why Japanese, German, and Korean automakers in North America have not concentrated their production in Mexico, despite lower operating costs and a free trade agreement with the United States,” while the United States’ own auto giants, who are evidently less patriotic than U.S. consumers, relocate more and more of their production to the other side of the Rio Grande.30
An alternative and widely used way to estimate the magnitude of outsourcing is to measure the share of intra-firm trade in overall international trade. This is the antithesis of the IMF’s approach, since it captures both intermediate inputs and finished goods, but it has no place for the increasingly important arm’s-length relations between Northern firms and their Southern suppliers.31 Peter Dicken comments that “unfortunately there are no comprehensive and reliable statistics on intra-firm trade. The ballpark figure is that approximately one-third of total world trade is intra-firm although … that could well be a substantial underestimate.”32 Princeton economists Gene Grossman and Esteban Rossi-Hansberg are more helpful, reporting that, “in 2005, related party [i.e. intra-firm] trade accounted for 47 percent of U.S. imports…. This fraction has risen only modestly since 1992, when it was already 45 percent.”33 This modest rise, however, conceals a dramatic reorientation of this trade toward low-wage economies: “Imports from related parties [i.e. subsidiaries] accounted for 27 percent of total U.S. imports from Korea in 1992, and 11 percent of total U.S. imports from China. By 2005, these figures had risen to 58 percent and 26 percent, respectively.”
Reviewing these attempts to quantify production outsourcing, William Milberg has pointed out that “most attempts to measure the magnitude of the phenomenon of vertical disintegration have captured only parts of the process. Some analysts focus on intra-firm imports and others on the import of intermediate goods whether these are intra-firm or arm’s-length.”34 However, the total outsourcing picture is captured by one set of comprehensive and readily available data—manufactured exports from low-wage nations to imperialist nations as a whole. Milberg and Winkler, in a study of the impact of the crisis on global production networks, explain the simple, powerful logic behind this approach:
Standard offshoring measures capture only trade inputs … [yet] much of the import activity in global supply chains is in fully finished goods. In fact, the purpose of corporate offshoring, whether at arm’s length or through foreign subsidiaries, is precisely to allow the corporation to focus on its “core competence,” while leaving other aspects of the process, often including production, to others. Many “manufacturing” firms now do not manufacture anything at all. They provide product and brand design, marketing, supply chain logistics, and financial management services. Thus, an alternative proxy for offshoring may simply be imports from developing countries.35
According to this broad measure of goods offshoring, “developing-country imports constitute over half of total imports by Japan (68 percent) and the United States (54 percent), while the European countries range from 23 percent in the United Kingdom to only 13 percent in Denmark.”36 This must be qualified in two ways. First, imports of raw materials and foodstuffs from developing countries reflect the traditional, pre-neoliberal pattern of North–South trade, and do not in general correspond to cheap labor-seeking outsourcing. Second, a small but significant fraction of developing nations’ manufactured exports arise not from outsourcing relationships controlled by imperialist leading firms but from home-grown industrial development. Brazil’s aerospace industry and China’s solar panel and wind-turbine industries are examples of this. But, as we shall see in more detail in the next chapter that discusses the structure of world trade, these higher value-added exports form a small part of overall South–North trade. With these caveats, then, we can agree with Milberg and Winkler and regard manufactured imports by imperialist countries from low-wage countries as a whole to be a composite of diverse outsourcing and offshoring relationships, manifested in different types of global value chains. Developing countries’ share of imperialist nations’ manufactured imports have rocketed since 1980, more than tripling their share of a cake that itself quadrupled in the subsequent three decades. In a study published by UNCTAD in 2013, Rashmi Banga found that 67 percent of the total value-added generated in global value chains is captured by firms based in rich nations.37
Transnational corporations, the majority of which are headquartered in imperialist countries and owned by capitalists resident in those countries, are the supreme drivers of the globalization of production. Their connection with production processes in low-wage countries takes two basic forms: an “in-house” relation between the parent company and its overseas subsidiary, as in FDI, or an “arm’s-length” relation with formally independent suppliers—an important distinction that will be examined in the next chapter. Its diverse forms, problems of definition, and non-availability of data mean that obtaining a precise measurement of the magnitude of outsourcing is fraught with difficulties. Nevertheless, UNCTAD estimates that “about 80 percent of global trade (in terms of gross exports) is linked to the international production networks of TNCs.”38 The extent of this transformation is indicated by UNCTAD’s 2013 World Investment Report, which estimates that “about 60 percent of global trade … consists of trade in intermediate goods and services that are incorporated at various stages in the production process of goods and services for final consumption.”39
In conclusion, South-North (S-N) export of manufactured goods as a whole must be thought of not so much as trade but as an expression of the globalization of production, and this in turn must be seen not as a technical rearrangement of machinery and other inputs, but as an evolution of a social relation, namely the relation of exploitation between capital and labor. International competition between firms to increase profits, market share, and shareholder value continues, but the fate of each worker is no longer tied to the fortunes of her/his employer; on the contrary, the employers that survive are those who most aggressively substitute their own employees with cheaper foreign labor.
The production process can be thought of as a sequence or choreography of tasks, of different concrete labors, in which “task” means a production task; as the labor expended in the production of commodities, “industry” is where this takes place. A striking feature of neoliberal globalization of production is the outsourcing of individual segments and links of production processes, leading analysts to talk of the fragmentation of production, or “slicing up the value chain,” as Paul Krugman described it in a much-commented-upon article.40 The old conception of North-South trade of raw materials for finished goods sorely needs updating. Baldwin’s notion of “task trading” captures a change in the nature of global competition, “which used to be primarily between firms and sectors in different nations, [but] now occurs between individual workers performing similar tasks in different nations.”41 This manifests an evolution of the capital-labor relation, which increasingly takes the form of a relation between Northern capital and Southern labor. Before the transformations of the neoliberal era, when competition consisted of firms producing different final goods, the relative wages and security of employment of workers in imperialist countries was dependent on their employer’s defense of market share and conditioned by the threat of redundancy resulting from the introduction of labor-saving technology. Before the neoliberal era the more successful and dominant the TNC, the greater the number of direct employees it concentrated in domestic factories. “Task trading” signifies that employers now have an alternative way of making their employees redundant, an alternative way of cutting production costs, by outsourcing individual tasks, that is, jobs, to where wages are significantly lower. Now the successful TNC is the one that has outsourced production to low-wage countries and does as little as possible itself. Apple has replaced GM in terms of market capitalization by going much further down the road that GM itself is traveling. Competition between workers is therefore sharpening and becoming more direct, and is less and less a simple function of their firm’s competitiveness.
EXPORT-ORIENTED INDUSTRIALIZATION: WIDELY SPREAD OR NARROWLY CONCENTRATED?
For nearly half a century, export-oriented industrialization has been the only
