Regaining Competitiveness

Abstract

The economic success story of the Asian Tigers of Singapore, South Korea, Hong Kong, and Taiwan inspired several other nations and encouraged them to adopt strategies based on industrialization and exports. Globalization and free trade, meanwhile, enabled such states to export their products to the United State and Europe and other countries without difficulties. As the economies of the industrializing states were growing and labor productivity was rising, their markets were expanding and becoming more attractive to foreign investment. High profit margins, lower costs of production, lax environmental regulations, and easy access to foreign markets encouraged American and European corporations to invest in those emerging economies. Consequently, many multinational corporations began to relocate some of their production facilities to where labor is cheap and to establish homes away from home. As a consequence, the United States and Europe lost millions of manufacturing jobs and became less industrialized and thus less able to compete in domestic as well as in foreign markets. A large and growing trade deficit between the United States and China in particular caused tension between the two states to arise.