In examining the pros and cons of the outsourcing of products and the impact they have will be covered using as much information as possible to give a clear presentation of the facts. One pro-can be seen in the cost savings to the United States citizens in regards to the costs of Chinese imported products. The cons can be seen in the risks of doing business with the companies. Kathie Canning states in the Private Label Buyer 2008 article, "Risky business: U.S. retailers and manufacturers need to weigh the pros and cons carefully before doing business with China," "In 2007, Chinese exporters of animal ingredients deliberately laced their products with melamine. Scores of U.S. pets became ill or even died after ingesting tainted food products. The ingredient turned up in both private label and national brand offerings across the country." This unfortunately is not the end of the story. Toys meant to be enjoyed by millions of United States children and had been produced in China had to be recalled due to the products being contaminated with lead paint or contained other safety related conditions (Canning, 2008). These are problems that cannot be ignored.
Though China has experienced enormous success in enticing United States companies to conduct business with them due to the low costs, some of that may soon be reversed. Increased costs in energy, transportation, raw materials, and labor rates may put a damper on the cost efficiency experienced in the past. Canning (2008) quotes Gavin Kahn, president of China Sourcing LTD., Philadelphia, as saying,
"In the past six months, costs in China have increased more than they have probably in the [previous] 20 years," he maintains. "I feel that trend is going to continue. One has to work out the base point as the reference point ... But I think the days when China products are 50% lower than the world market price are going to be fewer and fewer."
Competition will be better for the rest of the world to maintain a better competitive edge.
Quality and safety areas are definite causes for concern in regards to purchasing Chinese imported products. The problem with quality control and safety are being addressed by the Chinese through implementation of the CIQ or the Entry-Exit Inspection and Quarantine of the People's Republic of China (Canning, 2008). Regional offices can inspect any factory and can determine the shipment status of the goods produced. Canning quotes Nancy Chang, vice president for Torrance, Calif.-based Golden Beach Inc. As saying,
"These were loosely controlled in the past. This is a very specific measure. We've actually seen this [enforced] because some of our shipment would be delayed for inspection. But despite the stepped-up efforts of the Chinese government, sub-par -- and even dangerous -- products still can slip through the cracks."
Chinese factories are being run by some people with little or no previous manufacturing experience. This leads to areas of neglect and poor training by the management of the company.
What do other sources say about the outsourcing and its effects on the United States? In the Wisconsin State Journal on March 31, 2004 article, "The Delicate Balance of Shipping out Jobs Pros and Cons of Outsourcing," Newman proclaims, "Outsourcing can be a good thing for American companies, but too much of it, and the nation's economic base will crumble, an outsourcing expert warned a Madison business group Tuesday." Newman next quotes the U.S. Treasury Secretary John Snow, serving in role in 2004, as saying, "It's one aspect of trade and there can't be any doubt about the fact that trade makes ... America strong." Similar comments have since been retracted as being insensitive regarding the loss of jobs in the United States.
The 87-year-old company that produces the much loved Radio Flyer wagon for children closed its factory in Chicago and moved production of the wagon to China in 2004 (Newman 2004). This resulted in the loss of 45 jobs. Analysts predict that the number of service related job that will be moved overseas to be approximately 588,000 by the year 2005 and will be an major increase from the 100,000 in 2000. The risk is the loss of these companies from our job amounts and the money that fuels our economic structure. Bob London of GlobalQuota, a Stoughton consulting firm, told a Madison, Wisconsin business group, "If we're not doing the work here, we lose something of the infrastructure," London said. "When we lose our infrastructure, we become vulnerable. We don't control our trade -- China controls our trade" (Newman 2004). The loss of economic stability in the United States job markets will have adverse effects on people maintaining and finding employment. In return, the loss of jobs will result in less products being purchased and again the economy will be affected.
The question regarding the security of the region and the world remains one that has to be observed. Chinese rulers seem to be intent on building up and modernizing their military forces through dealings with the Russians in addition to wealth. Sharif Shuja, (1998), in the article, "China in Search of a Dominant Role" proclaims,
"China's large military budget and its March 1997 defense technological modernization program with Russia would make China more powerful. Russia agreed to sell China two squadrons of the advanced SU-27 aircraft which should increase China's strike power significantly. Similarly, China's capacity to project force at sea has been augmented by the purchase of 10-12 kilo class submarines from Russia."
This is cause for alarm by the United States and the bordering countries of China in relation to the motives of the Chinese Communist Party; but as stated earlier, the civil unrest in the country may eventually lead to a more democratic state of the country.
The people of China number in excess of 1.1 billion, China is a permanent member of the United Nations Security Council, and if China can become more trustworthy with its Pacific neighbors, China could stand to one day lead the Asian-Pacific Economic Co-operative (APEC) (Sharif Shuja, 1998). This standing and the desires of China has lead to the establishment of Chinese foreign policy 'to establish good neighborly relations with neighboring countries' according to Shuja. This would rule out Chinese aggression except in the area of Taiwan, which the Chinese believe belongs to the nation of China.
Though still a situation needing to be explored and watched, the Chinese stand to lose a lot if they were to get aggressive or show military action against any neighboring countries or the United States.
China will be a superpower without any doubt. They control a large part of the worlds manufacturing needs and capabilities and already have made enormous strides in the last decade to establish itself as a world superpower. The Chinese continue to increase the quality and safety of their products but high energy costs may result in a slowdown of Chinas lower cost savings.
Through outsourcing of goods from the United States to China, we have allowed the Chinese to gain or surpass the United States in many areas. The costs have had both up and down sides. The loss of jobs and status being on the downside but the lower costs of products is the upside. Products with low quality and tainted foods are a risk to other countries and cannot be taken lightly.
The other factor in the situation is the increased military power within the Communist Party of China. They are fast catching up the United States in terms of military might and could pose a threat to neighboring countries, the United States, or our allies. The only hope or alleviating factor to the threat is if the country continues to move toward democracy.
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Canning, Kathie. "Risky business: U.S. retailers and manufacturers need to weigh the pros and cons carefully before doing business with China.(Trend Watch: CHINA EXPORTS)." Private Label Buyer. BNP Media. 2008. Retrieved April 29, 2010 from HighBeam Research: http://www.highbeam.com/doc/1G1-177551987.html
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