We can't blame companies for Far East cost cuts

HANDS up anybody who has not sought out a bargain in the electrical discount shops, or maybe remortgaged the house to cash in on a lower rate of interest. What about those who have accepted the telephone call offering lower car insurance?

How many of those are among the callers to the radio phone-in shows last week threatening to boycott companies moving jobs to India and China?

Put simply, we cannot have it both ways. Low-cost goods and services mean companies have to cut the cost of producing them. Right now, that points to India and China. If we want to put a halt to the trend, we’ll have to accept higher prices. But, of course, we won’t.

What is also inevitable is that the trickle is turning into a flood. Last week, Dawson International said it would move most of its cashmere fibre processing to China. Cadence Design Systems is training thousands of engineers in the same country to do work which was once intended for Livingston.

Add in Norwich Union’s decision to shift another 2,300 jobs to India and we can see how the drift of work eastwards is picking up pace, all in the name of cutting prices and remaining competitive.

To a certain extent we have been complicit in this process. Over the past 10 years a consensus has emerged in western Europe which has been embraced in Scotland: that it is pointless to try to stop low-skilled manufacturing jobs from moving to low wage economies in Asia.

Instead, we need to concentrate on building an educated workforce to do high-value work and focus on niche areas where we can add value.

So when big companies such as NEC and Motorola closed factories in Silicon Glen, the response from politicians and Scottish Enterprise was muted. It was all bound to happen anyway.

But the process did not end with low-value manufacturing. Aside from cashmere and electronics, financial services jobs have moved east by the thousand - first back office operations and now customer services. Accounts and legal services are not far behind.

Trade secretary Patricia Hewitt was lambasted on Friday when she said that talk of the call centre industry being in terminal decline was a "myth". To some extent she may be right, because new jobs are also being created in the UK. But the balance of growth is undeniably in the other direction.

The Royal Bank of Scotland appears to be committed to retaining customer service jobs in Britain. But Lloyds TSB, which owns Scottish Widows, and Abbey, which has a strong presence here, have set up operations in the subcontinent.

Dawson International is part of the luxury goods sector which was meant to be immune from the process. But faced with mounting losses, the company cut its cloth and moved offshore.

Cadence’s massive training programme in China points to another problem with the consensus. Europeans have no more innate intelligence than Asians. If Scots can be taught to do high value work, so can Chinese people, and at lower cost. If computer chips are made in China, then it makes sense to base the designers there as well.

If the process continues, the only money-earning sectors left will be tourism, in which we already have a deficit, and whisky distilling. Even genuine Scotch whisky can be bottled overseas. Retailing and construction, which are keeping the economy out of recession at present, cannot continue if the economy falters.

The process will not be inexorable. Wages will rise in India and China, reducing their relative advantage over time. Our historic strengths in financial services and education will give us some room to breathe. It will be up to Jim Wallace and Jack Perry, our new enterprise team, to work out how to use that breathing space.

On track of good sense

AT LAST commuters to one of Scotland’s biggest business parks will get a rail station and 20,000 people, theoretically, can leave their cars at home. Services will link the new Edinburgh Park station with Waverley, Haymarket, Bathgate, Dunblane, Newcraighall and Brunstane.

The station, according to the city council, will play a hugely significant role in the capital’s economy. It should also achieve the other obvious target of keeping cars off the road.

It is a shame that it has taken more than five years to resolve rows over ownership for the first train to arrive at Edinburgh Park. Tomorrow, Jack McConnell, the First Minister, will cut the ribbon that officially opens the station and marks an end to the needless delays.

Now Edinburgh will be able to boast the opening of three stations in 18 months - a rare accolade in a city that is struggling to solve the transport logjam.

With trams on the agenda, there is room for optimism that at long last the public authorities see that bullying motorists out of their cars and on to public transport is not the answer unless good public transport services are made available in the first place.