Industrial Relocation: Update 2012

In June 2004 SEO Economic Research published the report Industrial Relocation: How Bad is it?, commissioned by the Stichting voor Industriebeleid en Communicatie (Foundation for Industrial Policy and Communication). The report was updated by SEO this autumn, again for the SIC. The relocation of production and employment continues to be a hot topic. How is the idea of industry rapidly relocating to low-wage countries panning out in 2012? To what extent is this idea supported by hard figures, and what are the economic consequences?

Just as in 2004, the idea of massive Dutch investment in Central and Eastern Europe or Asia is not supported by the figures. An increase in the added value of industry, with employment falling at the same time, points to increases in productivity and shifting patterns of consumption rather than problems due to industrial relocation. These problems occur when workers cannot find new jobs. The 2004 report set out the conditions for finding new jobs in terms of labour market flexibility, acquiring new knowledge and skills and exploiting comparative advantages, and there is no reason to view this any differently in 2012. The Dutch investment climate, the working population and the labour market are rated as ‘good’ internationally. But there is also room for improvement, in particular in the areas of policy certainty, creating a level playing field, focus on research and development, the shortage of technically trained workers, knowledge valorization and a labour market with the right degree of flexibility.

The figures in this report point to internationalization of the economy as a continuing trend, also – even particularly – in industry. International specialization is a source of trading advantages, and hence prosperity. Nonetheless, the areas for improvement mentioned above merit our full attention, particularly in an era of globalization. In that respect the conclusion of the 2004 report, that policy is best targeted at improving competitiveness and developing comparative advantages, remains valid, as globalization does not bring benefits of its own accord.