PRC‘s Trump Appeasement: Import Expo 2018

♠ Posted by Emmanuel in , at 11/29/2017 04:42:00 PM
He likes military pomp, but does Trump also like "import expos"?
I almost forgot about this post: In the run-up to Trump's recent swing through Asia, Chinese apparatchiks devised something that they hoped would appease the orange-colored menace. Since he keeps complaining about China's massive trade surplus with the United States, why not host an "import expo" designed for foreigners to show their wares in the mainland? 
In response to questions from Bloomberg News, China’s Commerce Minister Zhong Shan laid out a list of measures being undertaken that could help narrow the $327 billion gap, America’s largest with any nation. China will host its first-ever import fair in November next year, and will roll out tax, fiscal and administrative initiatives aimed at helping foreign firms sell more into what is becoming a big and sophisticated consumer market, Zhong wrote.

Slated for Shanghai in November 2018, the China International Import Expo (CIIE) reflects China’s “sincere wish to open its market to the world and its sense of responsibility as a big country to push for an open world economy,” he said. The “In the coming five years, (China) is expected to import over $10 trillion of goods and services,” Zhong wrote.

The import fair “with its potential to increase exports for countries around the world and enable the trade and economic cooperation between China and the rest of the world, will offer broad prospects for development.” In the past half decade, China’s imports from the rest of the world have totaled about $8.9 trillion worth of goods and services, according to IMF data.
This expo is designed to appease other PRC critics as well. Lest we forget, they are legion aside from the Americans:
U.S. and European trade officials have complained for years that despite China’s promises to open up, tariffs, intellectual property theft, forced transfers of technology and other rules that target foreign companies make doing business there difficult. The access afforded Chinese companies into their own markets provides a further rub.

The deficit “has to come down,” Trump said Monday. “And that has to do really with free trade, fair trade, or reciprocal trade. And frankly I like reciprocal the best of the group.” Still, the countries remain at odds over the causes and impact of the trade imbalance. China blames a “surplus transfer,” which Zhong says is the result of how global trade is organized. China frequently acts as the final link in a manufacturing chain where parts are made in multiple countries before being finally assembled -- and exported -- from there.
Is this trade expo ploy working? Earlier today, the US Commerce Department hit the PRC with a trade investigation concerning aluminum not originating from industry complaints. This is an infrequent occurrence:
The Trump administration, invoking powers the U.S. hasn’t used in more than a quarter century, began a probe into Chinese aluminum imports that could lead to tariffs. The Commerce Department is taking the unusual step of initiating the case itself, rather than going through the regular route of starting an investigation based on petitions filed by U.S. companies. Shares in Alcoa Corp. and Century Aluminum Co. jumped on Tuesday.

The investigation covers imports in common alloy sheet, which totaled more than $600 million last year, and was initiated using authority granted by the Tariff Act of 1930, the Commerce Department said Tuesday in a statement. China responded Wednesday by saying the move was “rare in the history of international trade.”
Go figure. If trade relations worsen further, I'd doubt whether the Chinese would be as enthusiastic about this bit of trade appeasement After all, it's still scheduled to be held in November 2018--a long, long time from now in the ever-changing global political economy.

Trump's Bigotry & Disappearing US Int’l Students

♠ Posted by Emmanuel in , at 11/22/2017 05:25:00 PM
Make America White Again, university without diversity edition. 
Commentators often use "nativism" as a euphemism to describe Trump's apparent self-superiority over non-white people. Often couched by fellow bigots in terms of "preserving cultural identity" or "protecting national security," this irrational fear of others who do not look like you is dragging an entire country into the mud in more ways than one. The United States' global reputation is taking a hit worldwide as only 22% of the rest of the world has confidence in the America Firster. At least Trump knows what his base looks like.

Perhaps unsurprisingly, would-be international students studying in the United States are now keeping away in droves--and this is only his first year in office. I can only imagine how up to (heaven forbid) four more years of Trump's homophobic, racist and xenophobic discourse and policy will affect those previously intending to study Stateside. The cheek of these uppity coloreds aspiring to a tertiary degree, Trump likely thinks...
The number of newly arriving international students declined an average 7 percent in fall 2017, with 45 percent of campuses reporting drops in new international enrollment, according to a survey of nearly 500 campuses across the country by the Institute of International Education. Experts cited an uncertain social and political climate in the United States as part of the reason for the decline in enrollment.

“It’s a mix of factors,” said Rajika Bhandari, head of research for the institute, which collects data on international students in cooperation with the State Department. “Concerns around the travel ban had a lot to do with concerns around personal safety based on a few incidents involving international students, and a generalized concern about whether they’re safe.”
Whether justified or not, safety perceptions are on the wane. For instance, Indian students who've been plentiful in recent years are now thinking twice, especially after the murder of a US-educated compatriot working Stateside:
Dr. Godard said fewer students came from India partly because of a currency crisis in the country, but also because of concerns about the Trump administration’s travel ban affecting Muslim countries. India was not on that list, but Dr. Godard said many of the university’s Indian students were from Muslim areas of the country and were concerned about the ban.

“Although India wasn’t listed as one of the countries, certainly feeling welcome and safe and all those things is important,” he said. “It would be na├»ve to say that wasn’t a contributing factor.” Prospective students from India — interviewed shortly after last year’s presidential election — have expressed fears about the racial climate in the United States, concerns that might have been heightened after the shooting death in February of an Indian engineer in a suburban Kansas City bar.
With so many other options at the present time--Australia, New Zealand, Canada and the "discounted" UK with its weak currency post-Brexit referendum, why go to Trump's America for the privilege of paying top dollar for racial abuse? Sure, there are white supremacists in all those other countries as well, but the difference is that the government isn't actively trying to make you uncomfortable.

Make no mistake: international students paying full fees help keep any number of US educational institutions afloat. Couple the loss of such students from Trump's hardly-concealed white supremacy with reduced funding for universities due to his ongoing "war on science" and I'd bet their global standing will take a hit over the next few godforsaken years.

But hey, there's a bright side to the story: the Canadians seem to be doing rather better as sensible international students go there instead to avoid TrumpLand:
Some of Canada's biggest universities are beginning the new school year with a record number of international students on campus. The steady upswing in foreign applicants began several years ago, then started to spike after the U.S. presidential election in 2016. The challenge for the Canadian government now is to maintain that trend amid competing countries, and to encourage more from the talented pool to stay on as permanent residents.

The University of Toronto, Canada's top draw for international students, enrolled 17,452 international students in undergraduate and graduate programs last year, making up about 20 per cent of the overall student body. That compares to 7,380 international students comprising about 10 per cent of the total student population a decade ago, in 2007.
There's no missing the Trump factor here:
The university's steady increase became a spike after U.S. President Donald Trump was elected." Clearly there are things about the international situation — worries about stability, Brexit and the U.S. political environment — that have changed or increased international students' interest in looking beyond their own countries and beyond the U.S.," said Richard Levin, executive director of enrolment services and university registrar.

"Now in places like that, students are looking for alternatives and Canada is presenting as a good one in terms of stability, safety and inclusiveness." According to data provided by Universities Canada there has been a sharp increase in both applications and website traffic from the U.S. and abroad since the 2016 U.S. election, with many seeing a 20 per cent jump or more in applications.

Norway's $1T SWF & 'Divesting' From Oil

♠ Posted by Emmanuel in , at 11/17/2017 05:23:00 PM
Make no mistake: Norway's gonna cover you in oil for the foreseeable future.
Financial markets are currently in a tizz over Norway's sovereign wealth fund (SWF) investigating the possibility of divesting entirely of its oil and gas stocks. We aren't talking small beer here since it is a $1 trillion fund amassed over the years largely from Norway's oil and gas royalties. Believed to hold an incredible 1.5% of the world's floating stock valuation, it is a relative giant in the business world. With the continuing drive among progressive (read: non-American) countries to move toward renewable energy sources, this announcement is being made out to be the death knell of fossil fuel production--at least in civilized parts of the world not run by reality TV stars and similar riffraff:
Norway, which relies on oil and gas for about a fifth of economic output, would be less vulnerable to declining crude prices without its fund investing in the industry, the central bank said Thursday. The divestment would mark the second major step in scrubbing the world’s biggest wealth fund of climate risk, after it sold most of its coal stocks.

“Our perspective here is to spread the risks for the state’s wealth,” Egil Matsen, the deputy central bank governor overseeing the fund, said in an interview in Oslo. “We can do that better by not adding oil-price risk.”

The plan would entail the fund, which controls about 1.5 percent of global stocks, dumping as much as $40 billion of shares in international giants such as Exxon Mobil Corp. and Royal Dutch Shell Plc. The Finance Ministry said it will study the proposal and decide what to do in “fall of 2018” at the earliest.
It's being portrayed as the canary in the coal mine...or the turtle in the offshore, if you prefer as environmentalists laud the move:
While the fund says the plan isn’t based on any particular view about the future of oil prices or the industry as a whole, it will likely add to pressure on producers already struggling with the growth of renewable energy supplies...

Built on the income that western Europe’s largest energy supplier has generated for more than 20 years, the fund’s investment decisions are guided by ethical rules encompassing human rights, some weapons production, the environment and tobacco. Norway’s fossil-fuel investments are coming under increasing scrutiny from a public that aims to be a climate leader without jeopardizing one of the world’s highest standards of living...

But environmental groups praised the plan. “The world is changing fast, and it’s very risky to put too many eggs in the same basket,” said Marius Holm, the leader of the Zero Emission Resource Organisation. Sony Kapoor, a former adviser to Norway’s government, said the plan is “a belated victory for common sense over the powerful oil and gas lobby in Norway,” calling on the fund to now boosts its “green” investments at least tenfold.  
The rub, though, is that Norway has little interest in shutting down the oil fields its government draws substantial revenues from. As mentioned, a fifth of all state revenues still come from oil and gas. As such, the explanation government officials provide for making this move is actually an honest one. Since the national purse is already exposed to oil prices in a big way, why should it not diversify away from the same industry with its SWF? A true rainy-day fund should not rain on your parade at the same time that economic downturns occur. While the SWF does claim to use ethical criteria in making investments, it would be hypocritical of the SWF to mention environmental reasons for its divestment when the government receives 20% of its revenues from oil and gas.

As such, I would be wary of those portending a Norwegian SWF portfolio readjustment as the "End of Big Oil" or the start of such stocks gradual demise a la Big Tobacco. While there are ethical and environmental reasons bringing us closer to such a point, this move by the Norwegians is probably just another milestone rather than the final nail in the coffin. 

TPP - USA = CPTPP

♠ Posted by Emmanuel in at 11/15/2017 02:50:00 PM
If you can't spot the sucker at the trade negotiating table, then it's probably Trump.
Whoa, that's some weird math we've got to deal with in today's international political economy: the fewer countries that are negotiating an FTA, the longer its name becomes. Due to Trump's intransigence on trade, the United States seems set to be left farther and farther behind in terms of economic integration. At the recently-concluded Asia-Pacific Economic Cooperation gathering in Vietnam, the remaining eleven countries decided to continue with efforts to seal a deal.

With the United States out of the picture, though, it looks like it's not going to have the same exact terms. Rather, the parts of TPP that were put in largely at the behest of the United States are going to be put in abeyance for now should a "Comprehensive Progressive Trans-Pacific Partnership" deal be finalized:
The 11 remaining members of the defunct Trans-Pacific Partnership (TPP) on Saturday reached an agreement to proceed with the trade pact under a new name and without the United States, as China, which is not involved, said the revised arrangement would not affect initiatives backed by Beijing.

Vietnam’s Industry and Trade Minister Tran Tuan Anh said on the sidelines of the Asia-Pacific Economic Cooperation summit in Da Nang that following three days of negotiations, ministers from the countries involved had decided to call the new regional free-trade arrangement the “Comprehensive Progressive Trans-Pacific Partnership. We have reached agreement on a number of fundamentals,” he said.

Tran said the spirit of the former TPP agreement would endure, maintaining its high standards regarding trade practices, but the members would suspend certain clauses in light of the new situation. The countries have yet to reach consensus in four areas so a date for signing the new deal has yet to be finalised.

Tran said: “The ministers will have negotiations to discuss the remaining technical issues that have not been agreed yet as well as the legislative matters needed to put the agreement into implementation.” Japanese Economy Minister Toshimitsu Motegi hailed the Da Nang talks as a “success”, saying they had managed to limit the number of suspended items to 20.
Obviously, CPTPP is a misnomer since it would leave a lot of the bits from the original out. An important point is that the Southeast Asian countries participating in the original TPP negotiations, Malaysia and Vietnam, were most eager to participate to improve their access to the US consumer market--still the world's largest. Without that "carrot" on offer, those two and likely the other developing countries were less willing to take the "stick" of accommodating US preferences that were largely of benefit to the United States. 

I'll take the opportunity to also point out that the United States doesn't exactly "stand still" by sitting out TPP negotiations. Insofar as countries in it will gain improved market access to each other while the United States does not, America stands to lose out. I'm thinking here of the likes of  Australia and New Zealand which may gain market share in burgeoning Asian markets for agricultural products at the United States' expense:
Once the new deal is implemented, American farmers could be left at a disadvantage: The agreement seeks lower tariffs for goods traded among members, the bulk of which are Asia-Pacific nations. That means non-member countries, such as the U.S., will still face high rates when shipping to Asia-Pacific. "It's going to really benefit farmers and agricultural producers here in Asia-Pacific and not the U.S.," [trade specialist Arthur] Okun told CNBC.
Ditto for American SMEs:
American small businesses will also feel the pain, Okun explained. Many U.S. small and medium-sized enterprises depend on the exports of goods and services to Asia. They will likely become less competitive as a result of exclusion from the new TPP, which seeks to facilitate easier access to regional supply chains for SMEs.
So, above all the ways the United States is screwed with Trump, this is probably going to be the cherry on top in the medium- to long-term. Then again, you don't expect the buffoon to be there forever. In fact, he may soon be removed from office due to his dalliances with Russians. If so, Vice-President Mike Pence is an avid free trader by contrast who'd probably complete TPP quickly. The reason why TPP's America-friendly provisions aren't being replaced altogether is partly based on the expectation that there's a good chance that a trade-friendly American leader will assume the presidency and make the TPP whole again. Perhaps during the 2020 elections, but right now, the rest of the world has literally left America behind. 

Brexit, Outmigration & Rotting Cornwall Crops

♠ Posted by Emmanuel in , at 11/12/2017 06:54:00 PM
"Erm, we didn't really mean it, mate."
Surely, this must be the dumbest Brexit headline yet. Cornwall in the United Kingdom is a rural community which has felt left out by the rest of her majesty's realms. Throw in a less-educated populace and you can pretty much guess how it voted during the Brexit referendum: they wanted out. British jobs for British workers and so on and so forth. They must've been in seventh heaven when the Brexiteers won and the UK won back its "independence," whatever that means.

Or maybe not. Recently, Cornwall has been petitioning the government to--get this--bring back the accursed furriners since there's nobody left to do the agricultural work. Having been told to leave the natives behind, it seems the locals aren't keen on, well, rural people engaging in rural livelihoods. In border American states, the saying is that there aren't enough gringos willing to do the backbreaking work. What do we have here? Not enough Anglo-Saxons to do the harvest?
Crops in Cornwall are said to be "rotting in the fields" due to a lack of migrant workers to harvest them in the wake of Britain's decision to leave the European Union. The county council has approached the Government to request it implement area-specific migration laws after Brexit, will help to deliver skills to the area.

Cornwall voted to leave the European Union in last year's referendum by more than 56 per cent, considerably above the national average. The area is home to 17,000 EU nationals, making up 3 per cent of the county's population. But research commissioned by the council found that, since the Brexit vote, staffing levels for farms had dropped to 65 per cent of what would normally be required.
What, now they want the accursed furriners back in? I don't want to say these Brexiteer ingrates had it coming, but this is the thanks the EU gets for trying to improve living conditions in one of Europe's (but for how much longer?) less well-off regions:
Let’s not forget that MPs assured Cornish voters that the levels of EU funding would remain the same if it voted for Brexit – which, just like the numbers on that infamous big red bus, is now known to be another lie. EU money has been crucial to the development of the region, assisting the introduction of renewable energy and new trains. EU funding also benefited our lifeblood, the tourism industry, with money helping build the Eden Project and cleaning up the sea on our beautiful beaches.

The £53m received that was spent on installing super-fast fibre broadband was not only important for business growth but also for connecting communities and individuals in very rural areas who were incredibly isolated (one of the reasons behind the county’s notoriously bad mental health figures.)
My view remains essentially the same: those who voted for Brexit were misled into believing that their interests--economic and otherwise--were better served by leaving the European Union. It appears that they're finding the opposite is true when the UK is still not even outside the EU tent. Although I remain convinced that it's more likely that the UK will not leave once the true costs become even more apparent, think of how much worse things will become outside. 

Fortunately, this whole Brexit idiocy becomes less likely with each passing day that the government does its comedy improvisation shtick with its EU counterparts.

Globalization According to Xi & Trump

♠ Posted by Emmanuel in , at 11/10/2017 04:26:00 PM
China's already done the failed Great Wall schtick, but others are certainly welcome to try.
The purpose of rhetoric has been studied extensively in the social sciences. By saying certain things, what do people intend to achieve? Of course, what people say does not always correspond to what they do. Indeed, people say things they do not mean. That said, the weight of what some people say matters more than others. Today's case in point are the USA's orange-hued leader Donald Trump and China's newly-reinstalled "maximum leader" Xi Jinping.

The commentariat has noted how, since the beginning of the year, Xi seems to have taken up the mantle of the globalizer in the place of an ever-more inward-looking America in the age of Trump. The ongoing APEC meeting in Vietnam was a chance to hear both leaders on this topic back-to-back, and the contrast in rhetoric was fascinating. Xi expanded on his vision of economic integration as one of other countries--especially those in the Asia-Pacific--getting on board the China train. To no one's surprise, Xi did not mention heavy-handed PRC actions to assert dubious territorial sovereignty:
Xi painted a picture of a global order that would bring collective benefits, saying, "let more countries ride the fast train of Chinese development." [...] Xi’s speech glossed over regional unease over China’s rising clout while pledging free trade and stability [...]

Xi [...] said “the concept of globalization should pay more attention to openness and tolerance, while the direction should focus on balance.” China will “continue to build an open economy and work hard to achieve mutual benefits,” he added. “Opening up will bring progress and those who close down will inevitably lag behind.”
So, it was essentially more Xi the Globalist (With Chinese Characteristics). That is, there are hard to reconcile elements of maintaining party authority while fostering greater openness. Certainly, would-be investors in China would beg to differ with Xi's characterization of China becoming more open to unhindered operations by foreign concerns:
The comments signal a continuation of Xi’s drive to cast himself as a champion of global free trade as the Trump administration challenges China’s barriers to access for foreign companies. Earlier this year, Xi launched his push-back against protectionism in a speech to billionaires and government officials gathered at the World Economic Forum in Davos, Switzerland.

Still, while Xi has spoken strongly in support of the global trading order this year there’s been little tangible evidence of Beijing following through. In a January survey of 462 U.S. companies by the American Chamber of Commerce in China, more than 60 percent expressed little or no confidence that China would open its markets in the next three years. China still ranks 59th out of 62 countries evaluated by the Organization for Economic Cooperation and Development in terms of openness to foreign direct investment.

In a major speech aimed at domestic audiences at China’s 19th Party Congress in October, Xi’s language on reform stuck closely to previous pledges while promising to make sure that China’s Communist Party "leads everything."
Now, let's get to Trump the Globophobe. Unsurprisingly for a third-rate businessman whose companies have gone bankrupt four times at last count, he's all in favor of protecting America from foreign competition. Let the WTO bashing begin! Trump is at least honest in making no pretensions about seeking to put America first relative to all potential trade partners:

Trump dwelled on regional flash points while criticizing the World Trade Organization and offering trade on America’s terms. Trump’s speech cataloged the ills of globalization, saying too many countries had flouted the rules for years with impunity, harming American workers and U.S. companies. “We are not going to let the United States be taken advantage of anymore,” Trump said [...]

Trump too laid out a path for how other countries could boost their economy: He offered economic partnerships with the U.S. but only through bilateral trade pacts, and he pledged never to again join a multilateral deal like the Trans-Pacific Partnership, which would have bound the U.S. to 11 countries as a bulwark against China.

"I will make bilateral trade agreements with any Indo-Pacific country that wants to be our partner and will abide by the principle of fair and reciprocal trade," Trump said. Nations already have doubts about the U.S. commitment under Trump. After Asian countries tied up with America on TPP, Trump tore up the deal -- leaving them wondering if Trump was turning his back on the region as he pursued an "America First" agenda. When the U.S. enters into a trade relationship, Trump said, “we will from now on expect that our partners will faithfully follow the rules, just as we do. We expect that markets will be open to an equal degree on both sides and that private industry, and not government planners, will direct investment. For too long and in too many places, the opposite has happened.”
Insofar as Trump & Co. want to pull a fast one on you straight to your face, is it any wonder that countries in the Asia-Pacific are not exactly lining up to be one of Trump's patsi...I mean, valued trade partners?
“I doubt Trump will have many takers for bilateral deals, particularly given that he defines fair trade as the absence of a deficit,” said David Skilling, director of Singapore-based advisory firm Landfall Strategy Group. “Apart from Singapore, most Asian economies run sizable trade surpluses with the U.S.,” he said.

“It is not a very well thought-out strategy. A transactional, zero-sum ‘America First’ approach won’t do much to advance U.S. interests in the region,” he said.
In some ways Trump is actually more honest than Xi. Trump says the only trade deal the US can abide by is a bilateral one in which the US runs a surplus (that's easier for the US to end if it's displeased by running a trade deficit). That these terms are so incredulous is counterbalanced by the lack of pretensions about fairness. On the other hand, Xi premises economic cooperation based on mutual benefit when, in reality, it mainly seeks to further entrench Chinese interests in the region. Once accomplished, it will be harder to escape the PRC's gravitational pull.

Ultimately, then, both are self-interested: Trump's USA explicitly so, Xi's China surreptitiously so by cloaking outreach in terms of altruism the US itself once used. In many ways, the world has indeed been turned upside down.

Can Trump Increase Japanese Car Plants Stateside?

♠ Posted by Emmanuel in , at 11/08/2017 03:36:00 PM
Actually, Japanese-branded cars "Made in America" are already plentiful. The point is making even more.
Here's a welcome dose of reality--even if just a little--from a person mostly devoid of it: Donald Trump lives a considerable amount of the time in cloud cuckoo land where he hatches his most harebrained ideas--global warming is a hoax invented by the Chinese, the Trans-Pacific Partnership is a backdoor to the PRC conquering the United States, we're going to build a wall along the US-Mexican border and get the Mexicans to pay for it, and so on and so forth.

To be fair, the idea of getting the Japanese and Koreans to buy more US-made automobiles is a bipartisan obsession since Clinton and Obama had the same idea at one time or another. As I've repeatedly pointed out, though, it would help if American car manufacturers actually designed cars meant for these markets. Insofar as they haven't done so, you hardly see any American makes in these countries unlike, say, German ones. On his swing through Asia--why does a guy who pulled out of the Trans-Pacific Partnership meant to draw America closer to the region want to do there anyway--Trump, however unlikely, had a rare moment of insight.

Instead of asking Asians to buy American crapmobiles--which is as silly as it sounds--why not have Japanese carmakers make more cars Stateside and create more (American) jobs in the process as well? It sounds reasonable enough...
“Try building your cars in the United States instead of shipping them over,” Trump implored during a briefing with [Japanese] business executives before asking, “That's not rude?”

Trump's comments echoed his previous jabs, but they were notable because he lobbed them publicly during his visit here. And they’re an indication that he will not let his close relationship with Japanese Prime Minister Shinzo Abe quiet his long-standing concerns about trade and manufacturing.
OK, Trump's phrasing could be improved, but hey, we'll take what we can get when it comes to this guy. As the Japanese Automobile Manufacturer's Association (JAMA) points out--see the graphic above--Nippon's automakers already have a considerable presence making cars Stateside. It's a rejoinder to Trumpist Japan-bashing as if it were the 80s all over again since Trump seems to be stuck in that decade:
The Japan Automobile Manufacturers Association’s (JAMA) U.S. office has released its 2017-2018 Contributions Report. Our 2017-2018 report celebrates JAMA member companies’ 35 year history of investment and innovation in the U.S. and features updated U.S. contributions data showing that JAMA members produced a record-high of nearly four million vehicles in the U.S. in 2016, a more than tenfold increase since the mid-1980s. It also shows that JAMA members provide over 90,000 direct U.S. jobs in manufacturing, R&D, and other roles; an eightfold increase over the same time span.
So I'm not going to split too many hairs here since getting Trump to say something with a reasonable semblance to reality is hard enough. He could have said, diplomatically, that Japanese automakers ought to continue the great job they've been doing of building cars Stateside and do even more of it.

After all, the Japanese will never buy US-made cars in large quantities. 

Nike Automation: Threat to the Asian 'Sweatshop'?

♠ Posted by Emmanuel in , at 11/05/2017 06:58:00 PM
Will automation cause labor's share of production costs to diminish ever further?
I have a whole @#$%load of books I've been trying to find time to read concerning the threat of automation to the future of human work. All the same, I must point out that many of the concerns cited in this literature may be of lesser importance to those of us from developing countries since the perspective most of these authors are coming from is white collar work in the developed world. So, their relevance may be limited.

Still, that's not to say more relevant stuff is unavailable. The International Labor Organization (ILO) has a fairly alarming study noting that up to 56% of all work in populous Southeast Asian countries is at threat of disappearing due to automation. As Western multinationals improve their manufacturing processes to eliminate the need for workers, they can move operations back to their home countries via "reshoring":
Yet, when it comes to implementing new technologies in the workplace, ASEAN enterprises tend to not stand at the forefront. They are perceived as followers of technology adoption rather than innovators. In developed economies, recent improvements in automation is leading to reshoring, in which production is brought “back home” for labour-intensive manufacturing sectors, such as garment and footwear, electronics, and automotive, among others. ASEAN Member States are lagging in their responses to this trend. As aforementioned, the costs of these technologies are rapidly falling and their application is becoming more commonplace. Consequently, ASEAN could experience huge setbacks in development and growth if increased reshoring is not countered.
Footwear manufacture is especially vulnerable. As it so happens, the FT has a new article detailing how one corporation is attempting to, well, just do it. Nike's focus on robotics may render unnecessary all the gluing and stitching work currently being done in making sneakers:
Since its debut in 2012, the Flyknit Racer has been considered a technological breakthrough. Produced with a special knitting machine, it uses less labour and fewer materials than most running shoes. But now the same material has become the basis for an even more radical experiment that has the potential to both upend the sports and leisurewear industry and accelerate an important trend in globalisation...
Since 2015, Nike has been working with Flex, the high-tech manufacturing company better known for producing Fitbit activity trackers and Lenovo servers, to introduce greater automation into the otherwise labour-intensive process of making a shoe. Flex’s facility in Mexico has become one of Nike’s most important factories, responsible not just for a growing slice of the company’s production but also for a string of innovations to be rolled out across Nike’s supplier base, such as laser-cutting and automated gluing.

For Nike, the shift to greater automation has two huge attractions. By driving down costs, it could lead to a dramatic improvement in profit margins. It would also allow the company to deliver new designs more quickly to fickle, fashion-conscious customers at a premium. A pair of Nike Roshe shoes costs $75 without Flyknit uppers, compared to as much as $130 with Flyknit.
Remember when spoiled Westerners complained about working conditions at Asian "sweatshops" under contract to Nike? Would it be any better for Asian development if Nike stopped employing Asians altogether? I guess we may be finding the answers to those quite soon:
The tie-up with Flex also has a much broader resonance. Over the past two decades, Nike has been one of the pioneers in outsourcing production to the developing world, where it has been the subject of accusations of using child labour and other workforce abuses. Yet many of those countries now fear that robots will deprive them of their shot at industrialisation. If Nike pushes through with a move to greater automation and ends up cutting production in Asia, the company could find itself at the forefront of a different political controversy.
Time marches on. Innovation may cause Asian countries moving up the development ladder to adjust their strategies. Still, I believe that production is only half the picture since these populous developing countries are increasingly lucrative consumption markets themselves with growing middle classes able to afford brand-name sneakers. So, not all manufacturing will probably be headed back for America--or Europe for that matter in the case of Adidas, Puma, etc.

Can Trump Make Koreans Buy US Crapmobiles?

♠ Posted by Emmanuel in , at 11/01/2017 06:10:00 PM
Hmm...why don't Asians like these pimped-out American rides?

The obvious answer is no, but that's never stopped any US president from trying. From Obama to Trump and beyond, the Asians should but American refrain never stops. For the longest time, the United States has been trying to cajole countries it runs large trade deficits with--especially those it imports a lot of vehicles from--to buy more automobiles "Made in America." The problem has always been that while non-American automakers have built vehicles designed for the US market to be sold Stateside [want a biggie-sized Toyota pickup?], the opposite does not hold true. That is, huge, gas guzzling SUVs built by German, Japanese or Korean automakers sell well in America because that's what Yankee customers desire. There are no mysteries here.

However, the opposite does not hold: American automakers have not really bothered to do the market research as well as the development necessary for selling cars in Germany, Japan and Korea. Witness GM leaving Europe entirely, or American automakers continuing troubles selling models in Japan and Korea. This should be an open-and-shut case of "no s--t": American automakers insist on selling virtually the same behemoth gas guzzlers in Asian markets which aren't particularly suited there given narrower streets, smaller parking spaces, and more highly-taxed fuel.

But don't tell that to US Trade Representative Robert Lighthizer though, who thinks we're stuck in the 80s when he was last in government:
U.S. efforts to narrow its trade gap will probably focus heavily on the auto industry, meaning the administration may push to increase the number of American-made cars that can be sold in South Korea, Stangarone said. Currently only 25,000 cars that meet U.S. rather than Korean safety standards can be sold in the country, which is a source of tension considering the U.S. has an $18.8 billion trade deficit in vehicles.
Remember too that Europeans have no difficulty selling in "protectionist" Asian markets.

Totally retro, Lighthizer dude. Maybe these Asians simply regard US automobile products as unattractive? To me that's the main reason for this so-called trade problem.

Climate Exodus, the Caribbean Residents' Dilemma

♠ Posted by Emmanuel in , at 10/22/2017 06:26:00 PM
If these scenes will just keep replaying, shouldn't you leave for good?
The recent hurricanes which leveled vast swathes of the Caribbean islands, Irma and Maria, have raised concerns among residents about how viable it remains to live there. Certainly, others like their big neighbor to the North aren't helping matters. Climate deniers like Trump likely make their future bleaker. Saying global warming is a hoax means denying sea levels are rising and denying warmer temperatures means more water vapor is being stored--both of which make storms even more damaging.

So, not only have many of these countries and territories suffered tremendous damage, but worse is still to common thanks in no small part to global inaction on climate change. What to do? With limited economic prospects at home, Caribbean residents are thinking of the inevitable in leaving for good. What's the point in rebuilding when nearly everything is wiped out almost every other year?
Investors, governments, visitors and the people who have called these islands home for generations now wonder: Has something elemental changed? Might paradise turn uninhabitable? Is it time to go? Devastation is part of the natural cycle of life in the islands. During the past four decades, the region has been hit by more than 200 major storms, which killed more than 12,000 people and caused nearly $20 billion in damage, according to an International Monetary Fund study. About 1 percent of the Caribbean’s gross domestic product is wiped out every year.

“Storms shape the history of these places,” said Joshua Jelly-Schapiro, a geographer and author of “Island People: The Caribbean and the World.” “And people have been leaving these islands for decades,” heading for New York, London, Paris and other more stable places in countries that once colonized the Caribbean.

But in recent years, hurricane season has delivered more intense storms. “A person in the Caribbean generally would experience one Category 5 hurricane in a generation,” said Tahseen Sayed, the World Bank’s Caribbean country director. “In two weeks, we’ve had two Category 5 hurricanes.” The result is not only physical damage and economic strain.

“There’s a new, strong consensus that storms are getting worse and climate change is to blame,” Jelly-Schapiro said. “You didn’t hear that even a few years ago. For the first time, people are saying, 'I love this place, but maybe it’s not a place where we can live.' ”
To be sure, large diaspora communities abroad can help facilitate out-migration:
Like many people in the Caribbean, Roman and her family have a relatively easy way out. The Caribbean diaspora is vast and deeply connected. About as many Caribbean natives live in North America or Europe as in the islands; immigrants from the region make up 20 percent of the population in greater Miami and 7 percent of New York City. Half of Caribbean immigrants around the world send remittances to support relatives back home, and 70 percent belong to organizations on their islands, according to a World Bank study. For Puerto Ricans, who are U.S. citizens, the back and forth is even more fluid.
The details may vary somewhat, but the overall picture is one of economic stagnation that resulted in large-scale departures prior to the hurricanes. That is, there's increasingly less and less left behind:
Puerto Rico’s government is cash-strapped and grappling with an impossible-to-pay-off seventy-four-billion-dollar debt; the island’s poverty rate is over forty per cent; and the number of people relocating to the mainland United States has been rising for a decade. Against this backdrop, many of Puerto Rico’s mountain people live an existence not unlike the people of Appalachia, with a rural life style and economic level somewhere between working poor and lower middle class. Like their mainland counterparts, they cling to a tenuous Second World status. Most of them own cars, though it is rare to see a new one. Their homes are small, flat-roofed, cinderblock structures with grillwork on the windows and little fences around the yards—their owners are house-proud, and paint these homes in a variety of bright colors. Many also keep chickens, and some have horses.
You never want to leave the place called home for no good reason, but mankind's collective inability to confront or even acknowledge in the case of Trump's USA) climate change makes staying a less rational decision than packing up for good among many residents of the Caribbean islands.