Regarding Specter and the question of trade with China

[grantcart]

"Losing jobs to China"


This is the kind of disucussion that is impossible to have in GD or GDP where trade issues are an emotional issue beyond logical conversation and an orthodoxy now exists where NAFTA is considered an unparralleled evil and almost completely misunderstood.

We haven't lost any jobs to China.

Any jobs that are now being done in China for $ 8 a day are not going to come back here, if they couldn't be done in China they would be done Indonesia, Thailand, or Bulgaria where people work for $ 15 a day but not here where minimum wage is $ 75 a day.

Also it should be pointed out that "balance of trade" figures are the most jingoistic and unfair numbers used in comparing what is happening in world economies.

It has always been used in a way that hides revenues to American companies and exaggerates economic activity in the third world.

Let's give one example: Cameron. This one guy has directed two movies Avatar and Titantic that resulted in billions of dollars coming back from overseas to the US. None of those dollars are used in calcualting balance of trade figures. Well it takes a lot of BMWs to match a couple of billion dollars and that is the intellectual product of one man.

When you calculate Movies, Music, Software and Electronic Games (the latter likely to outstrip all of the others) there is tens of billions coming back to the US but that is not considered 'manufactured goods' and is not counted in balance of trade figures.

But there is much much much more. If you go into any shopping complex anywhere in the world you are going to see Wrangler Jeans, KFC, McDonalds, Marlboro cigaretees and on and on. Most of those products are produced outside of the US and sold outside of the US. Approximately 30% of those sales will be able repatriated back to the US, and again none of that shoes up in 'balance of trade' figures.

While we lost labor intensive jobs to countries with lower costs in manufacturing we have gained more higher paid jobs that make those products and other more sophisticated manufactured products like Boeing jets.

In order to understand exactly how this works takes the IPOD.

Now to begin with 20 years ago SONY had overtaken personnal music devices and the US was dead. SONY stopped innovating and is now a relic (and whose CEO is not even Japanese). At that time many decried a situation where we would lose American jobs to Japan. Japan had a brief time coming up and then spent 10 years with no growth.



For this example lets assume that an IPOD that retails for $ 300 and is manufactured in Malaysia.

Let us assume that the manufactured cost in China for $ 10 or Malaysia for $ 15. When it is shipped to the US Apple makes another $ 165 and the retailer makes about $ 120.

Now lets follow the IPOD that goes from China or Malaysia and is sold outside of the US. The same product that has never touched the shores of the US will generate the following revenue:


$ 10 or $ 15 for either China or Malaysia

$ 5 shipping to country X

$ 150 for Apple

$ 100 for retailer in country x.


None of this appears in 'balance of trade' figures. When trading figures were reconfigured by Japanese economists, a few years ago, to include all of the repatriated money that goes to the owner of the brand, plus all of the repatriated profits from simply holding a brand, like KFC, an area where the US dominates the market.

So Obama's answer to Specter was 100% correct - we do have some issues with China but their taking our jobs is not one of them. Getting them to become better consumers of our products is.

Changing the rate that Chinese Duan is pegged to the US dollar will not be entirely beneficial to us. We will end up spending more for what we purchase and it will make Thailand, Vietnam and Indonesia more competitive against Chinese products. It will not however result in a single American getting a job producing something that was produced in China.

[treestar]

1. Thanks. I find this stuff complicated and it is difficult to untangle

the xenophobes from those who really know something about it.

It cannot be that we were losing jobs when the outsourcing took places during years of low unemployment.

[Kurt_and_Hunter]

2. It appears that I "cannot recommend threads from this group"

So I will give it a virtual recommendation.

[grantcart]

4. Yes in the BOG we are all above all of that rec and unrec stuff

The tradition here is if you like it then a free beer is in order.

:toast:

[goclark]

18. And in BOG we give the Post a BOWinner! thanks grantcart

I always wondered about that and you made it so plain.

When I was in Japan about 12 years ago I was surprised to see so many worshiped "Made in the USA" They loved all things American.

[Cha]

3. Thank you, grant..

for explaining the bigger picture in World Economics.

[sandnsea]

5. They are taking jobs that were done here

A multinational corporation has no obligation to hire anyone from any particular country to manufacture its goods. If they want to pay $8 a day for labor and $800 for shipping, that's their right. And while I have no clue how much the shipping actually is, I would bet that when you calculate in environmental and health damages, it's $800 or at least very very expensive.

The problem is not so much demanding these jobs back as it is demanding that these corporations implement the same, or prefarably better, labor, environmental and human rights standards as exists here. Elimination of poverty, which is the promise of globalization after all, won't happen if we don't start demanding the corporations that sell to this country meet accepted first world standards.

As third world poverty is reduced, buying power increases which opens US markets. Everybody's happy.

But at some point, labor, production and consumption evens out; and there's nothing for the capitalists. Sooner or later we have to figure out how to implement a sustainable economy that makes capital available for R&D and business start-up, but also maintains a standard of living for the worker that doesn't leave them dependent on governemnt assistance or in a corporate barracks working 16 hrs a day. The market isn't going to solve that problem. Government and unions will have to.

[grantcart]

6. No they are not they are talking jobs that would be done in other labor intensive

markets.

The idea that jobs that cost $ 100 a day at minimum wage are being transported to China is absolutely ridiculous.

Labor, like capital and oil is fungible.

Labor intensive jobs like canning tuna, making tires, shoes and micro electronic chips and toys did not leave the US and go to China.

They left the US decades ago for Taiwan, Thailand, Malaysia, Indonesia and so on.

The growth of those jobs basically went to China.

The one are where jobs are not fungible because it requires massive capital, a network of suppliers and sophisticated manufacturing; namely making cars is a clear example - we import cars from Japan, Korea, Germany but none from China. You could make a better argument that Germany steals more direct jobs than China.

An exception to the general development has occurred with the development of service jobs, i.e. call centers, going to India but that has only occured because of the level of English and technical knowledge in India, again something that does not exist in China.

However the President is correct in stating that if we don't get off the ball on energy development future high tech jobs will originate in China and we will be hiring Chinese to do it.

Again the low paying labor intensive jobs that are powering the growth in China represent industries, like the garment industry, that has moved its manufacturing outside the US decades ago to other Asian and so called third world countries. If China did not exist those jobs would not 'return' to the US but locate in other countries which operate labor at a fraction of ours.

[sandnsea]

7. China is symbolic

People don't literally mean China and only China. I worked for Keds shoes back in 1979 when their shoe manufacturing was overseas. I'm well aware of how long this has been going on. I think most people are. Many people have been fighting the exploitation of these laborers for decades too. I've been particularly appalled at the use of the Mariana Islands to stamp "Made In The USA" on products that were actually made using Chinese workers that were practically enslaved. Obviously, we can get cheap Walmart products while generating shareholder income from exploiting those poor people, but it doesn't mean the free market and fungibility has anything at all to do with it. It has to stop.

No those jobs won't come back to this country, but it's wrong to pretend the globalization philosophy isn't having a harmful effect here. Wages and standard of living are decreasing and they will continue to, because eventually those corporations won't need this 5% of the global population anymore. Who is waking up to that challenge?

[grantcart]

8. You still don't really grasp the principle

We don't want those kind of jobs.

When living in Singapore in 1980 the government tripled the minimum wage and invited all of the labor intensive low paying jobs to leave for other countries, they did.

The government then went on an agressive training program that trained workers for optics, micro chip manufacturing, pharmaceutical manufacturing and so on. Today Singapore has a higher standard of living than many places in Europe.

Singpore has zero natural resources. Literally zero. The only densely populated are on the globe that has no supply of water, having to import it every day from Malaysia.

We should not give a damn what is happening in China, it is not the kind of jobs that we want here.

We should be aggressively trying to develop higher paying jobs and compete more effectively with Germany, England, France, Japan, and yes, Singapore.

China is a symbol, and that was my point.

It is symbolic of low paying labor intensive jobs. Whether they are in China or Indonesia they don't fit our skill set and our long term job market.

Globalization has hurt those places that refuse to innovate. It has rewarded people Cameron, Hollywood, Northern California, and other places that innovate to create leading edge industries that have higher paying jobs that are more suitable to our work force.

There is one other area where we could add millions of jobs that cannot be outsourced, tourism. The US remains one of the cheapest places for people to visit and experience a high quality vacation.

It does require that Americans first get rid of their zenophobic attitude against foreigners.

It also requires that we stop blaming other countries for trade problems.

Rather than yelling at China about jobs that we don't want we should be yelling at them for not allowing more of their upwardly mobile middle class to visit here and spend their money here.

[sandnsea]

9. Your argument isn't new

We have not done anything noble for the rest of the world. Moving people from eating dirt to eating crickets is not a grand economic strategy for the benefit of the people. That's about the extent of tripling the minimum wage in Singapore. And as I said, while we can exploit those people in the short term, eventually their standard of living will go up as ours goes down, until it's even. That's the logical free market result.

Do you think we don't want construction jobs either? They pay $20-$50 hr where I live. We don't have a large influx of illegal labor yet. We do, however, have a large number of doctors who were educated overseas. Do we not want those jobs either?

It has nothing to do with xenophobia. It has to do with not buying into the "investor class" bullshit because it doesn't work for the bottom 80%.

[spoony]

11. If you want a job, all you have to do

is make a billion dollar movie or invent the iPod, like the OP said. Simple, right? lol. Oh, sorry, I'm being "zeno"phobic.

[grantcart]

13. No your being completely illogical and uninformed.

Your condescending tone belies how little you understand what is happening.

Given the choice of making a TV (or even a computer) that is purchased once every 5 years and producing all of the entertainment that is watched on the TV or on the computer all day every day for 5 years which would you choose.

The example of Cameron was an example of a single indivdual.

The facts are that the US remains the largest exporter of goods and services in the world and the largest products we export are entertainment, software, electronic games (most people are unaware that for many action movies the gameware produces more revenue than the movie) and so on. We also export other high capital high value products like Boeing passenger jets.

But beyond the direct manufacturing these exports require hundreds of thousands of indirect support services, including insurance, financing, advertising, and all of those people require the regular support of hundreds of thousands general service workers from barbers to car repairmen.

Now the point that the President was making was that we want China to become better customers in general and we need to make a greater investment in higher technological development, especially in renewable energy generation.

My remarks were consistent with and an explanation of President Obama's remarks today.

You are free to make uninformed unintelligent critiques of his policies elsewhere. This forum is for people who want to have an intelligent discussion of the President's policies.

[grantcart]

14. I have lived for three decades in the third world

"Moving people from eating dirt to eating crickets . . ."


The fact is that your charachterization of people in the third world as either eating dir to eating crickets fits all of the stereotypes necessary to continue to live in your American centered exceptionalist world.

The folks in most of the countries I lived in, while a less consumerist society, sustain a higher quality of life in most cases, including the Islamic countries I lived in.

Those areas of the US that have the highest technological jobs and export the most also have the highest paid construction jobs.

The quality of life in Singapore, a socialist run country with little private property, exceeds most of the basic criteria used in judging an advanced society.

Not only is medical care universal, inexpensive and accessible but Singaporeans are also guaranteed ownership of their dwelling (not the dirt but the condominium), there are no private mortgages as the government has long nationalized housing finance with a small payroll deduction so that even workers in their 20's can purchase their home. They are also guaranteed universal job training and skill impropvement for the rest of their life. It is probably the cleanest city in the world and you can take a subway from the center of the city to a nature reserve in about 15 minutes.

It isn't my cup of tea, for the same reason that Switzerland isn't, its overly regulated and the political party in control allows for only a narrow debate of the issue.

Even the harshest critics of Singapore admit that there is no financial corruption. They pay their President more than $ 2 million a year and pay their government workers competitive salaries to business so their is little temptation.

Making racist type statements that people elsewhere need our 'nobility' and that the quality of thier life amounts to "eating crickets" is racist, xenophobic and incredibly ignorant. Singapore rivals any of our cities and in fact has none of the slums. Its urban plannin is masterful and they even encourage office buildings to mix office and residential space so it is possible to, as I did, to live on the 44th floor of a building and work on the 30th.



And if you think that the above is only for the rich and the expatriates here is a picture of one of the government run public housing facilities where entry level workers live (and own their own flats).

Here is the slum of Singapore



By the way deep fried crickets is considered a delicacy.

[Kurt_and_Hunter]

17. Rather dismissive of life and death there

A hypothetical widespread change from eating dirt to eating crickets would constitute the greatest nutritional and quality-of-life leap forward in human history.

People can actually live on crickets. People cannot live on dirt.

[sandnsea]

21. It's worked so blessedly well in Haiti

Slaving away making Hanes t-shirts that we buy for $5 so shareholders can "retire" to, well if THEY weren't so xenophobic, to Haiti. And hire a couple to care for their home for just $2 a day!! Ain't it grand!!!

And then wonder why they fly airplanes into our buildings.

:crazy:

[spoony]

10. "We haven't lost any jobs"/"While we lost labor intensive jobs"

You're right, don't post this in GD. It has enough doublespeak nonsense already.

[grantcart]

12. We haven't lost any jobs to China

We have lost labor intensive jobs.


Too understand this rather simple non paradoxical statement you have to understand that low paying labor intensive jobs are as fungible as petroleum.

We have lost low paying $ 15.00 a day jobs in general, it is irrelevent where those jobs have gone they cannot be supported here.

Canning tuna, making tennis shoes, mass produced garment production was moved into other countries even before China became a major producer. If all of the factories in China were closed those jobs wouldn't come here, they would relocate to other countries that would welcome $ 15 per day jobs.

If you are not interested in a factual unemotional discussion of policy don't bother coming here. Stay in GD where highly charged emotional trade positions have taken on a religious, although completely unsupportable point of view.

Approximately 3 billion people live in countries that operate on a subsistance basis. We cannot and should not try to compete in those industries that are highly labor intensive but have low production value. We should concentrate on businesses that require high capital, high technology and high production value.

[spoony]

15. "they cannot be supported here"/"we cannot and should not try to compete"

You're essentially saying we should be a nation of middle management overseeing the cheap labour of other countries, then you have the audacity to call OTHER people racist in outlook! You're advocating predatory globalism at its worst, or at the very least you're surrendering to it. Apparently you're unaware that the manufacturing industries of this country are NOT dead and are not consigned to either making planes or movies.

By the way, I haven't said a single critical thing about Obama here, just about your terrible post, and this is not the "grantcart group" unless it has been renamed in your bookmarks.

[grantcart]

20. Your reply supports the jingoistic question asked by Specter.

My explanation is in support of Obama's answer why we don't consider China trade surplus as an example of China operating in bad faith.

Your charachterization of my position reflects absolutely nothing that I have said. Your inability to understand that low capitalization low tech jobs are highly fungible creates a barrier to discussion. Low paying jobs that pay $ 15 a day would relocate to other countries that can sustain $ something less than the $ 100 a day that employment in the US would cost.

You on the other hand advocate taking emotional charged factually unfounded positions that will rob us of real jobs.

People who make movies, music, software, electronic games and so on are workers who manufacture a product. Just because their is no smokestack where they work doesn't mean that they don't manufacture something. The fact that you would say "Apparently you're unaware that the manufacturing industries of this country are NOT dead" shows clearly that you do not understand that America remains the largest manufacturing country in the world, and in terms of value added worth, the greatest exporter.

You advocating taking a beligerant (and uninformed) trade position against our trading partners over jobs that will never be performed here and sacrifice real markets and real jobs by real people that are actually making things that people outside the US.

Now here is specifically the policy of the President which I support and you do not:

"THE PRESIDENT: Arlen, I would not be in favor of revoking the trade relationships that we've established with China. I have shown myself during the course of this year more than willing to enforce our trade agreements in a much more serious way. And at times I've been criticized for it. There was a case involving foreign tires that were being sent in here, and I said this was an example of where we've got to put our foot down and show that we're serious about enforcement. And it caused the usual fuss at the international level, but it was the right thing to do.

Having said that, I also believe that our future is going to be tied up with our ability to sell products all around the world, and China is going to be one of our biggest markets, and Asia is going to be one of our biggest markets. And for us to close ourselves off from that market would be a mistake.

I support President Obama on the issue, obviously you do not.

You are now free to return to GD and bash the President's nuanced non China bashing stance. Successfully revolking China's WTO membership would cost the US hundred of thousands of job. Not one of the jobs that are now being done by low wage earners in China would be returned to the US. That is because they are highly fungible. Here is the link to the definition of fungible http://dictionary.reference.com/browse/fungible

[Kurt_and_Hunter]

16. Okay, a bit of devil's advocate...

Your comments about balance of trade are correct, but the class of royalties and licensing is a little problematic, socially.

Labor intensive activities cannot be concentrated the same way... the fat-cat has to pay some people something, even if it's low wage assembly in Malaysia.

But the money that flows to James Cameron or to Apple doesn't have to be parceled out to anyone. In practice some of it is, but it doesn't have to be.

Apple can pay off whatever production debts remain and simply bank all that Ipod money. So that flow of wealth to America is not required to benefit anyone except Apple shareholders. It may, but it doesn't have to be.

On the other hand, the physical fabrication of the Ipods MUST benefit some worker.

Thats why people get so bent out of shape about trade. (Inappropriately, but still.) It's not the flow of money, it's the pyramidal nature of the new economy.

Less labor intensive means fewer people hired. If you are James Cameron, or work for him doing highly specialized work, it's cool.

But most folks are going to be laborers of some sort and they know it. So the fact that only labor intensive jobs flow overseas sounds like cold comfort.

The fact that iPods wouldn't be so popular at twice the price (if made in America) gets lost on folks. As does the fact that we all, workers included, enjoy much lower prices on goods made overseas.

It is bogus to dismiss, as so many here do, low-cost imports as "junk people don't need." A lot of low-labor-cost import goods are things people need very much.

Anyway, since what we lose is labor intensive work and what we gain is concentrated wealth paid primarily to a small class then it is basic that in America free trade requires higher taxes on the top earners and more of a social safety net and generally redistributive policies.

(Even if one thinks NAFTA sucks it should be conceded that NAFTA sucked less with Clinton tax-rates than with Bush tax-rates.)

[grantcart]

19. actually we agree on everything

But I do think that you are taking too narrow a definition of the word 'manufacture' and 'worker'. We should stop crying about jobs that we don't want and invest in developing the kind of jobs that we do want.

Making Avatar involved $ 100 million investment in labor intensive creative labs in the US. Of course it is a fantastic revenue earner but if you take the aggregate and not the exceptional then hundreds of thousands 'workers' go to work every day in CA and other high tech areas to produce entertainment.

Those workers in CA are very high maintenance and require lots of servoce; insurance, financing, gymns etc. etc. So the number of real workers doing real jobs that are either directly or just removed from the creation of entertainment (music, movies, games, software), communications (cellular, software, applications) and software is in the millions, and they are one of the highest paying sectors in our economy. Getting tough with China, which was represented in Specter's jingoistic question will only trigger retailiation and the loss of markets.

I go back to my earlier question. If you had the choice would you rather have the exclusive franchise on making a TV that a family purchases every 7 years or would you rather have the franchise that produces most of the content that is on the TV every night? Both should be considered as manufacturing.

Avatar was a labor intensive product to make, but also very high capital and high tech. The jobs that we lost, and should be happy that are gone are low tech, low capital and, by definition, low paying.

We shouldn't decry the loss of every job we should have a labor policy that seeks government investment into the areas where we can exploit our advantages, high tech, high capital, high research and high wages. This was the basis of the President's answer to Specter.

[cliffordu]

22. Excellent work, good friend.

[greenbird]

23. Excellent post.

Thanks so much for this, grantcart. I was having a hard time reconciling the things I hear on talk radio (especially Ed Schultz saying "we don't make anything anymore) with the charts showing where we stand as an exporter. Bookmarked.