Archive for the 'Economics and Politics' Category



19
Jul
17

The White House is Celebrating Made in America Week — But Not Without Criticism

Source: The White House is Celebrating Made in America Week — But Not Without Criticism | Alliance for American Manufacturing

This week is about celebrating Made in America. But is the #FakePresident the one to really tout “Made in America”? The article is from The Alliance for American manufacturing.

President Trump is under fire for his reliance on foreign manufacturing for his own products.

Here at the Alliance for American Manufacturing, we live every week like it’s Made in America Week.

But the official Made in America Week is currently happening, and President Trump has a whole host of activities lined up to celebrate.

The fun kicked off on Monday at the White House with the “Made in America Product Showcase,” which highlighted an American company from every state. On Wednesday, the president is scheduled to participate in a “Made in America certification event,” and on Thursday, the president is planning a “Made in America announcement.” Things wrap up Saturday in Norfolk, Va., where Trump will attend the commissioning of the Gerald R. Ford CVN 78 aircraft carrier.

But almost as soon as he announced Made in America week, Trump was criticized for not practicing what he preaches. Multiple news outlets have pointed out that many Trump brand products are made overseas, and frankly, some of that criticism is deserved. Here’s the Washington Post:

“For Trump, highlighting U.S.-made products is inconsistent with his practices as a businessman. For years, the Trump organization has outsourced much of its product manufacturing, relying on a global network of factories in a dozen countries — including Bangladesh, China and Mexico — to make its clothing, home décor pieces and other items.”

The Huffington Post also pointed out that Trump’s use of steel and aluminum from China was a big issue during the 2016 presidential campaign, and the president’s daughter/adviser Ivanka Trump is also under fire for her reliance on overseas factories to produce her fashion line. The Daily Beast traveled to the Trump International Hotel in Washington to check out the goods in the gift shop, which had a Made in America T-shirt but nearly everything else for sale was manufactured overseas. (Side note: We offered up some American-made suggestions for the hotel back in September 2016.)

Even the conservative-leaning Washington Examiner ran an op-ed pointing out Trump’s hypocrisy on Made in America.

“’America First’ sounds good when you are the president, but, we all know that whenever money’s been on the table in his extravagant, Napoleon-like penthouse in Manhattan, it’s always been ‘Trump First,’” contributor Mark Vargas wrote.

Ouch.

It’s unclear what might come out of Made in America week — past theme weeks have been overshadowed by current events, often at Trump’s own making. And there’s no doubt that Trump has divided the country, with his opponents pledging to fight him on all fronts.

But whatever you think of Trump, we hope that you can get behind Made in America.

We’ve featured many of the companies taking part in the White House showcase on the blog and our annual gift guide, and our summer interns even talked about their favorite Made in America companies on The Manufacturing Report podcast this week.

American-made goods create jobs and help grow the economy. If every American committed to buying $64 worth of American-made purchases each year, 200,000 new jobs would be created. If contractors increased use of American-made materials by just 5 percent, an additional 200,000 new jobs would be created.

American-made products are also better for the environment, from consumer goods to big industrial needs like steel and aluminum. That’s one of the reasons why a deeply blue state like California is moving toward buying its steel locally — American mills abide by strict environmental guidelines, leading to less pollution to both produce steel and ship it to where it is needed.

And American-made products are often of higher quality than their foreign-made counterparts. There have been serious concerns over China’s lax safety regulations, for example, from everything from toothpaste to toys to dog treats and even processed chicken.

Made in America matters. It’s also perhaps one of the few issues that Americans tend to agree on — 95 percent of voters polled in 2014 had a favorable view of American-made products.

We know that you can’t always buy American-made, but we encourage you to do so when you can. Check the label when you are out shopping, for example. Do a little research on American-made options before making a big purchase like a home appliance or new car.

And we also hope that Team Trump finally steps up and shifts Trump Organization product manufacturing to the United States (Ivanka Trump should also work to manufacture at least some of her clothing line here). Even moving production of just one or two items would go a long way to showing Trump isn’t all talk when it comes to Made in America — and it will support job creation and the economy along the way.

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09
Jul
17

New Thai labor rules send migrant workers packing for home – The Washington Post

Source: New Thai labor rules send migrant workers packing for home – The Washington Post

New Thai Labor Rules Send Migrant Workers Packing For Home.

This news seems to have nothing with the Made in the USA movement but if you look at this closely it has everything do do with it. Please see the end of the article for why it is pertinent.

An immigration official checks a vehicle before it leaves for Myanmar at a border checkpoint in the northern Thai province of Tak. Around 30,000 migrant workers have left Thailand.

July 3
BANGKOK — Fearful that Thailand’s new labor rules will get them into trouble, tens of thousands of migrant workers are returning to neighboring Myanmar, Cambodia and Laos, causing hardship to themselves and their Thai employers.Labor regulations that took effect June 23 could give foreign workers without proper permits up to five years in prison, while their employers could face fines of up to 800,000 baht ($23,500).Officials and workers’ advocates estimated Monday that roughly 30,000 workers have returned home since the rules took effect.Thai Prime Minister Prayuth Chan-ocha, under pressure from industries employing the migrants, says he’ll institute a 120-day extension of the deadline for worker registration.Thailand has about 2.6 million foreign workers, mostly from its poorer neighbors Myanmar, Cambodia and Laos. Half are estimated to be working illegally. Many work in low-paying or dangerous jobs that Thais are reluctant to take, in fields such as construction, farming and fishing.

Thailand’s Labor Rights Promotion Network, a migrant rights advocate group, estimates that more than 30,000 workers have gone back home and that the number will keep increasing if the government does not come out with measures to reassure workers of their rights and safety.

Police Col. Man Ratanaprateep, based in the northern Thai province of Tak, which borders on Myanmar, said that as of Monday, more than 23,000 workers had crossed back to Myanmar at the province’s Mae Sot checkpoint alone, but others may have gone back at unofficial crossings.

 The regulations have caused the loss of 40,000 to 80,000 migrant workers from the construction industry, according to Suwat Liptapanlop, president of Thai Contractors Association. He did not say how many workers left on their own, or how many were pushed out by nervous employers.

[“We found that many workers were told to leave, some without being paid, by their employers. Now, with such a massive outflow, the government is talking about the grace period,” said Patima Tungpuchayakul of the Labor Rights Promotion Network, which is involved in the protection of migrant workers. “But the damage is already done. Poor migrant workers already are panicking and leaving the country. These are people who can’t afford travel expenses or living without employment.”

 She noted that workers who left would face a new round of expenses should they seek to return to work legally, because they would have to come up with payment fees to employment agencies. This could force them to borrow money again, making their labor a way of paying off the debt, a cycle that is known as debt bondage.] (This part was deleted by the Washington Post but was in the San Francisco Chronicle and SF Gate – funny what some newspapers will delete – Ed.)

Cambodia’s embassy in Thailand issued a statement over the weekend urging migrant workers to stay calm. It said the embassy and Labor Ministry officials were negotiating with Thai authorities, asking them not to crack down.

“Many migrants are fleeing Thailand voluntarily at a high cost; some employers cover costs, but many are also unceremoniously fired without compensation,” said Andy Hall, a longtime human rights worker with extensive experience with migrant workers.

“Thailand’s government is completely irresponsible, treating these low-skilled workers with high value to its economy like dispensable second-class citizens who don’t deserve basic treatment in accordance with international human rights standards,” he said.


Editor’s Note

Let us connect the dots to see how this story is pertinent to Made in USA products. Thailand like China have done great economically over the past 25 years by doubling down on cheap exports. So how do these Asian products come so cheap? First, you create relations with very wealthy American corporations and CEO’s who then lobby Washington who then create “Free Trade deals” which basically removes import taxes from these products from China – which undermines basic economic sanity. Import taxes were implemented so other countries do not undercut your own country’s products which would destroy American businesses, economy and jobs (which has happened). Why pass Free Trade treaties like NAFTA, WTO and TPP? One word: Greed. Then you have the added bonus of Free Trade policies – destroying of unions and decreasing wages of the middle class (Definite win, win and win for the top 1%.)

Second, you hire people at a very low price who get no benefits, no overtime,  and no safety restrictions. And then when you can’t get enough people in the city to work in these miserable conditions, you send out “agents” to recruit people from the agricultural areas to come to work. How do you get these people to work in the city? Answer: Debt bondage. For the promise of a better life (actually a lie), agents will charge these future employees fees for being recruited, for travel expenses, and for miscellaneous. Sometimes these workers will have to work for many months or years to get out this debt. (Slave Labor). Then, when you run out of people from farms, then you start recruiting from other countries. This has been happening for years in China and Thailand. For Thailand, the number of illegal immigrant workers is up to 2.6 million workers.

So this is the situation we are in now. American companies every day are outsourcing jobs to China, Thailand, Bangladesh, India, etc so we can have slave labor make cheap Old Navy clothing for us, while American workers salaries diminish and the American economy languishes. Sorry, Fake President, the economy is not doing well. A GDP of 0.7% is not good. Obviously this is not an ideal system, sooner or later, Americans might get physically ill when they realize that they are enabling slave labor all over the world. (Or not). But, also, countries will eventually run out of immigrants to work. This may take another 10-15 years. And then what? Finally, the cheap labor countries will start to paying their workers more. But this will be much too late to have any effect on American companies who will continue to outsource or go under, unless U.S. consumers change their mindset and their buying habits.

Last Item: Migration. This story shows that you do not need a wall to stop immigrants from coming in. In fact, the wall is a great folly. It won’t stop any immigration. What would stop immigration? Answer: An immigration policy that makes sense. In the Thailand policy, it threatens immigrants without proper paperwork with prison time up to 5 years (not just deportation) but even more importantly, punishes the employers who hire the illegal immigrants $23,500 for each worker. It would stop the hypocrites who rally against illegal immigrants who still hire these same illegal immigrants. Now, if you were truly serious about immigration, the policy would need to hit both sides: the employee and the employer.

So how about the jobs that regular Americans shun, the ones that only immigrants often work, like farming, roofers,housekeeper, graders/sorters and drywall/stucco installers? Would “regular” Americans take over the void? Unlikely. The most reasonable work around would be allowing more immigrant to work these jobs, but with the proper paperwork. This system should work well until the Republican Party allows the gross abuse of the system – then we would be back at the same place.

30
Jun
17

Activists who probed Ivanka Trump supplier freed in China – San Francisco Chronicle

Source: Activists who probed Ivanka Trump supplier freed in China – San Francisco Chronicle

Activists who probed Ivanka Trump supplier freed in China

Updated: June 29, 2017 1:16am

One man has been arrested and two others are missing in southern China after conducting an investigation into a Chinese factory making Ivanka Trump-branded shoes, China Labor Watch, a New York-based advocacy group, said on Wednesday. “We appeal to President Trump, Ivanka Trump herself, and to her related brand company to advocate and press for the release our activists,” China Labor Watch said in an email to Reuters.

Media: WochIt Media

GANZHOU, China (AP) — After a month behind bars, three Chinese investigators who went undercover at a factory that made Ivanka Trump shoes walked freely out of the local police station Wednesday. But they still face an uncertain future and the threat of a trial.

Chinese authorities released the three, who have been accused of breaking the law by using secret cameras and listening devices. They were freed on bail, which is extremely rare for individuals who have been detained for alleged crimes, a possible sign they won’t be formally charged and put on trial.

But they’re not in the clear yet. Political dissidents and other activists who are released in China typically face restrictions on what they can do and say — including comments to the media.

“This is a way of keeping people under pressure, under police control, without subjecting them to actual confinement,” said Jerome Cohen, a law professor at New York University and a Chinese human rights expert. “Whether they are prosecuted depends on how they behave.”

One of the activists, Hua Haifeng, was clearly relieved as he held his 3-year-old son outside the police station in Ganzhou, a city in southeastern Jiangxi province.

“I appreciate the media following my case the last month,” Hua told The Associated Press, “but I’m not ready to speak yet.”

China released on bail three activists detained after investigating labor conditions at a factory that produced shoes for Ivanka Trump and other brands. The group involved in the probe calls the factory the “worst we’ve seen” in recent years.” (June 28)

Media: Associated Press

When they disappeared in late May, Hua, Su Heng and Li Zhao of the labor rights group China Labor Watch were preparing to publish a report alleging low pay, excessive overtime, crude verbal abuse and possible misuse of student labor at Huajian Group factories. Some of the factories produced Ivanka Trump shoes, among other brands.

Huajian Group has denied allegations of excessive overtime and low wages. It says it stopped producing Ivanka Trump shoes months ago. Abigail Klem, president of the Ivanka Trump brands company, said that its products had not been produced at a factory in Ganzhou since March but “the integrity of our supply chain is a top priority and we take all allegations very seriously.”

NYU’s Cohen said he suspects the case now may follow the pattern of the one against Ai Weiwei, the dissident artist who was released on bail in 2011 and never faced trial.

“I think this is face-saving way to get rid of the case,” Cohen said. “Formally, the case will exist for another year, then it will be dropped unless these people misbehave.”

Li Qiang, founder of China Labor Watch, said the Huajian’s factory in Ganzhou was among the worst he has seen in nearly two decades investigating labor abuses. His group says pay can be as low as a dollar an hour, in violation of China’s labor laws. According to China Labor Watch investigators, until recently workers might get only two days off — or less — per month.

China Labor Watch alleges the company forced workers to sign fake pay stubs with inflated salary numbers and threatened to fire them if they didn’t fill in questionnaires about working conditions with pre-approved answers.

Separately, the AP recently spoke to three workers at the Ganzhou factory — one current and two former employees — who confirmed some of what the labor group has reported.

The three workers told the AP that beatings were not unheard of and that they had each witnessed a particularly gruesome scene one day: A worker with blood dripping from his head after an angry manager had hit him with a high-heeled shoe.

“There was a lot of blood. He went to the factory’s nurse station, passing by me,” said one of the former workers, who said he quit his job at the Huajian factory because of the long hours and low pay.

All three workers spoke to the AP on condition of anonymity, for fear of retribution or arrest.

The detention of the three activists prompted the U.S. State Department to call for their immediate release. At the time, Hua Chunying, spokeswoman for China’s Ministry of Foreign Affairs, said the men had been accused of using secret recording devices to disrupt normal commercial operations and would be dealt with under Chinese law.

“Other nations have no right to interfere in our judicial sovereignty and independence,” she said, adding, “the police found these people illegally possessed secret cameras, secret listening devices and other illegal monitoring devices.”

The White House directed any questions about the detainees on Wednesday to the State Department. Anna Richey-Allen, a department spokeswoman for East Asia and the Pacific, said: “We urge China to afford them the judicial and fair trial protections to which they are entitled.”

Marc Fisher, which produces shoes for Ivanka Trump and other brands, has said it is looking into the allegations. Ivanka Trump’s lifestyle brand imports most of its merchandise from China, trade data show.

The detentions came as China has cracked down on perceived threats to the stability of its ruling Communist Party, particularly from sources with foreign ties such as China Labor Watch.

Faced with rising labor unrest and a slowing economy, Beijing has taken a stern approach to activism in southern China’s manufacturing belt and to human rights advocates generally, sparking a wave of reports about disappearances, public confessions, forced repatriation and torture in custody.

As he left the police station Wednesday, Hua was surrounded by family members. “I’m happy to be out,” he said. “I just want to spend some time with my family,”

Hua said he had not been mistreated but declined further comment.

___

Condon reported from New York. AP writers Gillian Wong in Beijing and Matthew Pennington in Washington contributed.


Editor’s Comment

The Trumps’ continue to use slave labor to make their products. Does the news report about this? Not a chance. The Trumps entirely encapsulate what is wrong with the American economy. Since 1980, the rich have gotten a stranglehold on government. Their Republican lobbyists continue to run the Senate and the House. Their agenda -to destroy the “artificial” middle class by destroying unions and better paying jobs – by shipping jobs out of union-strong-states and, then, to foreign countries. To do this, the Republicans (“the 1%”) developed the World Trade Organization, made the word “protectionism” – a dirty word and formulated multiple Free Trade Treaties in order for CEOs to pay much less for employees and damn those expensive American workers. So, of course the Trumps outsource all their jobs to China. They don’t care about American jobs. Don’t expect the Trumps to bring those jobs that are personally under their command. So, all we can do is report the terrible working conditions that the Trump companies embrace. Remember buying Chinese products over American products means that you support slave labor all over the world. Of course, Republicans do support slave labor – it is their Party line.

08
May
17

Why Germany Still Has So Many Middle-Class Manufacturing Jobs

 

Why Germany Still Has So Many Middle-Class Manufacturing Jobs

What will bring back strong American jobs? Nobody knows for sure. Some say clamp down on “Free Trade” this is where countries can import their products into the US without any tax. That could help, but the Free Traders (who actually control the country) are against this. For the Republican Party, their idea is the same old failed policy of the Ronald Reagan years: trickle-down economics – give tax breaks for the rich, ease regulations and see if anything trickles down. Yes, what trickled down were actually trickling away of manufacturing jobs and employees salaries while 95% of all profit went to the people who already have the top 99% of the income. That is a fact, it doesn’t matter which news source you listen to (although the right wing media does not like to announce this very often). So, we should reject this idea right out of hand, right. But no, the Republicans are trying to double down on this. For the Democrats, it has been about raising the minimum wage and making employers pay more for overtime in salaried employees. It would help some but not all. Now, here is one idea, that I have tried to get across, but it gets very little traction. Why don’t we follow an example of a country that has done things quite well: Germany?

Germany has been an economic powerhouse even since the Free Trade frenzy and the World Trade Organization have toppled all other countries and have placed China as the world’s manufacturing leader. Why is this? Why is that countries like former manufacturing-strong economies such as the USA, England, France and Japan lost most of its manufacturing while Germany still is quite strong – German manufacturing contributes to 25% of the country’s Gross Domestic Product. (the US 12% [down from 25% in 1960]; the UK 9%, and France 10%). As these former economic powerhouses off-shored their manufacturing to China and to other cheaper labor countries – what did Germany do different? One is that Germany didn’t fall for theory of trickle-down economics (in the US, CEO salaries sky-rocketed while adjusted-for- inflation workers salaries dropped). The German government was definitely instrumental in keeping manufacturing jobs in the country and keeping workers salaries strong. The German government and its industries heavily invested in apprenticeships and vocational training, but not just any manufacturing, it strongly invested in science and technology. For example: everybody talks about the iPhone and that is it assembled in China. However, the most profitable part of the iPhone is not the assembly, but it is the manufacturing of the high tech components which are made by both Germany and Japan.

Another reason why the German economy is one to emulate: CEO to Worker salary ratio.

The ratio of CEO pay to the median salary for all other employees in the company provides a reference of how high CEO pay is. It’s often used to compare CEO pay across countries. U.S. CEOs earn from 400 to 500 times the median salary for workers (it used to be 34:1 before Reagan). For CEOs in the U.K., the ratio is 22; in France, it’s 15; and in Germany it’s 12. (Whether it is 12:1 or 147:1, even Fact checker says they can not be sure).

Another reason that German salaries and manufacturing are strong:

German Workers Have a seat at the Table in the Boardrooms, in the USA they do not.Fortune Magazine

In Germany “collective labor rights are typically guaranteed.” At the same time, Germany has seen labor union participation drop considerable over the years.

Representation on German corporate board of directors is split between labor and shareholders through an executive board and a non-executive board. This has given workers the ability to raise employee pay along with overseeing CEO salaries.

Whether it’s through minimum wage hikes or acceptance of labor unions, for the U.S. CEO-to-worker pay ratio to decrease, workers will need a seat at the table. This would not only help improve worker pay, it could also provide a much-needed counterpoint during CEO salary discussions.

Most U.S. companies leave workers out of boardroom conversations, so it’s not surprising that executives primarily focus on CEO pay incentives ans fail to recognize the necessity to do the same for the rank-and-file.

So, here are the bulletpoints: Invest in apprenticeships and vocational schools primarily directed at Science and technology. Less greed – more long term thinking and put workers in the boardroom.

Below is an article by Hermann Simon in the Harvard Business Review.

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Source: Why Germany Still Has So Many Middle-Class Manufacturing Jobs By Hermann Simon

Only about 1.1% of the world population is German. However, 48% of the mid-sized world market leaders come from Germany. These firms, which I call “Hidden Champions,” are part of what makes German economic growth more inclusive: by my calculations, they have created 1.5 million new jobs; have grown by 10% per year on average; and register five times as many patents per employee as large corporations. And they are resilient: my estimate is that in the last 25 years no more than 10% of them disappeared or were taken over, a distinctly lower percentage than for large corporations. Nearly all of them survived the great recession of 2008-2009.

Moreover, Hidden Champions have also contributed to the sustainment of the German manufacturing base, and it is in large part thanks to them that nearly a quarter of the German gross domestic product continues to come from manufacturing. The percentage in most other highly industrialized countries such as the U.S., the UK, or France is only about half of this. The effect on employment is enormous. Manufacturing creates jobs at home and at the time same allows companies, through exports, to participate in the growth of emerging countries.

Given this success, it’s not surprising that many non-German policymakers and economists have looked to the Hidden Champions, or more broadly, the Mittelstand, to try and chart a path to more inclusive growth in their own countries. But how replicable is their success? While other countries could try to emulate aspects of what makes the Hidden Champions so successful, the reasons for their success are the result of a complex network of factors, many of them historical.

A Hidden Champion is defined by three criteria: 1) a company has to be among the top three in the world in its industry, and first on its continent; 2) its revenue must be below €5 billion; and 3) it should be little known to the general public. Germany seems exceptionally good at creating these companies; I have identified 2,734 Hidden Champions worldwide and no less than 1,307 of them are based in Germany. You might argue that my research is deeper in Germany than in other countries, and most likely I wouldn’t be able to prove you wrong. But researchers in other countries have also examined this phenomenon and found far fewer Hidden Champions in their countries. A colleague who looked for Hidden Champions in Japan for years identified only 220 companies, a researcher in France has come up with only 100. With the exception of Switzerland and Austria, the per capita number of Hidden Champions is nowhere near as high as it is in Germany.

Of course, success of individual Hidden Champions is based on their leadership and strategy. The most important difference is the continuity of the leadership. The leaders of the Hidden Champions stay at the helm for an average of 20 years; according to Strategy&, which collects data on the world’s largest 2,500 companies, in large firms the average CEO tenure from 2012 – 2016 was only seven years, and the median was even shorter, at five and a half years. The leaders of Hidden Champions are also more likely to come into power at a young age and are more often women than in larger companies.

But the reasons they are a predominantly German phenomenon are many. This includes the German history of many small independent states (until 1918 Germany consisted of 23 monarchies and three republics), which forced entrepreneurs to internationalize early on in a company’s development if they wanted to keep growing. In addition, there are traditional regional crafts, such as the clock-making industry in the Black Forest with its highly developed fine mechanical competencies, which developed into 450 medical technology companies, most of them makers of surgical instruments.

Scientific competencies also play an important role. The cluster of 39 measurement technology companies in the area of the old university of town of Göttingen are the result of the leading role Göttingen university’s mathematics faculty had for centuries. The Fraunhofer Institute continues to function as a transmission belt between science and practical applications. The Munich-based Hidden Champion Arri, world market leader in professional film cameras, used the expertise of Fraunhofer to navigate the transition from analog to digital technology, and was thus able to defend its leading market position.

A further pillar of the Hidden Champions’ competitive strength is the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades. The Hidden Champions invest 50% more in vocational training than the average German company.

Tax advantages are another reason. The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector.

Finally, the international openness of a society is an essential factor in the globalized world of the future. Germany is far ahead of other large countries with regard to mental internationalization. This includes language competencies, international experience from student exchanges, and university studies. Countries such as France, Italy, Japan, and Korea lag far behind in these respects.

Why is this mental internationalization so important? Because while Hidden Champions may be small, they compete on a global scale. They achieve world-class quality by keeping their focus narrow; focus is the most important element of a Hidden Champion’s strategy. Flexi, for example, makes only one product — retractable dog leashes — but has the claim to make them better than anyone else. This has allowed them to reach 70% of market share in this category. But focus makes a market small. How can you make it bigger? By globalizing. Today, the Hidden Champions are present in their target markets with 30 subsidiaries on average. Despite their medium or small size, they are true global players. About one quarter of German exports comes from the Hidden Champions.

I do think the Hidden Champions provide a model of inclusive growth that are worth emulating. But any foreign policymaker or economist seeking to foster a community of such companies in their own country should tailor their approach to that country’s own unique conditions.

This post is one in a series leading up to the 2017 Global Drucker Forum in Vienna, Austria — the theme of which is Growth and Inclusive Prosperity.

29
Apr
17

The First 100 Days of the Trump Administration and the Made in USA movement

The First 100 Days

With regards about the Trump administration in Bringing Jobs Back to America, I have evaluated all of its policies and activities. The report card on Trump’s first 100 days is : “D-“. The only reason is that it is not an “F” is that Trump had named the author and moviemaker of “Death by China”, UC Irvine professor, Peter Navarro, to his administration in December as the head of the newly formed National Trade Council. However, Mr. Navarro has been muted, criticized by GOP Free market critics like the China-owned Forbes Magazine. Mr. Navarro appears to be neglected just like the American workers. Compare this to the Obama administration’s first 100 days, They got a “B-“. Their contributions: Bailing out General Motors and h the major automakers, saving hundreds of thousands of jobs.  And, then, there was the Economic stimulus which stopped the Great Recession in its tracks. This has been followed by solid economic growth ever since.

The Promises

Remember the promises: “Day One, China will be named a currency manipulator”. Nope that didn’t happen, instead Trump: China Not a currency Manipulator BBC April 12, 2017.

“Day number one, we will withdraw from NAFTA”. Nope. Trump Tells Foreign Leaders That NAFTA Can Stay For Now – NY Times April 26, 2017.

“There will be jobs, jobs, jobs”. Hardly the GDP for the first quarter of 2017 was 0.7%. There once was talk about an infrastructure bill, which would create jobs. Nope, not a sniff of an infrastructure bill. Instead, there were: Executive orders to ban Muslims; Failed attempt to restrict Federal money to sanctuary cities; Failed Legislative attempts to kick 24 million people off health insurance and make people with pre-existing conditions pay more; and a poorly structured one page outline tax reform plan which demonstrates that Trump will bring back trickle-down economics by giving giant tax breaks to the 1% and to the Corporations. Still, Trump and his family continue to have their clothing made by slave labor in China and Mexico.  They are not bringing those jobs back to the USA. Further, the resort Mar-a-Lago, the government boondoggle which pays Trump $3 million every weekend, employs foreign workers here on H1-2B visas (what no American workers?).

One more breaking  story that nobody has reported: The GDP for the first quarter of 2017 grew at a measly 0.7%, much less than the 4% that Trump promised: See the link: The Economy is Barely Growing: Here are Three Theories Why – Vox, April 28,2017. Maybe this is the start of the next economic recession that Republican leadership always brings with it.

The Future

Well, maybe the GOP cover up over the Russian influence will finally blow over and impeachment proceedings can commence and Vice President Pence’s cover-up over disgraced General Flynn will come to light and he will have to resign as well. Then, the GOP hypocrites can all be voted out of office. That is when the real made in USA movement can re-start. How can a political party dedicated to globalization and off-shoring suddenly be the party on Bring Back American jobs back?  (The GOP has always been dedicated to bringing down the wages of workers, which is why they have always tried to defeat unions and communistic or socialistic policies.) Trump and the GOP were never serious about bringing jobs back to America in the first place. You were a fool to believe it the the first place.

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Below is an article by Daniel Marans which goes into more depth with the above issues. This was published the day before Trump tweeted that he was staying with NAFTA. Click on the link for the story. I am unable to copy it onto my webpage.

Source: Jobs Still Going To Mexico As Trump’s 100th Day Approaches | The Huffington Post

 

20
Jan
17

The Oaf of Office – More USA Jobs or Less?

This is written specifically for Inauguration Day. With Donald Trump being sworn in as the 45th President, the question is whether his administration will be good for the American worker and the Made in USA movement which ultimately means more jobs for Americans.

What Can We Expect for Made in USA jobs under the Trump Administration?

Will the Trump administration increase Made in USA jobs or will the Trump administration continue the Republican doctrine and do the opposite: to decrease good paying jobs in the USA? To predict these two outcomes, we have to know what Trump believes by what he has said (which is sometimes difficult as sometimes he is on both sides of the same issue). We know that he agrees with the ultra-right of the Republican Party on all issues except possibly two: first, the GOP has always been wary of Communism and Russia. Interestingly enough, Trump has expressed the exact opposite of this wariness. Second, the GOP are in full support of Free Trade, exporting US jobs and maximizing profits for the company’s CEOs. While Trump had previously offshored jobs and has his Trump clothing line (and his family’s products) made outside of the U.S, suddenly, in mid-campaign, Trump said that he is against Free Trade treaties.

Policies of the Republicans and Therefore, Trump and its effect on the USA.

So let us quickly look at some of the policies of the Republicans (and therefore, Trump) and see how it would effect US jobs. These include minimum wage, income taxes, Immigration, Free Trade, Energy, Mergers, Economic Growth, Free Press.

Wages and the Minimum Wage

For the past 100 years, the traditional view of Republicans towards business has always been on the side of owners of businesses.  This has not changed. Republicans have always been against all issues that would make the bosses pay more: minimum wage, vacations, 40 hour work week, overtime pay, social security, unions, pensions, employee health care, disability, child labor, worker’s compensation,  and workplace laws that outlaw discrimination or harassment. These issues were fine when the United States was an overwhelmingly run by small businesses. But, since 1980, the USA has become the Mega company capital of the world and many of these giant companies are multi-nationally owned. In fact, large corporations (since 2007) employ more Americans than small businesses (small business being defined as less than 500 employees). The US is so top-heavy (big corporations dominate) that just 6 companies made 50% of all profit in the US in 2015 (according to USA Today) and 28 companies made 50% of the profit to the S & P. So, sometimes it seems ludicrous that the Republicans go to great lengths to protect the mega-Rich, who already have their own lobbyists, but very little for small business owners. So, what about the workers? Workers compensation has been stagnant especially when compared to corporate profits and CEO pay. Workers wages are just starting to go up over the past two years, but many workers depend on the Federal Minimum Wage to make a living. The Minimum Wage has been unchanged since 2007 (as passed by a Democratic Congress), it is still $7.25 per hour (Louisiana and Tennessee do not follow the federal minimum wage). It has been shown by many economists that the minimum wage has not kept up with inflation. And at the present time, an employee working a forty hour week at minimum wage would still put one at the poverty level. Critics (mainly Republicans) have charged that the raising of the minimum wage kills jobs. This has never been proven, in fact, there evidence to the contrary (Business Insider) and (US News).

History of US Federal Minimum wage to Nominal Dollars

History of US Federal Minimum wage to Nominal Dollars

What is the opinion of Trump? He wants to repeal the minimum wage. But, of course, he has flip-flopped on this issue multiple times (see Washington Post Flip-flops on minimum wage). But if Trump follows standard Republican orthodoxy, and many expect that he will, Trump will try to repeal the minimum wage. What does this mean for American workers? The prospects don’t look good. It is assured that the Federal Minimum Wage will not be raised. However, some Democratic states have, on their own, voted to increase their own state minimum wage. These states have shown the greatest economic growth. Growth in these states will be great, because they are innovative, and despite the efforts of the Trump administration.

Income Taxes

Trump has promised to change the tax code. It has always been hard to pin down Trump, especially when what he says does not match what he says on paper. But the written Trump Plan is a basic Republican plan, First, it gets rid of the Inheritance Estate Tax which would help only the top 1%. Second, it decreases the corporate tax rate from 35% to 15%. Third,  it would decrease the rate of the top income makers from 37% to 33%. The group of $91,150 – $110,000 per year  would also get a small tax break from 28% to 25%. There is no change from $37,500 – $91,150. In fact, most may be paying more. (You can see more on the Trump Tax Plan/NPR analysis). The final verdict: This is classic trickledown economics, giving more money to the top 1%. It didn’t work with Reagan did it, it won’t work now. When you give more money to the rich ,they do not spend it (there is no trickledown), they invest it. Additionally with substantially less income coming to the government, the cost to the government is $62 Trillion per year (greatly increasing the deficit). Final Cost to the worker: more taxes paid by the middle class, less money from the corporations, less money from the top 1%, less money for the government to finance infrastructure. In fact, this is the exact same policy that caused the middle class to disappear in the first place.

income-tax

Immigration

Historically, there have always been groups that have hated immigrants: at first, it was directed at the Irish, and then the Germans, then the Chinese and Japanese and then later, the Hispanics. The Republicans haven’t always been about deporting immigrants. For Republicans, this is a relatively new phenomenon. I mean there were always a sub-group of Republicans – the KKK, the John Birch society, the segregationists, and other White Supremistist groups (they had been Democrats until the Civil Rights Acts of 1965, then they became Republicans) whose voices have always been minimal until recently. Now they are quite vocal. The cause of this movement? It happened after President Reagan repealed the Fairness Doctrine in journalism and Media. This is when Right Wing Media went into action. It encouraged prejudiced people who were previously silent to speak out publicly. And this is where Trump has made his connection. Trump loved to inflame this crowd with hatred towards immigrants: He said he would build a wall. And then he said Mexico would pay for it. Of course, it was talk, just saying outrageous things to get people to listen.

trump-minority

The Wall Between the US and Mexico

So, how serious is the possibility of building the wall between the US and Mexico? Even Trump supporters didn’t take this idea seriously, but they loved the hateful rhetoric anyways. Let us look at the 119 mile wall between Mexico and the United States. The Washington Post said that building just the wall would cost $25 Billion (not million- and it doesn’t consider surveillance). But, we know the actual costs are always more than estimated by three to four times. So, that would make it approximately $100 Billion. And Mexico is sure not going to pay for it. So, guess who is going to pay for a wall that won’t keep immigrants out? You are, the American tax payer. Estimated cost per person $308.

trump-wall                                                                                                    The Trump Wall

Republicans know that immigrants are a vital source of labor for certain business especially the farming community. In fact, the Senate had passed a Comprehensive Immigration bill in 2013 (that is right – both Democrats and Republicans worked together). However, some Republican Tea Party members scuttled the bill in the House and now, we are in the same state as before. Final decision: I can’t see Trump getting enough Republican votes to build the wall. Some Republicans are thinking about the future of their party. They know they can’t stay in power as the all-white Party about increasing their chances of getting Hispanics to vote for them. The Republican can’t stay the all-white Party, not without a lot of tricks anyways (like the ones they are already employing – gerrymandering, voter suppression), so they will need to lure some Hispanic voters. Theoretically, what if Trump built the wall , and deports all the ones he said he would (11 million), many industries would be hit hard: agriculture, construction, Home Health, Hotels, Motels, restaurants, landscaping, wine growers, etc. Some anti-immigrants say that this will “free up jobs for Americans.” My experience, Americans don’t take those jobs. When the Great Recession hit in 2009, how many Americans did you see working on the farm or Home Health? Practically none. Americans would rather collect unemployment than do the heavy manual labor that the immigrants do.

Free Trade

Free Trade is a Republican creation, taking root under the Reagan administration. It undermines what our Founding Fathers had started which was, in order to protect fledgling U.S. businesses, the government would levy tariffs on products coming from other countries. The first Free Trade Agreement passed was the North American Free Trade Agreement (NAFTA) which was an agreement between the US, Canada and Mexico. The next Free Trade agreement was a whopper. It was the World Trade Organization (WTO) which brought in tons of more countries, including China. And guess what happened, just as previous President contender, Ross Perot predicted, this created “a giant sucking sound” of American jobs to other countries. By eliminating import tariffs, it made imports much cheaper, American products suffered, businesses closed, and, then, American business owners joined the foreign competition by closing down American factories and sending the jobs to China, Mexico, Vietnam, India, Bangladesh, etc. (where labor is cheap and regulations minimal). Multiple industries in the USA have been hurt, severely injured and many are on life-support. A lot of good paying manufacturing jobs had been eliminated in the United States, which has created a giant vacuum in the US economy – that vacuum is from the loss of the middle class.

Trump had always been a Free Trader, in fact, he has offshored his Trump clothing to places like China and Mexico. He was never against Free Trade until, during his campaign, he had read a survey where people felt it was important that jobs be kept in the USA. During the campaign to whip up this anti-trade talk, Trump had made insinuations that he would raise the tariffs on China.

Buick Envision made in China

Buick Envision made in China

It is interesting that Trump has targeted companies auto companies that have planned to off-shore to Mexico, but does he say anything about China bringing cars into the USA? No. How about the Buick, Chinese – made, Envision? Nope, not a word. Then, there is the new all-electric car, Atieva which just changed its name to Lucid, to make it look like it is American, which is totally financed by Chinese businesses, will Trump comment on this? Nope. Trump will only comment once there is enough publicity to make it worth commenting on it. It is not like he really cares whether it is US made or not.

Will Trump raise tariffs on Imports from China?

So, the question is whether Trump will levy tariffs of 35 or 45% like he threatened. My prediction is No. Trump has too many ties to China (from Time Magazine). He has plans to build 20 Hotels in China over the next 10-15 years and not to mention that the Bank of China is his biggest tenant in Trump Towers. If Trump really infuriates the Chinese government, the Chinese could impound his company that makes Trump clothing and they could jail all of his employees and managers as spies, because totalitarian governments are like that. This is called conflict of interest. Federal policy is being influenced on how it effects hid business personally. Another potential conflict of Interest: The Obama administration has filed a suit against Fiat-Chrysler . Fiat is hoping that can make a deal with the Trump administration. Fiat might be thinking instead of being sued or paying a fine, maybe we could just make a contribution to some Trump business?

So How Will Trump Save American Jobs?

If  import tariffs on Chinese products are not raised, then, how will Trump save American jobs? My prediction is he won’t. What he will do, is what he has been doing since being elected? He will tweet and threaten a company who have had thoughts about building factories in Mexico. (See Ford and Toyota – Washingon Post). Also, see Fiat-Chrysler. In all cases, Trump took credit where no credit was due. He did not change the course of their company. Think about it, do you think corporations make millions of dollars in investment just because of a tweet? This is not a charity auction. (“I bid 30 milllion dolllars to bring jobs back to the USA!”) These corporation have been formulating these plans for years. (In reality, Trump should be thanking Obama for all these actions, but Obama is not one to be a credit hog.) Will he truly go after NAFTA which would hurt his most loyal constituents, the Farmers? Maybe, but Trump has no loyalty and no interest in agriculture.

Will there be serious reforms towards Free Trade? I truly doubt it. Trump will give the outward appearance that he cares. In the meantime, American companies will continue to off-shore, and companies that come back (re-shore of jobs), instead of being little noticed (like the present time), it will be crowed about by Trump who will take all the credit where none was due. One good thing to come out of this is that traditional Republicans like Paul Ryan are looking to decrease taxes on American products that are to be exported, they haven’t gone so far as to say that they will increase tariffs on foreign imports or getting rid of tax exemptions for moving expenses for companies as they move their company from the USA to another country. At least, the Republicans are entertaining some Democratic ideas, but don’t let them hear that.

Other Issues That May effect the Economy

Health Care

Health Care can strongly influence consumer’s pocket book. At the present, Trump and the Republicans are ready to repeal The Affordable Care Act (ACA). If the Republicans do replace the Affordable Care Act with a comprehensive Health Plan that covers everyone, providing good health care at less cost, this would be one of the greatest breakthroughs in the history of American government. But will the GOP take that giant and brave step. Not a chance.

The Evaluation of the Affordable Care Act (ACA)

The ACA did many great things, it insured an additional 20 million Americans, the highest percentage of insured Americans ever in the history of the nation. It controlled expenses, brought down the price of healthcare, paid for preventive health and eliminated exclusion based on pre-existing conditions. But, the ACA wasn’t close to a perfect system. One of the main problems with the ACA was that is was based on the obsolete notion that companies wanted to give their employees health insurance. Today, companies bend over backwards to make sure employees are not full-time and, therefore, does not have to pay benefits). In fact, companies like Macys keeps track to the minute any employee that comes close to qualifying for benefits, and makes sure that it does not happen. My belief was that the ACA was a band-aid to the health care system, to decrease its expenses – to delay the eventual bankruptcy of the nation from health care for several more years.

obamacare-insurance-rates

The Cost of Repealing The Affordable Care Act

There are a couple of problems with the idea of repealing the ACA. One is the Republicans have no replacement policy. Even though Trump says they have a plan and it is close and Everyone will be covered, better care, less cost. This is definitely a case of over-promise and under-deliver. (Especially if Medicare for everybody is off the table.) The other problem with the Affordable Care Act is that it is a Republican idea from the Heritage Foundation. The only “real” thing that the Republicans don’t like about the ACA is that President Barack Obama takes all the credit for it and therefore, for political expediency, it had to be demonized. The idea behind the ACA was to add more competition between the insurance companies (health insurance exchanges) and, therefore, decreases costs. The only wrinkle from the GOP brain trust, thus far, is that the insurance companies can compete across state lines. Wow, what a change. (Oh yeah, Health Savings Accounts which are available in the ACA, great idea). The problem with the ACA and the GOP wrinkle is that insurance companies can drop out of the competition at any time (because many times there are “agreements” between oligopolies) which raises the price of insurance premiums. The fact is the Republicans want to repeal only the name of Obamacare and leave the rest of the system untouched. They don’t want to go back to the extremely expensive  and dysfunctional old system. But that is the only way. So, what the GOP did under the dark of night was to hide the fact that repealing the ACA will cost the nation trillions of dollars, the GOP wrote a resolution that repealed a mandate that The Congressional Budget Office keep track of how much repealing the Affordable Care Act would cost. In the same article, it highlighted:The result of repeal is estimate that $140 billion of federal funding would be cut to states by 2019, resulting in the loss of 3 million jobs by 2021, loss of $1.5 trillion in gross state products and a $2.6 trillion reduction in business output. State and local tax revenues will fall by $48 billion. Obviously, the repeal of the ACA will be very costly, and it is very probable that the average American will be paying a lot more for Health Care. And expect a lot more Americans to declare bankruptcy due to medical expenses. The AP reported than premiums will increase by 25%, that 18 million more people will be uninsured one year after enactment and 32 million more uninsured by 2026. Look at it another way, the Trumpcare model will be so expensive and exclude so many people that it would rapidly drive the nation and individuals into bankruptcy, that the electorate would be willing to give the model of Medicare-for-all model a very serious look many years sooner. (But, the Republicans are very serious of getting rid of Medicare by privatizing it based on a model like Obamacare).

obamacare-repeal-vote-cartoon-luckovich

Energy

Trump has nominated Rex Tillerson, CEO of Exxon, as Secretary of State. What does this mean? Well, detente with Russia, of course. But, with regards to oil, we should expect to see more widespread drilling everywhere including the Oceans, the Arctic and National Parks. Expect more pipeline projects across the United States. And, you will definitely be spending a lot more for gasoline. The price of gasoline is not actually based on supply and demand (as people traditionally think) but rather on speculation (see my blog entry: Wall Street and the price of Oil). The price of oil hit a low in January 20, 2016 at $27 a barrel. Now, with the election of oil friendly politicians, the price of oil has increased to close to $54 per barrel (this is definitely not due to increased demand or decreased supply). It is estimated that in 2017 the cost of oil per barrel will be in the $60s, however, I believe this is severely underestimated and that speculators will push this up much higher. Remember it wasn’t all that long ago when a barrel of oil was $114 (in June, 2014). So, expect to pay a lot more at the pump.

take-me-to-your-leader

Mergers

Trump and the GOP believe in the government staying out of the way when it comes to businesses. We know from history that the natural outcome of unfettered capitalism is monopolies. But since this was outlawed by Theodore Roosevelt, the natural end point is oligopolies (a few companies that own everything). By collusion (oligopolies say instead “a gentleman’s agreement), a few companies can drive prices up without actually competing. For 2017, one can expect many new giant mergers to pass without fight from the Federal government. AT&T with Time-Warner will merger as will Monsanto and Bayer. Even Fortune Magazine has made this prediction with their headline A Trump Presidency Could Unleash a Pharma Merger Boom. So, maybe Pfizer and Allergan could try a try another merger (it was thwarted by the Obama administration). The effect for consumers: Pay More for Less Choice.

merger

Economic Growth

One thing that people forget is that the United States is at near maximal employment, the US economy is very strong (all economist believe this, maybe not political pundits). The economic growth has been steady at 2% per year. Yet, enough people (not a majority) still wanted a change. Here is what Goldman-Sachs predicts for 2017:

Donald Trump promised economic growth of 5-6%. No other economist is coming close to predicting this. It is another case of over-promising and under-delivering. In fact, some are thinking that Trump may slow the economy and Citi group thinks that it is a 50% probability that Trump will not even finish out his term. The next year – there will be growth and it will be all due to the Obama administration. Plus, there is no evidence of weakness in the economy, unlike years previous to The Great Recession. However, after that, it will be Trump’s baby. Sometimes, growth and recession have nothing to do with the President and there are swings that naturally occur or sometimes things occur can effect the economy (9/11). I predict based on the cycles of the economy, that we are due for a “slowing” as we have never seen this many consecutive years of positive growth ever. Certainly, President’s do make a difference. Sometimes it takes several years to really see the effect – but is plain when you evaluate Reagan’s legacy both on the United States and on California, (back when he was governor). The United States and California have never recovered. There is distrust in government, the government tax base is shrinking, infrastructure has almost collapsed. Are there any great infrastructure projects in the USA anymore? (Just compare the USA to China’s incredible growth, we look like Ancient Rome).

Conclusion

Trump’s policies are like Reagan’s. It is Voodoo economics. Bad for everybody except for the 1%. There will be more large corporation mergers, Health Care will become much more expensive, the middle class will have to pay more in income taxes, the Federal deficit will explode, oil prices will increase, the rich get richer and no real change in jobs coming back to the USA. The only potential bright lights for the economy are: Republicans working on adjusting their Free Trade policies and a “big” infrastructure project. The infrastructure project could be done right, but I severely have my doubts with this group of Republicans. As Trump takes the oath of office, he becomes the oaf in office. This inauguration is like scene from a parallel universe, like what if Hitler didn’t attack Russia, or what if we didn’t discover Penicillin. The American public have not grasped that we are living in a great time, but have decided that we needed a “change”. People for some reason can’t grasp the concept that change can be for the worse, sometimes much worse. So, for the people who to vote for a temper-“mental” man without one day of public service, “You reap what you sow”. If the economy goes south, you go bankrupt, you lose your health insurance, well you brought it upon yourself. 70 million Americans voted against your choice. As far as bringing jobs back into the USA, Trump will bring none, not even his Trump clothing line from China.

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Free Press

This last issue does not have to do with economic issues, but there has been a disturbing trend. With the rise of right-wing news groups, Breitbart, Fox News, Alex Jones, it is getting difficult for Republicans to know what is real news and what is fake news. Trump only reads the most extreme right wing news, so he does not know what is real news versus fake news. And if Trump is confronted by the real truth, he belittles the Press. Trump is kicking the Press out of the White House to limit access. He didn’t allow the regular Press to ask questions during his so-called “Press Conference”.He has threatened to sue the Press or jail them like other dictators. In the meantime, they have hired KellyAnne Conway as the Reich Minister of Propaganda (ala Joseph Goebbels). I believe that if he can intimidate the Press, then he can intimidate any Americans who disagree with him. My idea is that all networks should fact-check in real time – which means while a political participant or President speaks, at the same time, in close captioning – it says whether the person is lying. It would be easy because almost all of these TV shows are tape-delayed.

free-pressWe need to support the Free Press and they should be free from the intimidation of a dictatorial President. And we need to stay strong against the Trump and his trolls who threaten violence and vitriol on all who disagree with Don the Con.

 

07
Jan
17

Following Up: More on Why Tariffs Can Bring Back Much U.S. Manufacturing

What a shame that David Barboza’s New York Times article on all the help from government in China that powerfully shaped Apple’s investment decisions was published during the holiday. So starts the follow up story by Alan Tonelson. Barboza’s article shows exactly how China’s hands-on approach to economic policy has been a major success to uplifting China’s status to the number one economy in the world. Tonelson opines that it is tariffs than can bring U.S. manufacturing back.

Source: Following Up: More on Why Tariffs Can Bring Back Much U.S. Manufacturing

Following Up: More on Why Tariffs Can Bring Back Much U.S. Manufacturing

What a shame that David Barboza’s New York Times article on all the help from government in China that powerfully shaped Apple’s investment decisions was published during the holiday week – when so many Americans are paying so little attention to the news . A Pulitzer-worthy piece of reporting, it also adds to the abundant evidence debunking two critical claims often made about the globalization of manufacturing.

First, the article makes clear how much offshoring of American industry has taken place due to foreign government decisions that clash violently with the idea of “free trade.” And second, it exposes further weaknesses in a related, though more recent, claim that most offshoring during the 21st century has stemmed not from foreign tariffs and similar interventionist economic policies, but from technological innovations that enable effective management over far-flung international manufacturing operations. This second claim is especially important, since it’s also been used to demonstrate that American tariffs will be unable to reverse this offshoring significantly.

made-in-america1

Apple’s chief manufacturing partner in China, Foxconn, claims that the government supports it receives in the PRC are “no different than similar tax breaks all companies get in locations around the world for major investments.” And Barboza mistakenly seems to confirm this argument, characterizing China’s various market-distorting practices as “not unlike” those “in other countries, “including the United States, where states and cities vie for companies” – except that they are much greater in scale and much more secretive.

But the author himself provides key examples to the contrary. For instance, the Chinese province in which Apple’s manufacturing is concentrated is actively encouraging Foxconn to export. And when the company meets these targets, it gets hefty bonuses. Exports were also fostered via rebates for the value-added tax Foxconn would otherwise pay for at least the first five years of its operation.

Nor was China’s central government simply a bystander. Of course, the value of its currency was manipulated – which artificially lowered the price of goods China exported (including those from factories affiliated with foreign companies like Apple) and raised the price of imports for Chinese individual and certain business consumers. But there was also this scheme described by Barboza:

“Since China began opening its economy to the outside world in the 1980s, the government’s policies have encouraged manufacturing and exports with the creation of special economic zones. But those same policies have discouraged domestic consumption of overseas brands.

“Most products made in China by big multinationals had to be physically shipped out of the country and then brought back so that they could be taxed as imports — hence, the U-turn employed by many companies.”

Revealingly, these arrangements stayed in place well into the 21st century, and similar export-focused zones can still be found all over China.

Barboza’s reporting also bears out arguments I made in a post last week on this subject – that technological change has been a necessary, but not sufficient, condition for the export of advanced manufacturing capacity, and that much offshoring was encouraged by the guarantees of wide-open access to the U.S. market provided by trade policy decisions like backing China’s entry into the World Trade Organization.

As the author notes, “When Apple first moved into China, the country was largely a low-cost production site.” That was in the late-1990s. He also quotes a former long-time executive for Wal-Mart and other multinationals as stating that most of these firms’ China investments represented “supply chains good at making things in the East and selling them in the West.”

China’s domestic market has of course developed impressively since then. But as I observed last week, the continuing importance of exports to these firms’ business models has been spotlighted by their loud protests of Donald Trump’s plans to erect trade barriers against production they aim at American customers.

But it’s also crucial to point out that this initial offshoring of production set in motion a dynamic with huge future implications for America’s economy and for today’s claims about “knowledge-based” offshoring of scientific and technical knowhow – and jobs – that supposedly are immune to trade policy overhaul. Simply put, the offshoring of production made the export of manufacturing’s more knowledge-based activity inevitable in case after case.

The two main reasons: First, super low-cost developing countries are full of smart, people that are highly educable, and trainable by multinational corporations; and second, manufacturing production and innovation rarely exist in isolation. Their relationship is typically interactive, and fueled by continuing and close contact between the researchers and engineers and product designers etc who come up with new products and processes, and the production supervisors and other workers who need to translate their ideas into real world products.

And don’t take my word for it. Listen instead to the late Andrew Grove, founder of Intel. Or Hank Nothhaft, retired Chairman and CEO of Tessera Technologies. Or former Allegheny Technologies executive Jack Schilling. Or the Defense Science Board (both quoted in this 2010 study).

In other words, Apple has found success in locating its manufacturing “brain work” thousands of miles from its production work.  But that formula appears to be the exception, not the rule, in manufacturing, including in advanced manufacturing.  And interestingly, this tech giant has recently announced it’s building its first two research and development centers in China.

So the United States has a fundamental choice ahead of it.  It can keep listening to multinational companies and their hired guns, pretend that the keys to long-term prosperity move around the world purely or even largely due to market forces, and run ever greater risks of sliding into second-class status.  Or it can finally recognize Washington’s immense potential power over globalization, and use it to make sure this process works for its own citizens and domestic producers as well.


Editor’s Note

Most economists are still Free-Trade advocates even though almost all economists have seen the devastating effect of NAFTA and the World Trade Organization which has caused havoc on the US economy: severe losses in US manufacturing, a decreasing middle class, an exploding Trade deficit and crippling effects to the many small towns across the US who had their manufacturing plants offshored to China and Vietnam. These economists love to use the derogatory term “Protectionism” if anybody interfered with the do-no-wrong plan of Free Trade. Even if any policy saved American jobs, improved the economy, made America a great manufacturing power again – all of these great things would be belittled by the term “protectionism”. It is these same economists who are also skeptical that raising tariffs would indeed create more jobs, more manufacturing and a better US economy. But, of course, these tariffs would do this. It has been proven over and over again for centuries. That is why our Founding Fathers imposed tariffs on imports, so nations like England and the Netherlands wouldn’t swamp our businesses with products that would damage our fledgling US businesses. If the U.S. government increased import tariffs, it would greatly reduce companies wanting to offshore. And if we could get rid of the tax breaks that make it easier for US companies to offshore, this would also keep businesses here. Like it or not, import tariffs are the only way to level the playing field for American businesses and the only way to forever stop businesses from abandoning the United States. Don’t use the derogatory word “Protectionism” use the term ABSP – American Business Survival Policy.




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