As China warns the United States that America has more to lose in a "trade war," we are left scratching our heads. Last year we were in the trade hole with China to the tune of $227 billion, better than 2008's $268 billion deficit, but no reason to send in the brass bands. (That's almost a half a trillion deficit in two years.)
What is more insulting is that often the products that China sends our way are not just poorly made, but downright dangerous. The Fisher-Price lead-painted toys recall cost that company between $40 and $70 million. If you think that kind of hit made China's manufacturers sit up and take notice, you're mistaken.
In the last month or so, everything from children's bicycle bells with lead paint to power packs that can burst into flame and explode, to kids hoodies with dangerous drawstrings around the neck to remote controls for gas-heated fireplaces and hockey sticks have been recalled. (By no means should these be compared to the massive recall of Toyota products, but the response of Toyota - weak in spirit, but concrete in action - should be compared to the companies from China, which has no response except for the recalls. There were also salmonella precipitated recalls of food here recently.)
The biggest culprit in China is the incredibly low net profit margin on goods produced there. It runs in the range of 1 to 2%. Developed countries run around 6 to 9%.
This is part of a grand scheme to capture ever larger shares of markets and amounts to legalized dumping. Couple that with the manipulation of China's currency, the yuan, and we have a prescription for conflict. Toss in the impossibly low wage scales in China and the perfect import-export storm has developed.
This is a liberal cause because for decades now, through Democratic and Republican administrations, the expression Free Trade has been bandied about as if the universal panacea. Simultaneously, unions have been denigrated and demonized by economists from slightly left of center to the far right. Only truly leftist economists have completely understood and explained the value of unions.
Germany, which is second now to China in total manufacturing exports - having just slipped from first place - is about 34% unionized in its industrial sector. The United States runs about 12%. So, the issue isn't unions and efficiency.
Additionally, unions prevent under-priced, shoddily-made goods from entering the country they operate in. Multinationals with the assistance of their minions in government relentlessly persecute unions. Yet, consistently, right to work states, mostly in the American South, have consistently lower wages and purchase a higher proportion of goods from countries like China. Why are we racing to the bottom?
Right to work? How about right to compete on an equal footing? How about the right to a decent wage and legitimate benefits? Our governments have sold out our manufacturing workers.
This, in spite of the fact that American factories are the most efficient in the world along with Japan's and Germany's.
Related posts:
http://nyliberalstateofmind.blogspot.com/2010/03/cutting-trade-imbalance-with-china-in.html
http://nyliberalstateofmind.blogspot.com/2010/03/counterfeit-country-and-american-jobs.html
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Showing posts with label United States. Show all posts
Showing posts with label United States. Show all posts
Monday, March 29, 2010
The Counterfeit Country Part 2
What can a closed society really produce? That which is safe, proven, nonthreatening. Thus it is with China.
Even modestly open societies such as Japan and South Korea are more capable of innovation than a closed system like the one in China.
Taking the idea of copying to its ultimate extreme, in January a Counterfeit Mall opened in Nanjing (click). It's a stunningly offensive idea, although not much more than Canal Street in New York, where many of the same fake brands made in the same shoddy way are sold under the nose of New York City authorities.
Why should we care? As the currency of advanced countries becomes more enmeshed with intellectual property, that currency becomes the source of our wealth. Agree or disagree with the value of the real liquids in PepsiCo's products, or the quality of Izod shirts, the people who own those brands have spent decades investing in their images, enhancing their desirability. And they've spent billions.
Moreover, products that rely almost solely on intellectual development - movies, books and music - take an enormous economic hit when illegal or pirated copies flood the market worldwide. One can argue that George Clooney or The Beatles don't really need the extra dollars that the fakes drain away. But, that money also ends up not going to small bit players and staff, and importantly is not re-invested in the companies that produce our intellectual or cultural products. So, lower earners, from the go-fer getting coffee for the main actors, to the gaffers, electricians and so forth are penalized by not having unrealized profits plowed back into new productions. Jobs are literally stolen.
Here are a few other examples of counterfeit brands and some of the not so pretty effects counterfeiting engenders. Click on the brand name:
Even modestly open societies such as Japan and South Korea are more capable of innovation than a closed system like the one in China.
Taking the idea of copying to its ultimate extreme, in January a Counterfeit Mall opened in Nanjing (click). It's a stunningly offensive idea, although not much more than Canal Street in New York, where many of the same fake brands made in the same shoddy way are sold under the nose of New York City authorities.
Why should we care? As the currency of advanced countries becomes more enmeshed with intellectual property, that currency becomes the source of our wealth. Agree or disagree with the value of the real liquids in PepsiCo's products, or the quality of Izod shirts, the people who own those brands have spent decades investing in their images, enhancing their desirability. And they've spent billions.
Moreover, products that rely almost solely on intellectual development - movies, books and music - take an enormous economic hit when illegal or pirated copies flood the market worldwide. One can argue that George Clooney or The Beatles don't really need the extra dollars that the fakes drain away. But, that money also ends up not going to small bit players and staff, and importantly is not re-invested in the companies that produce our intellectual or cultural products. So, lower earners, from the go-fer getting coffee for the main actors, to the gaffers, electricians and so forth are penalized by not having unrealized profits plowed back into new productions. Jobs are literally stolen.
Here are a few other examples of counterfeit brands and some of the not so pretty effects counterfeiting engenders. Click on the brand name:
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