china

Temporarily Buoyed by Japanese Earthquake, General Motors Looks for Profit Overseas

by Hans Bader on May 14, 2011

in Bailout Watch, Economy, International, Trade

“GM sees China as a road to profit,” reports the Washington Post today. “GM last year sold more cars in China than in the United States,” ranging from “high-end Buicks” to “low-end Chevrolets.” It’s good that GM is expanding its markets overseas, because its current share of the U.S. auto market may not last.

Even GM’s own shareholders seem to recognize that, and the fact that its recent profits may only be temporary. As Mickey Kaus noted recently in the Daily Caller, General Motors’ “sales and prices are up recently in part only because competing Japanese car suppliers have been crippled by the earthquake and tsunami. GM’s stock fell today and is still below the initial IPO price” (that is, below the price of the stock when it was sold to shareholders by the U.S. government).

Before that, GM’s finances were temporarily buoyed by bad PR regarding Toyota’s alleged safety defects in its cars, which turned out to be largely bogus. (The Toyota crashes turned out to have been caused by driver error, not manufacturing defects).

These setbacks for Toyota temporarily drove buyers away from Toyota to GM, artificially propping up GM’s profitability. But devastating earthquakes like the one that hit Japan occur there only once or twice a century, and can’t keep GM profitable in the long-run.

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CEI Podcast for April 28, 2011: High-Speed Rail

by Ryan Young on April 28, 2011

in International, Mobility, Podcast

Have a listen here.

Land-use and Transportation Policy Analyst Marc Scribner looks at China’s experience with high-speed rail, and finds that it may not be a very good deal for the United States. Costs are so high that revenues don’t even cover the interest on the $271 billion of debt that high-speed rail has incurred for China.

U.S. Continues to Ignore Staunch Trade Partner and Ally Colombia — And Possible Consequences

by Fran Smith on February 17, 2011 · 1 comment

in Agenda for Congress, International, Trade

As the U.S.-Colombia Free Trade Agreement languishes, the U.S. stands to lose some of its influence with that staunch and critical ally in South America. The agreement was signed in 2006, then, in mid-2007, at the behest of the Congressional leadership under Nancy Pelosi, had stringent environmental and labor provisions inserted, and since then, has been largely ignored by the administration.

The major opposition all along the way has been from U.S. trade unions, which charge the Colombia is not doing enough to stop violence against domestic trade union leaders and members. Yet Cato research has shown that “the rate for union killings was 5.3 per 100,000 unionists in 2010, six times lower than the homicide rate for the overall population (33.9 per 100,000 inhabitants).” Colombia is still a violent country, but the strengthening of the legal system in Colombia under former President Alvaro Uribe and continued under the new President Juan Manuel Santos has meant that a larger percentage of perpetrators of union violence have come to justice.

Meanwhile, Colombian leaders were gracious even though they were pushing for fast action on the pact. The U.S., after all, is Colombia’s chief trading partner, and they were looking for assurance through the trade pact that the tariff preferences in the Andean Trade Promotion and Drug Eradication Act (ATPDEA) would continue into the future, without having to be reauthorized each year as is now the case.

Colombia’s patience may be wearing thin, and that wouldn’t be good news for the U.S.  Already China is Colombia’s number two trading partner and may overtake the U.S. if the FTA isn’t implemented. There’s also a new twist that increases the odds that this will happen. China and Colombia are having very serious discussions about China building a transcontinental railroad across Colombia – from the Atlantic to the Pacific — that would be a “rail canal” rivaling the Panama Canal for moving imports and exports across Latin America.

Now that would be a real coup of a different kind.

The Obama administration should get its head out of the sand and put the three pending FTAs on the fast track. Colombia already gets preferential tariffs under the ATPDEA. With the U.S.-Colombia deal, Colombia would remove more than 80 percent of Colombian duties on U.S. imports, with the remaining tariffs being phased out over ten years.

But that’s not the only reason, as CEI noted:

The agreement can also promote the national security interests of both Colombia and the U.S. Colombia faces increased tensions with its near neighbors, as Venezuelan President Hugo Chavez stokes anti-American sentiment. Ecuador briefly suspended diplomatic ties with Colombia after Colombian forces raided a narco-terrorist camp located in that country. Approval of the FTA will bolster Colombia’s ties with the U.S. and standing in the region, and help counter Chavez’s influence.

Image credit: tanya~b’s flickr photostream.

U.S. Blows Hard at Chinese Wind Power Subsidies

by Fran Smith on December 23, 2010

in Energy, Ethanol, International, Sanctimony, Trade

Well, the U.S. has taken it one step further — it has gone to the World Trade Organization for “consultations” about China’s green energy subsidies, specifically for wind power manufacturing. As a result of investigations triggered by a United Steelworkers’ complaint, U.S. Trade Representative Ron Kirk announced on December 22, 2010, that the U.S. is requesting consultations with China under the WTO’s dispute settlement provisions.

The U.S. says that under China’s Special Fund for Wind Power Manufacturing program,

. . . China appears to provide subsidies that are prohibited under WTO rules because the grants awarded under the program seem to be contingent on Chinese wind power equipment manufacturers using parts and components made in China rather than foreign-made parts and components.

According to a USTR press release, China is giving large grants to Chinese manufacturers of wind turbines and their components while excluding foreign parts manufacturers.

The size of individual grants currently available under the Special Fund for Wind Power Manufacturing ranges between $6.7 million and $22.5 million, and the recipients of these grants – Chinese manufacturers of wind turbines and Chinese manufacturers of parts and components for wind turbines – can receive multiple grants as the size of the wind turbine models increases. USTR estimates that grants provided under this program since 2008 could total several hundred million dollars.

These consultations are the first stage of the WTO’s dispute settlement process. In many cases, the parties at this point will reach an agreement to resolve the issue.  If agreement isn’t reached, the next stage is more serious and formal — it involves adjudication by a WTO panel and perhaps by the Appellate Body, and then the ruling’s implementation.

Some observers caution that the U.S. should be wary, as it could face challenges to its own funding of green energy programs and its “Buy American” program:

In President Obama’s stimulus bill, $71 billion was dedicated to clean energy funding, with an additional $20 billion for loan guarantees and tax incentives to support clean energy projects.  President Obama’s budget proposes $150 billion over ten years in clean energy and efficiency programs.  Clean energy job creation is also one of the central tenets of the Administration’s new Middle Class Task Force.  Given these policies, and other proposals pending in Congress, the United States needs to tread carefully in denouncing green-energy subsidies as violations of WTO rules.

In terms of green energy, the best approach is to let the market work, without subsidies that distort that market. Government support through green subsidies and incentives for particular industries, whether by foreign governments such as China or by the United States, are a form of industrial policy intervention to pick winners (and losers) and can lead to unintended consequences in addition to the trade implications, e.g., heavy support for corn ethanol and its effect on food prices and the environment.

Photo Credit

WTO: For Trade Imbalances, Use Value Added For a More Accurate Picture

by Fran Smith on November 24, 2010 · 2 comments

in Economy, International, Trade

The World Trade Organization’s annual report released today is well worth reading, not only for the data on recent trade flows, economic and unemployment trends, and trade financing but also for the cautions against protectionism and the analyses of trade policy.

Policymakers should particularly take note of the discussion on trade imbalances and why current ways of measuring trade flows don’t take account of value added, that is, currently the full value of a product’s imported value is attributed to the exporting country, even when that country has had a very small part in its total production.  Apple’s iPad – produced through a global supply chain – was a prominent example in the media of the distortions that current measurement of trade flows produces.

Here’s the WTO’s discussion (on p. 17):

A factor that is of particular relevance when situating trade and trade policies in the context of current tensions over trade imbalances is that trade flow statistics are recorded universally in gross terms;  the full value of an imported product is attributed to the country that exports it, even if that country contributes only a small proportion of the product’s value-added.  This has long been recognized in trade policy terms, for example when imposing rules of origin requirements on products that are eligible for preferential tariff treatment.  Even so, it can send misleading signals to trade policymakers.  With many manufacturing processes today broken down into separate parts and spread across different countries before the finished product is assembled for export in one of them, attributing the full value of the product to the country from which it is exported to its final consumer destination will give an exaggerated idea of the real importance of trade with that country.

The report notes that when a value-added approach is used to calculate bilateral trade flows between China and the U.S., for example, it would result in “a reduction of the [US] deficit by more than 40%.”

Here are the calculations (p. 19):

US-China trade balance, 2008: Traditional and value added measurement

(Billion dollars)

ItemValue
USA exports to China (traditional statistics)71
USA exports to China (in value added terms)60
USA imports from China (traditional statistics)  *356
USA imports from China (in value added terms)224
Trade balance (traditional statistics )-285
Trade balance (in value added terms)  **-165

* Adjusted for China processing trade.

** While individual bilateral balances are affected by the value-added measurement, the total trade balance of each country -as measured by the balance of payments- remains the same.

Source: A. Maurer and Ch. Degain ”Globalization and trade flows: what you see is not what you get!”,  WTO Staff Working Paper ERSD-2010-12, June 2010.

That is certainly a significant fact that policymakers should have beaten into their heads before they are allowed to discuss U.S. trade imbalances with China.

Chinese Woman Sent to Labor Camp for Re-Tweet

by Nicole Ciandella on November 18, 2010

in International, Personal Liberty

When Cheng Jianping didn’t show up for her wedding ceremony on October 27th, her fiancé and family thought she’d gotten cold feet.

But this week, they discovered that Cheng was in police custody. She’d been arrested on her wedding day, detained without trial, and sentenced to one year of “re-education” at a labor camp. Why? Because Cheng re-tweeted a joke.

Twitter is blocked in China, but web-savvy Chinese have found ways around the ban. Cheng Jianping and her fiancé Hua Chunhui were both active Twitter users. In mid-October, Hua tweeted:

“Anti-Japanese demonstrations, smashing Japanese products, that was all done years ago by Guo Quan [an activist and expert on the Nanjing Massacre].  It’s no new trick.  If you really wanted to kick it up a notch, you’d immediately fly to Shanghai to smash the Japanese Expo pavilion.”

Cheng then re-tweeted her fiancé’s tweet, and added three words: “Angry youth, charge!” Ten days later, Cheng disappeared.

Chinese police allege that Cheng’s tweet expressed dangerous anti-Japanese sentiment. Cheng is serving her year-long sentence at the Shibali River women’s labor camp in Zhengzhou city. Her fiance Hua, who has not been detained, says Cheng is now on a hunger strike.

Amnesty International points out that Cheng may have been targeted for her past low-level human rights activism. Cheng had previously expressed online support for Nobel Prize Laureate Liu Xiaobo and consumer rights advocate Zhao Lianhai. But Amnesty Director for the Asia-Pacific Sam Zarifi emphasizes that the government is not accusing Cheng of any crime other than her offending re-tweet.

“Sentencing someone to a year in a labor camp, without trial, for simply repeating another person’s clearly satirical observation on Twitter demonstrates the level of China’s repression of online expression,” Zarifi says.

CEI and other pro-liberty groups have been celebrating this week’s release of Egyptian blogger Kareem Amer, who spent four years behind bars for criticizing the Egyptian government. Now, Cheng Jianping’s story reminds us that oppressive governments around the world are locking new people up every day.

So tweet, blog, and email about what the Chinese government is doing to Cheng Jianping–because where Cheng is, she can’t spread the word herself.

Rare Earths — Not So Rare?

by Fran Smith on October 28, 2010

in International, Natural Resources, Trade

What do yttrium, ytterbium, erbium and terbium have in common?  They are rare earth elements first found in the Swedish town of Ytterby between 1828 and 1878 and named after that town in the periodic table. These are just a few interesting facts about rare earths in the “Trade Fact of the Day” from the Democratic Leadership Council.

There’s been a lot of talk lately about rare earths, even from people who can’t pronounce their names, in relation to China’s purported monopoly of these elements, used for a wide variety of technological applications such as digital communications, hard drives, solar panels, and motors for hybrid vehicles. There’s also some fear that China may reduce its exports of rare earths to show its displeasure with some countries.

It turns out that rare earths aren’t really rare at all.  It’s just that China now produces almost all of the world’s rare earths for its own use and for exports.  Of the 124,000 tons of rare earths produced in 2009, China produced 120,000 tons.  According the U.S. Geological Survey:

“Rare earths are relatively abundant in the Earth’s crust, but discovered minable concentrations are less common than for most other ores. U.S. and world resources are contained primarily in bastnäsite and monazite. Bastnäsite deposits in China and the United States constitute the largest percentage of the world’s rare-earth economic resources, while monazite deposits in Australia, Brazil, China, India, Malaysia, South Africa, Sri Lanka, Thailand, and the United States constitute the second largest segment.”

The U.S., with its significant reserves of rare earths, estimated at 13,000,000 tons, has one major production facility soon to be operating again, the rare-earth separation plant at Mountain Pass, Calif., now owned by Molycorp Minerals. With environmental problems and tough environmental rules, the mine closed in 2002. According to the Washington Independent,

. . . the company hopes to begin mining again at Mountain Pass in 2012. Sims says the mine will produce 20,000 tons of REE-equivalent each year, more than the current U.S. demand of between 15,000 and 18,000 tons per year.

With the renewed interest in rare earths, there is also renewed interest around the world in mining those elements, which over time could possibly compete with the Chinese.  Also, it’s likely more attention will be paid to recovering those elements in certain manufactured goods through recycling.  Also, while there are some substitutes for rare earths, they are not considered as effective.  More attention will probably be focused on those and other substitutes.  Markets do respond to scarcity – or perceived scarcity.

Take a Look at U.S. Tariffs – They Raise Costs and Restrict Choice

by Fran Smith on September 29, 2010

in International, Trade

With so much focus on “unfair” trade vis-à-vis U.S. trade partners, especially China, it’s sometimes sobering to look at protectionist U.S. policies that restrict imported goods and services by slapping them with high tariffs.  The Business Insider provides a good start in its focus on 25 imported products that have the biggest U.S. tariffs. Take a look at the highlighted tariffs that range from 20 percent on some dairy products to 37.5 percent for leather shoes, then 163.8 percent on unshelled peanuts up to a whopping 350 percent for imported tobacco.

But what do these tariffs mean for consumers?  Obviously, they raise their costs.  Ed Gresser of the Progressive Policy Institute has written extensively on how U.S. tariffs are really regressive — they hurt the poor the most by increasing the costs of needed goods, such as shoes and clothes.  Here’s what Gresser says:

Though the tariff system is smaller than other taxes, it is far more regressive. This is because poor people spend a greater share of their income on clothes and shoes than do wealthy or middle-class people. The cheap and simple goods made in poor countries and bought by low-income Americans are subject to far higher tariffs than luxury goods. An acrylic sweater attracts a 32 percent tariff, while a cashmere sweater gets only 4 percent; a polyester bra is tagged with a 17 percent tariff, while one made of silk gets less than three percent; and a cheap stainless steel fork is hit with a 19 percent tariff, while a silver-plated spoon has none at all.

Since the Business Insider feature only looked at tariffs, it missed some of the most egregious protectionist programs in the U.S. — the U.S. sugar program that guarantees sugar producers a certain price by restricting domestic supply as well as sugar imports.  Or take the U.S. cotton program that subsidizes a small number of cotton producers at taxpayer expense and makes it uncompetitive for many poor countries to export their cotton to the U.S.  As with these and other protectionist policies, they generally help a small group of producers by restricting competition, but the costs are borne by consumers in terms of fewer choices and higher prices.

No Chickening Out on Trade Retaliation

by Fran Smith on September 28, 2010 · 1 comment

in International, Trade

Trade relations between the U.S. and China are heating up, with both countries bringing antidumping charges against the other — some in retaliation for earlier actions.  With the House of Representatives primed to take up a bill allowing the U.S. to levy tariffs on Chinese imports to protest China’s currency intervention, China announced it was slapping a huge tariff on imports of U.S. poultry. This would up the chicken tariff to a minimum of 50.3 percent and a maximum of 105.4 percent on chicken products imported from the U.S. — an escalation from an earlier tariff tacked on by China in retaliation for the U.S. slapping a higher tariff on Chinese tires last year.

Last Friday, the House Ways and Means Committee approved H.R. 2378, the Currency Reform for Fair Trade Act. (Note to readers: whenever “fair trade” is used instead of “free trade,” it’s almost always supporting a protectionist policy.)  Almost immediately on September 26 — though apparently not connected — China’s ministry of commerce announced that it had concluded a year-long antidumping investigation of U.S. poultry imports and concluded that the chickens were being sold to China at lower than production costs.

This was followed quickly by a September 27 announcement by the U.S. Department of Commerce that the People’s Republic of China and Mexico were unfairly dumping seamless refined copper pipe and tube, and the U.S. would be imposing dumping duties on those imports pending a thorough investigation by the International Trade Commission.

Currently, the ITC has numerous investigations in their final stages involving Chinese imports. Here’s the current list: Certain Coated Paper Suitable for High-Quality Print Graphics Using Sheet-Fed Presses from China and Indonesia; Drill Pipe from China; Magnesia Carbon Bricks from China and Mexico; Narrow Woven Ribbons from China and Taiwan; Seamless Refined Copper Pipe and Tube from China and Mexico; Seamless SLP Pipe from China; Woven Electric Blankets from China. 

It’s not likely that these actions and others will advance President Obama’s goal of doubling exports in five years as part of an economic recovery plan.  Important trade partners such as China and Mexico that have retaliated against some U.S. protectionist policies may encourage other countries to take action.  Tit-for-tat trade remedies won’t improve U.S. competitiveness, but can undermine the international trading system.

Regulation of the Day 124: Kissing Your Girlfriend Good-Bye

by Ryan Young on March 10, 2010 · 1 comment

in Nanny State, Personal Liberty, Politics as Usual, Precaution & Risk, Regulation, Regulation of the Day, Sanctimony

How do we know the terrorists are winning? When a man kissing his girlfriend good-bye at Newark Liberty International Airport results in the evacuation of an entire terminal, 200 delayed or canceled flights, and re-screening for thousands of passengers.

There is a word for this: overreaction. If this how the government reacts to a threat that is 20 times scarcer than being struck lightning, we are doing something wrong.

Yes, the criminal kisser was wrong to sneak under a security rope to get one last peck from his girlfriend. But closing down an entire terminal at a major airport for six hours is overdoing it. Just take a look at the offender.

His name is Haisong Jiang. He is 28 years old and very much in love. He emigrated to the U.S. from China in 2004, and met his girlfriend at Rutgers University. She recently moved to California, though they remain together. Mr. Jiang remains in the New York area, pursuing a biology Ph.D. When he receives his degree later this year, he plans to move to California to be with her. He is clearly not a terrorist.

Mr. Jiang’s forbidden kiss was recorded by surveillance cameras. It was clear that he was sneaking a kiss, not a bomb. Even so, a five-day manhunt ensued. Mr. Jiang was arrested and tried. Fortunately, his sentence is a light one: “a $500 fine and $158 in costs and fees,” plus 100 hours of community service.

I was a bit worried that he would have been shipped to Guantanamo Bay, frankly. Hopefully retired Maj. Gen. Robert Harding, the new head of the TSA, will take steps to make airport security more rational and less driven by fear.

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