Delocalization - SpeedyLook encyclopedia

Definition of the concept

To delocalize, it is to separate the places (countries) from manufacture or transformation of the goods of their places (or country) of consumption; it is to move the productive activity of the companies towards foreign countries. The production is delocalized while being transported apart from national territory; by doing this, it offers its employment to the residents of the host countries. This is why, the delocalizations are advanced to explain, partly, the rise of unemployment in the majority of the developed countries. For the contractor, the delocalization answers a constraint of management: to produce where it is the least expensive and to sell where there is purchasing power.

It is necessary however to make the distinction between two types of delocalization. Delocalization in a strict sense, that which consists in the abandonment of a national production activity, the transfer of this activity towards an production unit abroad and the importation of the production carried out abroad to serve the national market and the space redeployment of the economic center of gravity of the groups, which is largely related to the dynamics of the markets and the organization.

The delocalization is an old practice, but the lowering of the costs of transport, the improvement of the techniques of communication as well as the universalization of the markets --by imposing the fall of the customs tariffs (GATT then OMC) and freedom of movement of the capital, while freedom of movement of the people is limited much-- brought a renewal of this practice. This one:

pushes the countries, areas and agglomerations with policies of relaunching improving their economic attractivity and incentive with creation of new activities to replace the economic “vacuum”;

encourages with very decentralized forms of management, for example the system of the Entreprise wide, making it possible to coordinate without engaging of large capital the best sources of products and competences in the various points of planet and to be in addition present on the economic markets most carrying;

armature contrary temptation to the Protectionism, which is likely to be against-productive, while isolating from world economic flows and by reducing the Purchasing power because of absence of competition which involves high internal prices for lack of efforts of improvement and creation of local monopoly rent, decreasing still more the Compétitivité.

It is however in the history of after Second world war of the countries which benefitted from an opportunist protectionism like the Japan or the dragons of Asia (Korea, Taiwan, HongKong, Singapore). In the case of Japan, of Korea and Taiwan, this strategy allowed a particularly fast rise of the standard of living of the population.

With the economic plan

With the beginning of the year 1990, statistical bringings together were carried out between the figures of the employment lost since the beginning of the Seventies in the manufacturing industry of the the United States and Europe, and the figures of the jobs created in these same industries in Southeast Asia. The convergence of these two statistics (6,5 million in both cases) is disconcerting but it is known that other factors influenced the disindustrialization of the rich countries: the robotization and tertiarisation of the economy for example.

One can reproach the media and the policies to feed from the polemics on particular cases and to give the impression which the poor countries steal, by a unfair Social dumping , uses of the rich countries. Studies show that actually, the nature and the causes of the delocalizations are not so simple. In 1997, the National Office off Economic Research published an investigation devoted to the large American firms highlighting that these companies had reduced the number of interior employment well, but that job creations which they in parallel had operated abroad had more benefitted other rich countries that with the poor countries.

It is notable that the economic plan the delocalizations allow:

to lower the costs of certain intermediate consumptions and thus to increase the competitiveness of the companies resident.

to lower the price of the consumer goods, which supports the purchasing power of the households. At the beginning of the 19th century, David Ricardo ( Test on the influence of the low prices of corn on the profits of the capital , 1815) pointed out that the fall in the prices of cereals permitted by their production abroad will allow to reduce the salary costs and thus to support industry.

With the social plan

The delocalization involves job creations in the countries of establishment (example in France of the Toyota factory to Valencians). However it creates also Licenciement S, and job losses indirect, difficult to compensate in the countries presenting of the competitive weaknesses. The threat of delocalizations can also be a means of pressure on the work conditions (daily time amplitude, night-work, duration of paid vacations, social security, age and rate of retirement) when those pose an economic problem. They thus are often badly lived by the employees of the companies concerned.

Population and sectors concerned

In the United States, work and of Jagdish Bhagwati (and Al ) sought to show that the delocalizations had little chance to threaten employment.

the uses of services account for 70% of total employment in this country (and in the economies of the rich countries in general), and very little of them are likely to be delocalized because they suppose a proximity of the producers and consumers.
the qualified jobs are not threatened yet by competition of the poor countries because of the delay of these keeping countries of low level of schooling in the higher learning.
the delocalizations of certain stages of the production process make it possible to stimulate the competitiveness of the companies resident, which is source of growth and employment. According to its authors this profit of competitiveness would allow a profit of growth from approximately 0,3% of GDP the the United States.

In France a report/ratio of the Economic Council of Analysis the same year (Jean-Herve Lorenzi and Lionel Fontagne, Disindustrialization and delocalizations ) arrives at similar conclusions.

In Richness of the world, poverties of the nations (1997), Daniel Cohen estimates that the population of the rich countries put in competition with the poor workers of country is about 2 or 3% only. This figure can be close to a study of INSEE: over the period 1995-2001 “it is: 13500 industrial employment which “would have been delocalized” on average each year, is 0,35% of the total of the industrial employment. A little more half of delocalized employment would have been it bound for the developed countries, in particular of the countries bordering on France and the United States. ”

It should however be noticed that the branches of industry concerned with the delocalizations are increasingly numerous as that recent of certain services attests it.

The delocalization of the services is related to the availability of important infrastructures of communication, consequence of the development of telecommunication and Internet at the end of the years 1990. Following the computerization of many services, it was possible to move the place of production of the services towards countries with low wages without that not assigning the customer.

India is the profit first of this tendency because it has an important skilled labor and anglophone. Services of technical assistance are for examples provided to the American customers without those not knowing the nationality of their interlocutor. The development of computing industry in India, in the town of Bangalore for example, was accelerated by the establishment of the American large companies. In France, companies such as Axa or the General society delocalized their accountancy in India, British Airways and Swissair their activity of reservation…

Delocalizations and oil peak

The delocalizations the purpose of which are to produce in a country with the weaker production costs (such as China) of the products in order to export them in another zone or exists the main market for this product (such as Europe) are tributary, to be economically viable, of very weak costs of transport related to a very cheap oil. But with the increase in the oil price related to the rarefaction of this resources (see oil Peak), the costs of transport previously marginal become significant and the profitability of such a step is reduced. Certain economists consider that will lead to a relocalization of certain industries (those concerning of the weighty products such as the tools) which in the past left these territories.

Delocalization by country

France

According to a report/ratio of the DREE (2002), the French companies which have more Filiale abroad employ approximately (???) million people. In the U.E with 25, it is the Poland which receives the most French subsidiary companies (153 813 paid).

That generally translated a policy of establishment of long time on the overseas markets, as well on the level of the resources as of the outlets, allowing to reinforce these French companies within the world framework, rather as of delocalizations. It will be also noted that the overseas investments in France are on their side creators of employment and reinforce economic fabric and technological country.

In addition, the delocalizations observed in the trades of service, seem to pursue goals bound much more to aspects of reorganization and optimization of the resources of the companies, access to new markets, or inalienable human resources on the national territory, that with considerations of reduction of the labor costs. Work of the Committee of supply of the Senate could estimate the potential of delocalization of these trades of service at 202.000 employment between 2006 and 2010. (Report/ratio of study on the potential of delocalization of the trades of services, available on the site of the Committee of supply of the Senate, carried out by cabinet KATALYSE)

See too

Town and country planning
economy of the territories
economic Externalisation
Geography
Localization
Offshoring

External references

Brunel report/ratio on the delocalizations of France (2006)

Report/ratio of study on the potential of delocalization of the trades of services, available on the site of the Committee of supply of the Senate, carried out by cabinet KATALYSE

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