Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing U.S. levels. Therefore, the substitution of Asian for U.S. labor in tradable goods and services is likely to continue.This is risible on its face. If Asia's only advantage is a relative price advantage then Asia itself is supremely vulnerable. Does anyone remember when everyone thought Japan would bury us economically? Whatever happened to the Japanese juggernaut, anyone? Meanwhile, Asia continues to subsidize the US by providing it below-market-value goods and services--and we're supposed to be the losers? Ask yourselves: is underselling your goods or services a sustainable practice?
No, nor is it meant to be. The Chinese will subsidize their currency just long enough to drive the maximum amount of industry from the US.
Manufacturing is unique as it requires immense amounts of patient capital and a deep knowledge base. Neither of which can be assembled quickly to regain a lost market.
Asia has other advantages than price too.
You do understand that once dumping (that's what it's called) has cleared out the US competitors, prices will rise. Furthermore, if you think we're ever going to get those factories we're busily shipping to China back, you're kidding yourself. That infrastructure is gone. We don't even have the facilities (on a large scale) to make equipment anymore, most of that is in China too.
If we ever reach a crises with China, we either obey or they can crash our economy: flood the market with dollars and nationalize our factories.
Quote: Does anyone remember when everyone thought Japan would bury us economically? Whatever happened to the Japanese juggernaut, anyone?
You cannot compare with what is happening with china/India today as what happened with Japan 15-20 years ago. The primary differnce is we were not shutting down US factories by the thousands and moving them to Japan.
Japan continues to grow wealthier, and own more of the world.
Its IIP (international investment position) is the highest in the world (although per capita two other countries are still well ahead), and it is the largest single foreign holder of our public debt, having around $700 billion in treasury debt.
General Motors is cutting 25,000 American workers' jobs and building more plants in Mexico and China. I guess we're supposed to get busy inventing something quick to sustain us until it's outsourced. Cellphones and HDTV aren't enough.