Flattener 6 – Offshoring

• The difference between offshoring and outsourcing is that in offshoring, a company places an entire factory in another country rather than just sending some work to another country. On December 11, 2001 China joined the World Trade Organization. China therefore assured foreign companies that they would be protected by international law and standard business practices. This meant cheaper labor, lower taxes, subsidized energy, and lower health-care costs for companies to build factories offshore.
• Cheap imports saved U.S. consumers $600 billion from 1995 to 2005 and have saved U.S. manufacturers untold billions in cheaper parts for their products. This has helped the Federal Reserve to hold down interest rates which allows more people to purchase and refinance homes, and provides more capital for businesses to invest. Factories in a giant market like China can also sell to the Chinese without having to export. (Keep in mind this was written prior to the recent housing bubble in the US.)

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