- 18 Mar, 2021
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Law
2. Lower labour costs. If labour costs are at a comparative disadvantage in the
home market then the organisation may locate production in a low cost economy.
In 2012 the Office for National Statistics (ONS) reported hourly rates in the UK
as £14.56 (US$ 23.30) per hour. Average US hourly rates are US$24.10. These
rates are multiples of average rates in India (US$2.90) or Philippines (US$1.37).
As emerging economies are also raising their educational performance levels
then quality consumer services such as IT call centres being based in India (for
example) become increasingly attractive (www.statistics.gov.uk).
3. Proximity to raw materials. Manufacturing costs can be contained by reducing
transport costs by co-locating plants with sources of raw materials. For example,
Australia is enjoying this advantage with its reserves of coal and mineral ores.
4. Subsidies to help indigenous industries. State support for the home market can
obviate or cancel the comparative advantage enjoyed by overseas competitors.
Trading consortia such as the EU aim to eliminate subsidies by individual
members to their home markets in order to maintain a fair trading environment
and avoid comparative advantage through state subsidy State su