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we could use to become the camshaft leader in China。 As a result; we now have the 
best camshaft technology and a customer base both in China and the U。S。〃 

This is a very important point; because the general impression is that offshoring 
is a lose…lose proposition for American workers…something that was here went over 
there; and that is the end of the story。 The reality is more complicated。 
Most companies build offshore factories not simply to obtain cheaper labor for 
products they want to sell in America or Europe。 Another motivation is to serve that 
foreign market without having to worry about trade barriers and to gain a dominant 
foothold there…particularly a giant market like China's。 According to the U。S。 
Commerce Department; nearly 90 percent of the output from U。S。…owned offshore 
factories is sold to foreign consumers。 But this actually stimulates American exports。 
There is a variety of studies indicating that every dollar a company invests overseas 
in anoffshore factory yields additional exports for its home country;because roughly 


one…third of global trade today is within multinational companies。 It works the other 
way as well。 Even when production is moved offshore to save on wages; it is usually 
not all moved offshore。 According to a January 26; 2004; study by the Heritage 
Foundation; Job Creation and the Taxation of Foreign…Source Income; American 
companies that produce at home and abroad; for both the American market and China's; 
generate more than 21 percent of U。S。 economic output; produce 56 percent of U。S。 
exports; and employ three…fifths of all manufacturing employees; about 9 million 
workers。 So if General Motors builds a factory offshore in Shanghai; it also ends 
up creating jobs in America by exporting a lot of goods and services to its own factory 
in China and benefiting from lower parts costs in China for its factories in America。 
Finally; America is a beneficiary of the same phenomenon。 While much attention is 
paid to American companies going offshore to China; little attention is paid to the 
huge amount of offshore investment coming into America every year; because foreigners 
want access to American markets and labor just like we want access to theirs。 On 
September 25; 2003; DaimlerChrysler celebrated the tenth anniversary of its decision 
to build the first Mercedes…Benz passenger car factory outside Germany; in Tuscaloosa; 
Alabama; by announcing a 600 million plant expansion。 〃In Tuscaloosa we have 
impressively shown that we can produce a new production series with a new workforce 
in a new factory; 

and we have also demonstrated that it is possible to have vehicles successfully 'Made 
by Mercedes' outside of Germany;〃 Professor Jiirgen Hub…bert; the DaimlerChrysler 
Board of Management member responsible for the Mercedes Car Group; announced on the 
anniversary。 
Not surprisingly; ASIMCO will use its new camshaft operation in China to handle the 
raw material and rough machining operations; exporting semifinished products to its 
camshaft plant in America; where more skilled American workers can do the finished 
machining operations; which are most critical to quality。 In this way; ASIMCO's 
American customers receive the benefit of a China supply chain and at the same time 
have the comfort of dealing with a known; American supplier。 
The average wage of a high…skilled machinist in America is 3;000 to 4;000 a month。 
The average wage for a factory worker in China is about 150 a month。 In addition; 
ASIMCO is required to participate in a Chinese government…sponsored pension plan 
covering heath care; housing; and retirement benefits。 Between 35 and 45 percent of 
a Chinese worker's monthly wage goes directly to the local labor bureau to cover these 
benefits。 The fact that health insurance in China is so much cheaper…because of lower 
wages; much more limited health service offerings; and no malpractice 
suits…〃certainly makes China an attractive place to expand and add employees;〃 
explained Perkowski。 〃Anything which can be done to reduce a U。S。 company's liability 
for medical coverage would be a plus in keeping jobs in the U。S。〃 
By taking advantage of the flat world to collaborate this way… between onshore and 
offshore factories; and between high…wage; high…skilled American workers close to 
their market and low…wage Chinese workers close to theirs…said Perkowski; 〃we make 
our American company more competitive; soit is getting more orders and we are actually 


growing the business。 And that is what many in the U。S。 are missing when they talk 
about offshoring。 Since the acquisition; for example; we have doubled our business 
with Cummins; and our business with Caterpillar has grown significantly。 All of our 
customers are exposed to global competition and really need their supply base to the 
do the right thing as far as cost competitiveness。 They want to work with suppliers 
who un… 
125 
derstand the flat world。 When I went to visit our U。S。 customers to explain our 
strategy for the camshaft business; they were very positive about what we were doing; 
because they could see that we were aligning our business in a way that was going 
to enable them to be more competitive。〃 
This degree of collaboration has been possible only in the last couple of years。 〃We 
could not have done what we have done in China in 1983 or 1993;〃 said Perkowski。 〃Since 
1993; a number of things have come together。 For example; people always talk about 
how much the Internet has benefited the U。S。 The point I always make is that China 
has benefited even more。 What has held China back in the past was the inability of 
people outside China to get information about the country; and the inability of people 
inside China to get information about the rest of the world。 Prior to the Internet; 
the only way to close that information gap was travel。 Now you can stay home and do 
it with the Internet。 You could not operate our global supply chain without it。 We 
now just e…mail blueprints over the Internet…we don't even need FedEx。〃 
The advantages for manufacturing in China; for certain industries; are becoming 
overwhelming; added Perkowski; and cannot be ignored。 Either you get flat or you'll 
be flattened by China。 〃If you are sitting in the U。S。 and don't figure out how to 
get into China;〃 he said; 〃in ten or fifteen years from now you will not be a global 
leader。〃 
Now that China is in the WTO; a lot of traditional; slow; inefficient; and protected 
sectors of the Chinese economy are being exposed to some withering global 
competition…something received as warmly in Canton; China; as in Canton; Ohio。 Had 
the Chinese government put WTO membership to a popular vote; 〃it never would have 
passed;〃 said PatPowers; whoheaded the U。S。…China Business Council office inBeijing 
during the WTO accession。 A key reason why China's leadership sought WTO membership 
was to use it as a clubto force China's bureaucracy to modernize and take down internal 
regulatory walls and pockets for arbitrary decision making。 China's leadership 〃knew 
that 
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China had to integrate globally and that many of their existing institutions would 
simply not change and reform; and so they used the WTO as leverage against their own 
bureaucracy。 And for the last two and half years they've been slugging it out。〃 
Over time; adherence to WTO standards will make China's economy even flatter and more 
of a flattener globally。 But this transition will not be easy; and the chances of 
a political or economic crackup that disrupts or slows this process are not 
insignificant。 But even if China implements all the WTO reforms; it won't be able 
to rest。 It will soon be reaching a point where its ambitions for economic growth 


will require more political reform。 China will never root out corruption without a 
free press and active civil society institutions。 It can never really become efficient 
without a more codified rule of law。 It will never be able to deal with the inevitable 
downturns in its economy without a more open political system that allows people to 
vent their grievances。 To put it another way; Chi

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