May 2004 
Volume 03, Issue 1 
Special Features

Global economic integration




In the upcoming decades, look for even stronger and more global economic linkages as capital, goods and services continue to flow across borders—enabled even further by advancements in communications and information technology.

Partly from this integration and the changes it’s fostering—and partly by demographic trends—several nations will rise in global economic importance. According to a recent study by Goldman Sachs Group, the growth generated in coming decades by the large developing countries and the so-called “BRIC economies”—Brazil, Russia, India and China—is likely to result in their becoming the world’s largest economies along with Japan and the United States by 2050.

“The near term may not be as profitable to move into some of these markets,” said Deborah Westphal of Toffler Associates, “but you may need to do it for long-term viability.”

Stanley Roth, Boeing International Relations vice president for Asia, agreed that we will see new opportunities for growth in the emerging economies in the Asia-Pacific region. Those who focus solely on giants such as China and Japan to the exclusion of Southeast Asian countries such as Malaysia, Indonesia, Thailand and Vietnam—which will have an aggregate population approaching 500 million in the coming years—will do so to their own disadvantage, he said. His forecast: “It is quite likely that this region will resume its previous high growth rates sometime during the next 20 to 25 years.”

Analysts said they see world economies linking at a faster rate, meaning that corporations are almost required to have a worldwide web of operations to compete. This observation gets into the often-volatile discussion of companies maintaining operations outside their home countries—a topic that’s become a focal point of the upcoming U.S. presidential election.

“The only thing we can count on is that the current environment won’t remain the same,” Roth said. “Had we asked this question 20 years ago, we probably would have been focusing on Korea, Taiwan or Hong Kong.” But as these economies developed and wages rose, opportunities emerged in less costly environments such as China and India, Roth said. But count on these economies to develop over the next 20 to 25 years, which will make as yet–unspecified other markets more competitive.

In light of the combined impact of continued population growth and enhanced educational opportunities in the Asia-Pacific region, “it is all but inevitable to assume that at least some countries in the region will emerge as high-tech centers over the next 20 to 25 years,” Roth said. He pointed out that China alone already is graduating about 100,000 engineers each year, compared to the estimated 92,400 engineers the U.S. Department of Education and National Center for Education Statistics said graduate annually from all levels in the United States.

“Clearly, American companies that do not engage in efforts to find the lowest-cost, highest-quality producers will be at a competitive disadvantage,” said Craig Johnstone, Boeing International Relations vice president for Europe, whether a U.S.-based multinational company is looking at labor or production costs. “In some cases, it’s job creation overseas rather than moving jobs overseas. Sometimes, your offshoring gives you the opportunity not to move U.S. jobs overseas, but to keep U.S. jobs. That tends to be the rule rather than the exception.”

Because of the interconnectivity of the world’s economies today, Johnstone said, the work Boeing and other global companies place in their foreign customers’ home countries—especially through supplier partnerships—improves their ability to sell to these countries.

“It may not be a legal requirement,” he said, “but it helps to get the job done. It’s also important to be able to access lower costs” that may be found in non-U.S. countries. “You will maintain a core of jobs in your company and hence, in the United States.

“If you have products at uncompetitive prices, no one has a job.”


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