Okay, so what happens when the world finally runs out of dirt-cheap labor? Will all the U.S. companies that have moved their manufacturing facilities and jobs to other countries one day have no place to flee because no place else is cheap enough?

I suppose not. There are probably enough Third World and underdeveloped countries left — where labor is $5 or $2 a day or less, “bennies” are non-existent, and there are no EPA/OSHA equivalents — to enable this shell game to continue for a long, long time, all the while exporting more and more U.S. jobs overseas.

On a recent interminably boring flight from L.A. to Memphis, while trying to shield myself from all the germs radiating from the guy behind me who was hacking, coughing, and sneezing every five seconds, and being entertained by the piercing wails and screams of what must have been half the infant population of several states, I had an intermittent conversation with my seatmate, an importer/exporter based in the Far East, returning home for a few weeks.

Between his bouts of grogginess from two days-plus on airplanes, he talked about doing business in China and all the products he's having manufactured there for U.S. clients.

“I used to do a lot of business in Mexico,” he said. “Labor was cheap, the work was good, and transportation to the U.S. wasn't that big a deal. But Mexico priced itself out of the labor market, so now I'm operating mostly in China. Labor's cheap and plentiful, the quality of the work is good, and they're anxious to do business and get our dollars.”

Among the products he imports, he said, is a small Chinese-made tractor that's finding favor with weekend hobby “farmers” and with the lawn/garden set. “Even with all the shipping costs, it's significantly cheaper than U.S. or Japanese models,” he said. “There's not much of anything they can't make — cheaper than just about anybody in the world.”

Meantime, the Commerce Department was reporting the U.S. trade deficit for the first three months of this year at an annual rate of $367 billion. While that's down from last year's recession and 9/11 setback, the figure could end up higher as America's economy recovers and demand for imports rises. Except for March, when Japan edged ahead slightly, China has for the past two years been the country with which the United States has the biggest trade deficit ($5.6 billion in March). That number one status is likely to hold as the flood of Chinese imports into the United States continues. Other major deficits for the month were with Mexico, a record $3.46 billion, and Canada, $3.9 billion.

While the Bush administration continued to push for “fast track” authority to make trade deals, saying it will save consumers money by making cheaper products available, labor and environmental groups countered that it would result in even more U.S. job losses and reductions in wages as more people scramble for fewer, lower-paying jobs. They contend, too, that U.S. trade policy encourages sweatshop labor, exploitation of children, and environmental harm.

But hey, as long as it's cheap…


e-mail: hbrandon@primediabusiness.com.