maybe not

@ john: or maybe not

I think it is important to profile the competition. They can largely be divided into "other countries with high costs and a stable, law abiding business environment", and "countries with low costs and an uncertain, insecure business environment".

You name three countries, China, Korea, and Japan. Other important countries exist or are emerging, and in generality fit the descriptions I gave above.

China, although costs may rise as time goes on, along with a number of other emerging countries, enjoys an advantage over established countries because workers expect less money, in international exchange terms. This is because of an availability of extremely cheap unskilled labor from the rural areas, which enables it to also provide relatively cheap skilled labor (if the man who farmed your cow is payed $3 for a whole cow, you can afford a lot of steak as an educated chemical engineer on $5/hour). Particularly with china, a wide range of other factors are in play, but I feel the above is important.

This advantage is answered by certain disadvantages. Critical in terms of high tech goods such as the LCDs mentioned above are intellectual property protections. While china has been improving a lot on this front, there is still a valid perception that any important IP being manufactured in china is at significant risk of being stolen. IP laws have tightened, but their enforcement has not been as tight as some might like, and local political influence can have a big effect on the viability of a prosecution. Disregarding some celebrated cases, such as the "fake LG" company who's own employees believed themselves to work for the tech giant, industrial espionage and restrictive "joint ventures" still discourage companies from building the most high tech parts of their devices in both china, and other developing economies. Sharpe for instance manufactures much of its LCDs in china, but produces the screens themselves in either Japan or Korea.

In terms of Europe's rivalry with other "expensive, secure" countries, even the UK is comparatively cheap for japan, and sees some outsource business, yet japan still maintains a strong manufacturing sector. How? one factor is domestic purchasing - domestically produced goods enjoy a better market there than they might here for a variety of reasons including taxation and patriotism.

Another is efficiency, in terms of automation and process. Visiting effective factories in western and eastern countries you are struck by the difference in the use of manpower. In the west, because workers are expensive, it is likely goods might be carried around a warehouse in quantity by a forklift. In emerging economies it is not uncommon to see a chain of workers, who cost less than the lift would. This is not necessarily a bad thing for those economies - these people are cheaper than a forklift, and for the work pays enough that they can send money to their rural families - but it is an insight into how Europe can continue to compete.

Europe cannot count on things like "superior skill" or "efficiency" to compete with emerging economies. The number and quality of graduates in these countries is often greater than here, and "efficiency" will come just as soon as it is cost effective.

Rather Europe should rely on the laws of competitive advantage, and keep in mind that they only work if all sides play fair. In the future, as now, things will work because they work for everybody. Competition is important, but Europe doesn't need to 'win', just to find its place.