The Global Factory

Since the early 1960s exports of manufactures from developing countries have grown rapidly. Widening gaps between the wages of rich and poor countries, coupled with dramatic declines in transportation costs and increased technological capabilities, led to this growth. Production of labor-intensive goods in newly industrializing economies became a significant factor in work markets. Industrial country firms responded to this situation by integrating production processes were transferred abroad to countries with an abundance of cheap labor, while technologically advanced components were supplied at home. In this book the authors evaluate the positive and negative aspects of foreign assembly and suggest ways in which it may develop and affect the future of North-South relations. They examine in detail the U.S. semiconductor industry, the first to go abroad on a large scale. They also chart the development of the semiconductor industries of Western Europe and Japan, and show the strengths and weaknesses of the various policy alternatives available in this rapidly growing, highly competitive industry. In other chapters they present case studies of the assembly industries in Mexico, Haiti, and Colombia. Mexico, which shares a 2,000-mile border with the United States, is the most important partner of the United States in assembly activities abroad. Haiti, one of the poorest countries in the world, has received a strong economic stimulus from assembly. The explosive growth of Colombian assembly for the U.S. market came as that country rose to be the fifth largest industrial producer in Latin America. The book concludes with an overview of the domestic political, social, and economic effects of the reorganization of industry abroad and a summary of the policy implications, both for the United States and for the developing countries that are its manufacturing partners.

Joseph Grunwald, a former senior fellow in the Brookings Foreign Policy Studies program, is now president of the Institute of the Americas at the University of California—San Diego.

Kenneth Flamm is a research associate in the Brookings Foreign Policy Studies program.