Making a success of globalization is a key challenge for business leaders and politicians in Europe.
UK Prime Minister David Cameron said at the World Economic Forum’s Annual Meeting at Davos-Klosters, Switzerland. The emerging trend to achieve this is reshoring jobs, he added.
Re-shoring means the opposite of offshoring. Offshoring jobs is the practice of outsourcing work, often abroad, in order to take advantage of cheaper labor costs and lower taxes. Re-shoring means bringing jobs back home.
Companies have become increasingly concerned about operational challenges that have resulted from offshoring, as well as falls in productivity and quality.
Increases in wages in countries where the work was outsourced, improvements in domestic energy production as is occurring in the US, government incentives, and trends towards having production nearer to customers, have encouraged reshoring.
Shale gas can facilitate reshoring
“There is a chance for Britain to become the reshore nation. Europe needs to act now to seize the opportunities of reshoring.”
Cameron believes the major factor pushing reshoring in the UK will be the development of shale gas, which will significantly bring down domestic energy costs.
Rumors have been growing for years that the West has had it and that it is facing an unstoppable decline. Cameron said “It is the same dystopian vision. The East wins while the West loses; the workers lose while the machines win. I don’t believe it has to be this way.”
The West cannot afford to be “starry eyed” about globalization, he cautioned. There is an emerging trend of jobs that had been sent from West to East, now moving in the opposite direction, from East to West. Cameron explained “It’s time to bring the benefits of globalization home to ensure the benefits are felt by hard-working people in terms of security, stability and peace of mind.”
Many UK and US companies bringing jobs back home
A recent survey found that more than 10% of small and medium-sized businesses in the UK have brought some of their production back to the UK over the last twelve months.
More than 30% of US-based manufacturing companies are currently planning to bring production facilities back to the United States from China, according to a survey, Cameron pointed out.
The development of shale gas is a key factor in reshoring in the US. Cameron said “This is flooring US energy prices with billions of dollars of energy cost savings predicted over the next decade.”
What is happening in the US could easily occur in the UK and the rest of Europe.
“Right now economies in Europe have a unique opportunity to accelerate this new trend of jobs coming back home.”
Europe needs a good business environment and cheap energy
Before Europe is able to benefit from reshoring, two key arguments need to be settled, otherwise they risk undermining competitiveness, Cameron explained:
- The overall business environment – Europe needs macroeconomic stability. Countries need to open up free trade, have their deficits and debts under control, and ensure strong finance. Cameron said Europe needs to have “an unashamedly pro-business regulatory environment. There are still people who think the key to success is ever greater social protections and more regulation.”
- Cheap and reliable energy sources – including shale gas, nuclear and renewables. Cameron said “We need to explore the opportunity offered by shale gas.” He acknowledged that the public need reassurances regarding the environmental dangers related to shale gas, as well as the needs for the right regulations.
If the countries within the EU impose unjustified, premature or burdensome regulations on shale gas exploration in Europe, investors will rapidly head to other parts of the world. Cameron warned “Oil and gas will still be plentifully produced, but Europe will be dry.”
When asked about the UK’s relationship with the EU, Cameron said there is “enormous unhappiness and public disquiet” about the European Union. “Let’s reform the EU and reform the UK’s relationship with the EU. It is doable, deliverable and winnable for Britain to stay in a reformed EU,” he said.