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Educate ourselves. Here’s a place to start: http://en.wikipedia.org/wiki/Comparative_advantage Study Adam Smith and David Ricardo. Learn about wine-and-cloth until you can explain to others why it has always made sense and created greater wealth for a country, city, region, company, or individual to specialize in the good where it has comparative advantage, and trading that good for the other things that are needed. This is all that’s going on between the US and China at it’s heart. ... .... ....

At its heart China enjoys and absolute, not comparative advantage.

For Ricardo’s theory of comparative advantage to work, a country's labor, capital, and technology must not move offshore. This international immobility is necessary to prevent a business from seeking an absolute advantage by going abroad. His theory only works for such factors as geography and climate.

Ricardo assumed that factors such as patriotism would prevent investors from seeking absolute advantage abroad.
"Experience, however, shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connexions, and intrust himself with all his habits fixed, to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations"

Thanks for the thoughtful reply, but I disagree that China holds an absolute advantage, and that it is anything but transitory. The BCG research I referenced is the best collection of evidence that supports this belief. In fact, the migration of low-tech assembly work from China to other parts of southeast Asia has even made China the victim of it’s own stragegy, as has the reshoring of even things like call center functions, due to a variety of issues that go beyond the “absolute” cost advantage they enjoy.

It’s a fair debate, but I’ll leave it on this note: the essence of competitive (and comparative) advantage lies in understanding the source of VALUE in the eyes of the customer. Value elements often include much more than direct labor cost, and again the BCG research highlights which ones are significant in specific industries. And part of the value equation includes factors we CAN control, such as the regulatory environment, productivity, and business friendliness. Those who understand the new sources of opportunity will seek to do business in those states or regions that allow them to prosper and those who are not competitive will be blaming China for their problems 20 years from now.