Wednesday, May 18, 2011

Wednesday Quick Hits

Plenty of great links to share today (the last day of my 34th year on the planet), so let's get right to it.
  • The Economist reports on how increasing labor costs in China are once again changing the globalization dynamic - in many cases, back in US manufacturers' favor: "'Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,' says [BCG's] Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar.... Companies are thinking in more sophisticated ways about their supply chains.  Bosses no longer assume that they should always make things in the country with the lowest wages.  Increasingly, it makes sense to make things in a variety of places, including America."  The whole article is definitely worth a read.  (h/t Mark Perry)
  • Heritage's Bryan Riley makes a great catch:   "People who believe the United States no longer manufactures anything need to check out the newest Consumer Reports “Best Cars” list. The magazine recently selected the top cars for 2011 in 10 categories. Five 'best models' are made in the USA, three in Japan, one in Canada, and one in Mexico. Four of the made-in-the-USA models carry foreign nameplates; by contrast, the one Chevy on the list is made in Mexico."
  • AEI's Michael Auslin provides a roadmap for expanding US-India trade and explains why it should be a point of emphasis.
  • A must-read story in USA Today shows that US visa restrictions may be driving companies out of Silicon Valley and the United States entirely: "Silicon Valley may be the cradle for tech start-ups, but some foreign-born executives, engineers and scientists are leaving because of better opportunities back home, strict immigration laws here and California's steep cost of living."  I totally get the need for us to secure our borders and staunchly police illegal immigration, but the United States is suffering (and will suffer a lot more in the future) because of our government's inability to develop and implement policies to efficiently and lawfully keep super-smart foreign entrepreneurs and workers here.  Our lack of such policies is, ahem, bordering on the insane. (Sorry, I couldn't resist.) 
  • The White House has surprisingly announced that it won't move pending FTAs with Colombia, Panama and South Korea unless the House GOP ties it to the now-expired Trade Adjustment Assistance program.  IBD dismantles the administration's political motivations, while Cafe Hayek's Don Boudreaux eviscerates TAA's shoddy economic foundations.  (More on this issue to come.) 
  • Logistics improvements in China would mean huge gains for consumers and exporters, further proof that trade facilitation efforts can dramatically improve global trade when market access negotiations break down: "Logistics costs as a percentage of GDP are around 21%, compared with 10% in the U.S. and 13% in India.... [T]he country has a fragmented system, high tariffs for road transport and multiple providers piling on fees.... A Chinese government investigation found that two-thirds of the retail price of vegetables represents logistics costs. And even though costs are high, service is often poor.  Local logistics providers are famously slow and unreliable. Assuring end-to-end delivery of products across provincial boundaries is a real challenge."  Unfortunately, things appear to be getting worse instead of better:
  • Looks like we're seeing a serious bubble in US farmland, yet American agriculture subsidies keep, ahem, plowing ahead. (Sorry, I couldn't resist... again)
  • Good news: US exports surge to a new record high.  Less-good-news: as the graphic below makes clear (courtesy of Mark Perry), US exports are still below their pre-recession trendline.
That's all for today.  Enjoy!

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