Buy America, weaken America

usnews ^ | 3/25/06 | Richard J. Newman

[ncountylee]

The Durabrand 10-inch portable DVD player available at Wal-Mart retails for $199.94. A group of senators would like to raise the price to $254.67. The Creative Zen Nano Plus 512-megabyte MP3 player seems like a bargain at $89.72; less so at $114.39, the price the senators would prefer that you pay. The price hikes would be the result of a 27.5 percent tariff on goods imported from China, a proposal sponsored by Democrat Chuck Schumer of New York and Republican Lindsey Graham of South Carolina and is scheduled to come up for a vote in the Senate this week.

Schumer and Graham aren't crazy, of course—they know better than most that taking money out of voters' pockets is a sure way to be sent packing. In other words, that 27.5 percent price hike won't be coming to a retailer near you anytime soon. But as an attention-getter, it's pretty good, and attention is what the two senators, and a number of colleagues who support them, are after. The chief bogeyman they want to flog is China's communist government, which—according to Schumer and the rest—deliberately keeps its currency undervalued in order to sell more cheap imports to the United States and other countries. Reasonable economists differ on that question. The tariff, if you buy the argument, would bring prices on Chinese imports closer to their unsubsidized value, leveling the playing field for honest tradespeople in, say, New York and South Carolina, who can't possibly produce goods as cheaply as the Chinese and still earn enough wages to buy all the DVD and MP players that they need.

[Number57]

Chinese regulators insist the increases in foreign debts pose no threat to the nation's financial security, thanks to its massive foreign exchange reserves, which stood at US$609.9 billion at the end of last year.

w00t for Chinese!!
/sarcasm

[jec41]

Chinese to Partner on Boeing Airplanes, 7E7 Dreamliner
BEIJING, June 10, 2004 -- Boeing [NYSE: BA] today, with China Aviation Industry Corporation I (AVIC I) and China Aviation Industry Corporation II (AVIC II), signed memoranda of understanding to provide parts and assemblies for Boeing airplanes, including the rudder for the Boeing 7E7 Dreamliner. The signing celebration at the Boeing China office marked the first announcement of Chinese suppliers selected for Boeing 7E7 opportunities.

Boeing will work with Chengdu Aircraft Industrial (Group) Co. Ltd. (CAC), an AVIC I affiliated company, for supply of the rudder -- a key component of the vertical fin that provides stability for an airplane's directional control. Boeing is developing additional opportunities for Hafei Aviation Industry Co., Ltd (Hafei), an AVIC II affiliated company, to produce metallic and composite parts and assemblies for various Boeing jetliners, including the 7E7. The total value of China opportunities with Boeing, including the 7E7 rudder and work on other airplanes, could reach several hundred million dollars.

"China has an important role on the 7E7 program," said Jim Morris, senior vice president of Supplier Management for Boeing Commercial Airplanes. "Chengdu Aircraft and Hafei represent the talents, technological capabilities and resources of Chinese aviation industry that Boeing needs to provide the best value to our airline customers."

Other officials joining Morris at the partner signing event were Yang Yuzhong, executive vice president, AVIC 1; Luo Rong Huai, chairman and president, CAC; Xu Zhangbin, vice president, AVIC II; Wang Ning, Hafei; and David Wang, president of Boeing China. Also on hand was Mary Armstrong, vice president and general manager of the Boeing Fabrication Division, representing the Composite Manufacturing Center , through which the rudder contract is managed.

"We are honored to be one of the first supplier partners in China to be named to such an important role supporting the Boeing 7E7 Dreamliner," said Luo. "We want to add our strengths to make Boeing's Dreamliner dream come true."

Commercial aviation is crucial to the advancements that will sustain continued economic growth and development in China . Boeing has worked together with China 's aviation industry for more than 30 years. To date, Boeing has procured more than $500 million of aviation hardware from China.

Today, more than 3,400 Boeing airplanes -- one third of Boeing's world fleet -- have major parts and assemblies built in China. Examples of major parts and assemblies built for Boeing by Chinese industry include the 737 horizontal stabilizer from Shanghai Aircraft Corp., 737 vertical fin from Xian Aircraft Corp., 737 tail section modules from Shenyang Aircraft Corp., and 757 empennage and aft fuselage section from Chengdu Aircraft Corp. All are AVIC I affiliates.

Boeing is China 's largest commercial aviation partner. Over the next 20 years, Boeing forecasts China will need 2,400 jetliners, becoming the world's second largest airplane market.

[Number57]

But... how many of Boeing's jobs will migrate eastward in the next few decades?

Chinese Boeings. Oy.

[Rate_Determining_Step]

> Current trends are *all* in China's favor. We are slowly but clearly losing our capability to make things. To design things. To create. To work. To save. And to learn.

You make a key point central to your argument here. I think the point is false, but accepting it in the context of a protectionist argument gives rise to the following question:

If your assertions are correct, will insulating us from competition by expropriating the wealth of our countrymen the proper way to address the flaw you see in our work ethic?

[buglemanster]

I would rather buy Chinese than Mexican. East Asian quality is better than Latin American. It's cultural.

[buglemanster]

Boeings are already using Chinese made airframe parts.

[jec41]

James Borton eyes the media

---

Magazine licensing red-hot in China

Signs that the world's most populous nation has abandoned socialism in almost all but name and hurled itself into exuberant capitalism are colorfully demonstrated by the globalization of the magazine industry and in the slick pages of slick new Chinese journals. This has given rise to Chinese fashion magazines, enticing a new generation of female readers with high-end name-brand advertisements and tips on the latest fashions, the "in" lipstick colors, hairstyles and lifestyles, and peeks at the rich and famous. Some even write about art and culture and tell China's new middle class where to find the most-talked-about plays, films and books.

International media deals in the Middle Kingdom are getting hotter than a hot cup of green tea, according to many global magazine publishers and industry consultants, since all publishers want a slice of China's expanding consumer market. China's accession to the World Trade Organization (WTO) means it must admit foreign competitors into banking, auto production, publishing - you name it - and level the playing field.

And as long as they're "just" apolitical, money-making glossy magazines about consumerism, business and being fashionable, censorship issues do not arise. Modern China wants its women. especially its independent professionals with disposable incomes, to put their best, most modishly shod foot forward - no more shapeless and identical drab "Mao" suits, hacked haircuts and black slippers. Those were discarded long ago, and now China looks to the real glitz and glamour.

Under the bright neon lights of major newsstands and kiosks in the major coastal cities - the trend setters and followers, especially in Shanghai - are hundreds or possibly thousands of international titles including Esquire, Cosmopolitan, Seventeen, Harvard Business Review, Forbes, PC, magazines of all shades and stripes, and appealing to virtually all interests. And of course there are domestic glossy fashion and lifestyle magazines, such as iLook and Rayli, all vying for space in cluttered kiosks along busy thoroughfares.

"Brand names are social status and quality of life. For example, when I was in the United States, I didn't pay much attention to brand names. Here it's a culture. Look at me now, I'm equipped with nothing but brand names, say, Gucci, Fendi, Armani, Versace and the like," Lin Jie, 34, a producer/manager for China Central Television (CCTV), told Asia Times Online when asked about the importance of fashion magazines to her.

Magazines the door to the rising middle class
With the liberalization of the Chinese publishing industry, the magazine industry's consumer and trade publishers found an open road to China's rising middle class, a springboard for many Western publishers in their joint ventures with Chinese partners. China's recent media reforms, in line with its WTO obligations to level the playing field and admit foreign competitors, have made this magazine bonanza possible.

Until very recently, foreign publishers working in partnership with a Chinese agent had to use various municipal distributors and local post offices for distribution of their magazines. The reforms are now helping magazine publishers lift the restrictions on distribution. This has been achieved largely because of China's accession to the WTO and it now enables foreign companies to establish their own nationwide magazine distribution networks.

"Consumption as part of the economy is very much promoted. These new magazines have come to be recognized as part of the media industry rather than the state ideological apparatus. They also represent the effort of foreign media corporations in extending their influence in the Chinese market," Professor Joseph Chan of the Chinese University of Hong Kong School of Journalism and Communication told Asia Times Online.

The Chinese Academy of Social Sciences (CASS) has released reports that suggest China's middle class accounted for roughly 20% of the country's 1.3 billion population in 2003, estimated at between 200 million and 300 million. Based on an annual growth of 1 percentage point, the "middle class" (according to the academy's standard, this constitutes families with assets valued at US$18,137-$36,275) is expected to make up almost 40% of the total population in 2020, according to the academy report (not yet available in English online).

"China's size and influence are such that current and aspiring players cannot afford to be absent from the market," said publisher Tom Gorman, who successfully launched the Chinese edition of Fortune magazine in 1996 and now works as a media analyst at CCI Asia Pacific Ltd. Author of Guidelines for Publishing in China, Gorman explained that advertising spending in the magazine category grew by an average of 33% annually from 1984 to 2003 and is likely to maintain very high rates of growth for the foreseeable future.

30,000 magazines introduced in 2002 alone
According to the International Federation of the Periodical Press (FIPP) headquartered in London, China's reported magazine financial picture over the past year is the only compass needed for foreign publishers to make a beeline to Beijing and also to inspire more domestic start-ups. In 2002, the total value of imported publications in China amounted to well over $68.5 million, with 30,000 publications introduced into the marketplace. In 2003, the total advertising revenue of all Chinese B2B (business to business) titles was more than $302 million. With the highest gross domestic product growth in all of Asia, China's GDP was well over 9% in the first half of 2004, and with nearly 300 million middle-class consumers spending wildly on cars, computers, mobile phones and property, it's no wonder that the Chinese version of Cosmopolitan magazine sells more than 550,000 copies each month.

[Rate_Determining_Step]

> We can, and I personally do, avoid buying Chinese. But the truth is: CHEAP LABOR = CHEAP PRODUCT. Even if it is a quality item, does that justify such grim working conditions/pay in China/Japan/Korea/India/Taiwan/etc...?? Does it justify saving a few bucks while three or more of your friends get laid off?

We all make that trade-off. I personally don't want to buy a furniture set that lasts 100 years when I'm only going to want it for 10 or 15 years. Very few designs are "timeless". I would consider some of the Heywood-Wakefield mid-century modern furniture worthy of the craftsmanship they fortunately received, but I buy my stuff from Ikea. Sure, it's not of the quality that's going to be passed to my kids, but then again, they won't want it - preferring something new.

It's even more relevant in tech goods. I have a 36" Chinese TV I paid squat for and it'll crap out the same time I can't stand the old technology.

You may be attached to your Corvair, but most people wouldn't buy one new (or any "vintage" car for that matter) if it was on sale now. The people that do are the ones that bid at Barrett-Jackson. Although B-J is successful, they couldn't supply the nations automotive demand because the economics aren't there for most (non-rich) people.

The "heirloom" argument for excessive quality doesn't support the protectionist case you hold.

[Myrddin]

I worry when some Americans believe , we have to stop here,now, if we don't, our success as a nation will end. The Soviet Union is gone but Red China is still there, I would like to let them fight us on this new battle field of capitalism, we have experience on this battle field, and we have a good chance of profiting from this new war. Talk about drawing someone onto your own battlefield.

China has some real problems. All the apparent success in their capitalistic endeavors is limited to some big coastal cities. The people inland are horribly impoverished. Fresh water is a big problem. Same for sufficient fuels. They also have a growing population of muslims who are bent on bringing internal strife. The U.S. marketplace of 300 million consumers is a real, tangible market to exploit. The Chinese may have 1.3 billion people, but the fraction of those people with adequate disposable income is very small. Most barely manage a subsistence level.

[Number57]

Again... my point: we are losing any capability to manufacture anything without outside help. It is insane for a power like us to rely on outside countries for parts of any kind. We have almost fallen to the point that, left to our own devices, we couldn't/can't survive.

[buglemanster]

The Yuan is not free traded. The exchange rate is very carefully controlled by the government of China.

You forgot one point. The Yuan is pegged to the dollar (although less so now than a year ago). In a sense, the Yuan IS the dollar. When the dollar appreciates, so does the Yuan (in exact amounts), and likewise when the dollar depreciates. It is the equivalent of having a single currency in a free trade area, like the Euro in Western Europe and the American dollar in the United States. Do you honestly think the purchasing power of the USD is the same throughout the 50 American states? No way. This whole Yuan revaluation talk is a smokescreen, it has little economic merit. The Chinese aren't slave labors, they are free labors (albeit very cheap), and they are better off with their present wages than toiling in the farms.

[Hank Rearden]

In the world to come, explain that to him. I'd like to hear what you say.

I'd say: "After the enormous sacrifices you made, it's a damn shame you were killed by your own buddies."

"And what does your experience have to do with politicians stealing more money from Americans?"

I'd also say: "Did you know this Neutrino guy is using you to make bogus analogies?"

[Myrddin]

You can start by firing all the Indian and Chinese engineers and re-hiring the US citizens who were forced to train their own replacements...on the grounds that there was a "severe shortage" of qualified technically competent people.

I have swapped e-mail with quite a few Americans who were forced to train foreign replacements on pain of being denied a severance payment. Some of that behavior happened inside my own company. There has been a small measure of schadenfreud as the replacements failed to perform and the displaced American engineers contracted to resume the work at much higher rates.

[buglemanster]

The U.S. marketplace of 300 million consumers is a real, tangible market to exploit. The Chinese may have 1.3 billion people, but the fraction of those people with adequate disposable income is very small. Most barely manage a subsistence level.

China has 400 million cell phone users as of 4th quarter 2005 (not pulling this out of my ass, do a google news search to verify). Sounds like a pretty big and growing market to me.

[Number57]

The "heirloom" argument for excessive quality doesn't support the protectionist case you hold.
I never once brayed about an "heirloom" being better than anything, quality-wise. I think I was fair. Thank you for putting such an english word into my gaping maw.
I have a 36" Chinese TV I paid squat for and it'll crap out the same time I can't stand the old technology.
Well bully for you. God Bless.

[Zhang Fei]

jec41: "What on earth are you talking about. A Chinese engineer designed Bowing's first seaplane in 1916 and they have always maintained ties with China. The Chinese already make parts and buy many planes from Boeing. In fact a new 600 million dollar contract. Put tariffs on China they cancel contracts with American companies. It would lay off 25,000 at Boeing alone."

Chinese sales represented 6% of Boeing's sales in 2005. Boeing had 150,000 workers as of year-end. A 25,000 worker lay-off would represent a 16.6% reduction in the work force. I doubt the end of Chinese sales would cause a 25,000 worker lay-off at Boeing. What it would mean, though, is big time damage, from a cost standpoint, for China, which doesn't make its own planes - at least not in this segment. Airbus could really stick it to the Chinese airlines, since the large civilian jetliner business is really a two-horse race.

Bottom line? My feeling is that China wouldn't stick it to Boeing. They'd focus on products in industries where there are many manufacturers and substitutes are plentiful.

I think it's easy to exaggerate the impact on the US of even the most extreme trade war between the two countries - a total trade embargo. US exports to China in 2004 were $35b out of a total GDP of $11,667, or roughly 0.3% of American industrial output. Chinese exports to the US for the same year were $196b, or roughly 14% of Chinese industrial output. If US exports to China had ended in 2004, it would have shaved 0.3% from 2005 US industrial output, taking GDP growth from 3.5% to 3.2%. If Chinese exports to the US had ended in 2004, it would have shaved 14% from 2005 Chinese industrial output, taking China from a 9.2% growth rate to a -4.8% growth rate.

Bottom line here is that in the event of a total trade embargo between the two nations, US growth slows, but China goes into severe recession. The imbalance between the impact on the US and its foreign adversaries of trade embargoes is the reason why these adversaries are always clamoring for the removal of these sanctions, even as they continue to view Uncle Sam as their mortal enemy.

[T. Buzzard Trueblood]

Unless you knew the man, you have no idea what Pat Tillman would have had to say about this issue.

[Rate_Determining_Step]

> There is no seperating the economic war from the political or military. To state otherwise is to demonstrate short-sightedness almost beyond belief.

All your greenbacks are belong to us?

To what extent to you advocate to "public" control of private wealth?

That's a position Marx (and Schumer - surprise!) agree on. Oh yeah, and it appears, yourself.

[Myrddin]

When they stop business planning by the quarter, and start planning by the decade or half century their products they offer the consumer will regain the market.

When the pin-striped bandits arrived in the upper management at PacBell in 1988, I suggested that they be required to hold stock options for 5 years before they could exercise them. It takes that long for policies to have a long term impact. The bandits recoiled in horror. It was unthinkable to expect them to have to perform in a manner that caused a long term improvement in the company. They stayed with quarterly focus and snatched their bags of money as rapidly as possible. The company did not prosper and was acquired by SBC.

[buglemanster]

Bottom line here is that in the event of a total trade embargo between the two nations, US growth slows, but China goes into severe recession.

Your conclusion is flawed as you only based your statistics on export data of the US and China. Trade goes both ways.