatal. Photograph: Don Emmert/AFP/Getty Images

Also read: In Pictures: China And India Then To Now
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