Photograph here 6.27 Concern about the potential loss of manufacturing industry to developing countries fails to recognise the opportunities globalisation offers to open and competitive economies. The UK's task is to build a strong position from which to attack world markets. Our major competitors remain other G7 countries, not emerging Asian economies. Demand in the developing world, stimulated by Western investment, is creating new markets for our goods, even if most of the population remains poor. There is a rapidly growing middle class in India and China.
Labour costs are low in developing countries because productivity is low.
Although competitive wages are always important, firms in developed economies do not have to match wages in such economies. They need to have higher labour productivity. Developed economies import no more from low-cost economies now than a decade ago. For the OECD as a whole, imports from developing economies currently account for around 4 per cent of GDP, compared with 5 per cent in the early 1980s. At about 15 per cent, the proportion of UK imports from countries with wages 25 per cent or more below UK rates is the same as 20 years ago.