Monday, August 30, 2010

Monday Quick Hits

Lots of headlines and cools stuff over the last few days, so let's get right to it:
  • Obama Administration: We'll increase exports by, err, attacking Chinese imports.  Last week, the US Department of Commerce announced a bevy of new trade remedies policies aimed at achieving the President's export-expansion goals by increasingenhancing the accuracy of antidumping and countervailing duties on imports from "non-market economies" (essentially Vietnam and China).  With almost 60% of all imports into the United States capital goods and equipment - things that American companies (including exporters) need to remain globally competitive - I'm at loss as to how making Chinese and Vietnamese imports more expensive will expand US exports, and the WSJ agrees: "President Obama has been making some encouraging pro-trade noises recently, after a protectionist first year. So it's troubling to see him veering off course again with a new proposal to boost American exports by cracking down on imports from China."
  • A funny thing happened on the way to attacking Chinese imports...  So while DOC is plotting to "get tougher" on hypercompetitive Chinese imports, more news arrives showing that China's labor cost advantages - and thus its global competitiveness - appear to be rapidly shrinking: "China’s rising wages are cutting the country’s cost advantage over other manufacturing centers such as Mexico, according to Flextronics International Ltd., the world’s second-largest custom electronics maker.... Flextronics, which supplies to Hewlett-Packard Co. and Cisco Systems Inc., has been forced to increase wages in China in line with government regulations and growing affluence in the fastest-growing major economy. Larger rival Foxconn Technology Group said this month it will move production away from China’s coastal regions after announcing a doubling of wages at its largest production bases in the south east." So if you needed any more evidence that government is just really, really bad at keeping up with the market, well, there you go.
  • United States in 2009 was the most energy-efficient economy in the history of the world.  Ever.  From Mark Perry: "Since 1990, the energy consumption per unit for five of the most common household appliances has fallen so consistently over the last twenty years that today's household appliances use between 20% (air conditioner) and 73% less energy (clothes washer) than in 1990."  Very, very cool.
  • "Glass City" museum buys Chinese glass, unintentionally demonstrates the complexity of US-China trade and the global economy.  The WSJ has an excellent article today on why construction of the Toledo Museum of Art's $30 million Glass Pavilion required some specialized Chinese glass: "No one in the U.S. had the capability to satisfy cutting-edge architectural specifications for the curving pavilion, even though the 2006 job involved techniques advanced decades ago by Toledo inventors: bending and laminating glass. The pavilion features 360 thick glass panels, each up to 13.5 feet tall, eight feet wide and weighing over 1,300 pounds." Of course, it's actually not that simple, so be sure to read the whole article.  My favorite part: American politicians and unions blaming unfairly subsidized Chinese imports for destroying the US glass industry (as opposed to their own economy-killing fiscal policies and labor contracts), despite the fact that (i) although China makes about 45% of the world's glass, it exports almost none of that production and (ii) the little that China does export to the United States is really, really bad: "Most of China's glass output is such low quality, it has no market other than China. And much of the Chinese glass now hitting U.S. shores is chiseling into market extremities where profit margins are thinnest: the cheapest salt shakers, table tops and replacement windshields."  Exit question: if Toledo had been forced to follow "Buy American" policies, would their snazzy museum have been built as designed?  Hmmm.
  • Speaking of manufacturing, guess what part of the country's getting a brand new Toyota plant and a couple thousand jobs?  If you guessed a part that has less regulation, lower taxes and isn't controlled by labor unions, you'd be right: "  Toyota began taking applications Monday for 1,350 production and maintenance workers at its Blue Springs, Miss., plant that had been stalled while the Japanese automaker waited for the worldwide recession to end.... Starting pay is $15 per hour, ranging up to $21, for production workers and $18 to $21.25 hourly for maintenance workers. Maintenance salaries will top out at $25 an hour.... The company has said it would create 2,000 jobs at the Blue Springs plant. New auto plants such as this also spin off about 2,000 supplier jobs."  Import-blaming governors Jennifer Granholm (MI) and Ted Strickland (OH) were unavailable for comment.
  • Skepticism about US-Korea FTA is well-grounded.  NRO's Stephen Spruiell reports on the administration's, ahem, revived efforts to advance the KORUS FTA and - based on the White House's complete lack of effort on the pending US-Colombia FTA despite amazing improvements in Colombian labor union violence - is very, very skeptical (be sure to check out the great charts).  And based on the latest reports out of Korea, it appears that Spruiell's skepticism is well-deserved: "'The Korean government has not promised any kind of concessions concerning the Korea-United States free trade agreement,” said Choi [Seok-young, Korean deputy minister for trade]. 'The U.S. Congress is currently in recess, and we have not yet been offered anything from the U.S. government concerning the FTA.'  He added that since the U.S. government has not offered anything yet, it is not the right time to talk about the Korean government’s plans on disputes over imports of U.S. autos and beef."  Awesome.
  • Cato wages an all-out assault on fallacies surrounding last week's revised GDP figures and the US trade deficit.  First, Alan Reynolds provides an eye-opening look at "what everyone missed" in last week's revised GDP numbers (hint: rising domestic consumption, real disposable personal income, and business fixed investment).  Then, Dan Griswold calmly corrects the Washington Post's misreporting that the trade deficit harmed GDP growth: "The fatal flaw of the [Post's] story line... is that it assumes that rising imports slow economic growth.  That assumption, in turn, rests on a simplistic Keynesian view that if a portion of domestic demand is satisfied by spending on imports, that means less demand for domestically produced goods, thus less output and lower employment.  That view neglects the supply-side role of imports.  More than half of what we import consists of goods consumed by producers—capital machinery, raw materials, parts and other intermediate inputs. Those imports help us produce more, not less.  The Keynesian view also confuses cause and effect: Imports usually grow in response to RISING domestic demand. Consumers more eager to spend 'swelling sums' on imports typically buy more domestically produced goods as well."  Finally, Dan Ikenson piggybacks off Griswold's post with our charts-of-the-day, which clearly demonstrate that "neither imports nor trade deficits cause U.S. job loss or slower economic growth.   If anything... imports and the trade deficit rise when the economy is growing and creating jobs, and they both fall when the economy is contracting and shedding jobs":

  • Feel free to judge the President by the company he keeps.  From the Hill: "President Obama will spend Labor Day alongside AFL-CIO President Richard Trumka, the union announced Monday. Obama, Secretary of Labor Hilda Solis and Trumka will all participate in a Labor Day "celebration and rally" in Milwaukee on Monday, an appearance confirmed by the White House this afternoon, which separately announced the president would travel to Wisconsin for the Laborfest. The appearance is another recent sign of unity between Obama and Trumka — the pair had sometimes had an adversarial relationship over the past year on issues like stimulating the economy and healthcare reform...."  Woo hoo! Laborfest!
And on that happy note, folks, let's call it a night.

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