Study Of The Export Commodity Structure Under The Influence Of Labor Cost

In November 2001, China formally joined the World Trade Organization. By taking advantage of its rich and cheaper labor force, and under the export-oriented economic strategy, China has exported large quantities of labor-intensive products; meanwhile China’s GDP has maintained rapid growth. However, with the development of social economy and the change of population age distribution, the overall social wage level has been greatly improved and the cheaper labor is no longer as cheap. The labor cost advantage of foreign trade enterprises is weakened. The added value of traditional processing trade can be very low, which is at the low end of the international value chain, and it’s unsustainable. After the government working report of 2014, in which the goals of “steady growth” and “structural adjustment” were brought up, in the 2015 government working report Premier Li Keqiang claimed that we should “ promote the transformation and upgrading of foreign trade”, which means to foster new competitive advantages in international trade and to reform the old processing trade model.Theoretically speaking, the impact of labor cost on the export commodity structure is reflected in the impact of labor cost through the comparative advantage, which determines the trade pattern between different countries. From the static comparative advantage view, trade pattern has a lot to do with resource advantage. From the dynamic comparative advantage, rising labor cost can has a forced effect on the industrial upgrade. High labor cost contributes to intensive economic growth instead of extensive economic growth. What’s more, changing comparative advantage in labor cost can lead to international industrial transfer, for which the East Asia economic development of flying goose model is a typical example, which embodies the decisive role of changes of labor cost advantage, capital and technology advantages on industrial structural and thus, export commodity structure.This paper empirically analyses the relationship between labor cost and the structure of export commodities in Guangdong province. For more than 10 years after joining the WTO, there is a co-integration relationship between labor cost in form of average wage and the proportion of labor-intensive goods in all export commodities. With the rise of social average wages, the proportion of labor-intensive goods declined. From this point of view, the rise of labor costs promotes the optimization of export commodity structure. Despite of the decline of proportion of labor-intensive goods, the trade competition index of labor-intensive goods is still on the rise due to the improvement of labor productivity. What’s more, although overall wage level has been greatly improved, unite labor cost adjusted by purchasing power parity(PPP)($) is still at a low level when compared to other more developed countries.To make an analogy, this paper examines the significant change of the export commodity structure of South Korea form the 60’s of the last century to the 90’s. During the 60’s and the early period of the 70’s, when labor cost is low, Korea industries mainly export labor-intensive goods. From the late 1970 s to the 1990 s, both social wage levels and unite labor costs increased rapidly, with the weakening of the labor cost advantage, the proportion of labor-intensive goods dropped correspondingly. The South Korea government played a vital role in policy guidance, and enterprises put great investment in R&D, the success of this series of efforts contribute to the significant change of export commodity structure, when capital, technology advantage replaced labor cost comparative advantage, capital-intensive and technology-intensive products became the majority of all exports goods in late 1990 s.Therefore, we should encourage the reasonable promotion of social wage level. By improving labor productivity rather than depending on the cheap labor, we can maintain trade competitiveness. Rising labor cost is a pressure contributing to the realization of industry structure transformation and upgrading. With the rise of social wage level, the weakening labor cost advantage force us to foster new capital, technology comparative advantage in order to participate in the international competition of higher level production factors, in which way optimizes the export commodity structure.