Spain and the United States - Real Instituto Elcano

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Exhibit 7.3 International Labour Costs*
SPAIN AND THE UNITED STATES
is slowly drifting eastward. Spain has traditionally been an export market, but
the gap between exports and imports of vehicles has gradually been narrowing
since 2000, and in 2004 imports from the EU were higher than exports to the
EU. One of the reasons for this is the opening of new plants in eastern Europe.
Spain, however, is not an isolated case; relocation is part of a growing
trend in Western Europe. Nonetheless, it could be more vulnerable than other
countries because, as well as rising costs in the manufacturing sector (they are
now not far off Italy’s), the country lags behind in knowledge and innovation
indicators in the broadest sense. According to a study on the relocation of
companies in Spain, the most threatened sectors are transport equipment,
electrical and electronic equipment, rubber and plastics. 5 These sectors
represent 15% of Spain’s industrial sector and are all areas with US companies.
Improving Spain’s competitiveness involves a lot more than labour costs,
which in themselves do not make a country uncompetitive provided it offers
other advantages, such as superior product quality, and can provide value
added. Finland is a case in point. Its labour costs are much higher than Spain’s
and yet it is regularly among the world’s ten most competitive economies. The
problem for Spain is that its rising labour costs are combined with other
factors, such as an education system that is not producing the skills and training
levels required by companies, the lacklustre behaviour of productivity, low
spending on R&D and labour market laws that are still too rigid for the firing
of people on permanent as opposed to temporary contracts. The situation of
5. See El riesgo de deslocalización industrial en España ante la ampliación de la Unión Europea, by Lluis
Torrens and Jordi Gual (IESE Business School, February 2005).