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February 28, 2007
One Heart Rending Vignette of a Young Chinese Cancer Patient
OneManBandwidth, written by Guangzhou-based American expat Lonnie Hodge, gives a heart rending story of a young Chinese student’s fight against bone cancer, her courage, and the obstacles, including an inadequate and costly health care system, she faces:
. . . The hospital was without air conditioning and in desperate need of paint and renovation, but I knew that even this questionable house of healing was more than she could afford. I met her mother, a woman who has obviously labored hundreds of long days under the sun, and immediately knew that finances were going to the biggest single factor in Coffee’s treatment and recovery. . . . Her leg was removed only two weeks ago, but Coffee is far ahead of the healing curve. I am told that Coffee attended class up until two days before her scheduled surgery and today she shared, in confident and relaxed English, that she intends to go back to college next semester even if it is during her chemotherapy. I believe her. The school, with no handicapped accessibility, no air conditioning, overcrowded dorms and mind-numbing class schedules, is all she thinks about. She will finish college even if her post-graduate chances for good paying work have been diminished. If I could have bottled one-tenth of one-percent of the courage that issued from her today I could sell it and fund a cure for her disease. . . .
Hopefully this tidbit encourages you to read Lonnie’s post in its entirety.
Posted by John at 7:47 AM | Comments (0) | TrackBackChina's Engineered Stock Market Tumble
The 8% percent drops in both the Shanghai and Shenzen stock markets on Tuesday were engineered by a Chinese government worried about excessive speculation ($), notes Stratfor, the Austin-based private intelligence firm. Even after Tuesday’s debacle, Shanghai stocks are up 3% over the past week, stock turnover is up 700% from a year earlier, and the number of traders on Chinese exchanges has risen 134% from just the previous month. In other words, says Stratfor, there’s more to come:
. . . the Chinese believe their exchanges are massively overvalued (hence the engineered crash). They will do this again, and are not (yet) particularly concerned with the international consequences. China planned to dampen its own stock market, not the world's markets. Along with the rest of the world, Beijing did not expect the contagion effect to be so extreme. Yet, for now at least, China's own exchanges are its primary concern, and it will act according to that belief.
Second, everyone else now is going to chew on the fact that Beijing did this intentionally. They will either agree with the Chinese that the exchanges are overvalued and that additional measures are needed, or they will be terrified that Beijing did this intentionally and not care about the reasons. Whether what is sold is a domestic Chinese firm or a foreign firm invested in China does not matter much. Neither does it matter if the stock is on an exchange in China or abroad. Either way, the reaction will be the same: Sell.
Third, trading in 800 of the 1,400 stocks on the Shanghai exchange was suspended during the sudden drops Feb. 27; they have a lot farther to fall, even without any engineered drops caused by panicky selling. . . .
Analysis like this, on a daily basis, is what you get from Stratfor; I encourage you to subscribe to their service if you have any interest at all in global affairs.
Posted by John at 5:36 AM | Comments (0) | TrackBackThriving Eastern European Steel Mills
Once the political cronies and protectionists were swept away, Eastern Europe’s steel industry began a revival under foreign ownership. Those foreign owners, including U.S. Steel, are regarded as model employers providing excellent jobs. The Christian Science Monitor reports. (U.S. Steel Košice in Slovakia pictured at right.)
Posted by John at 5:26 AM | Comments (0) | TrackBack
Quote of the Day for Wednesday, February 28, 2007
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February 27, 2007
China FAW Group Looking at Chrysler?
According to the Shanghai-based Oriental Morning Post, China FAW Group, China’s first auto-maker and one of its “Big Five” automobile manufacturers, has sent representatives to the U.S. to negotiate the purchase of a stake—amount unknown—in Chrysler.
Separately, the Detroit News reports Chrysler is set to receive the green light from DaimlerChrysler’s board to begin its previously announced project to build compact cars for the U.S. market in conjunction with Chery Automotive.
Posted by John at 8:01 AM | Comments (0) | TrackBackRemembering Dates of Peaceful Cooperation and Trade
Stephen Davies, writing in The Freeman, suggests that when we learn history, the focus is always on the ebb and flow of political power, and particularly the wars which arise from the pursuit of such power. Most anyone with a passing knowledge of Western history remember the significance of 1815 and 1914. Yet how many of us are taught the significance of April 26, 1956 (the date the first container ship sailed, revolutionizing world trade) or January 22, 1970 (the date of the inaugural flight of the Boeing 747, a jet airliner which more than any other single plane has engendered mass international tourism)?
Such dates are important, says Davies, because they
Posted by John at 5:14 AM | Comments (0) | TrackBack. . . mark key points in a very different narrative from the one that concentrates on power and its workings. This other narrative traces the growth of trade, the interconnections between more and more people, and the greater part of productive activity over an ever-larger portion of the planet’s surface. Aspects of this story are the discovery of previously unknown wants, a steady growth in the range of possibilities and opportunities open to ordinary people, a massive improvement in living conditions, and the mutual exchange of ideas and cultural expressions between the various parts of the world to their mutual enrichment.
However, because this narrative is not spelled out and its key dates are mostly unknown, we are generally unaware of it. The process it traces and its benefits are taken for granted and assumed to be natural. If we do stop and think about it, however, we will see the world and the course of human history differently from how the narrative of power would have us see it. We should realize that what is important for the everyday life and hopes of ordinary people is not power but peaceful cooperation and exchange. Not everyone welcomes this. There are those who would decry increased affluence, regret the easier movement of people, and deplore cultural mixing and exchange. We should ignore them and reject their argument.
Larry Summers on Lessons China (and the U.S.) Can Learn the Japanese Experience
Larry Summers in the Los Angeles Times:
. . . if China is to sustain rapid growth and not repeat Japan's mistakes, it must fix the policy roof now, when the sun is shining. Allowing inevitable currency appreciation and spurring domestic demand by encouraging consumption is much easier now when the economy is at the edge of overheating than it is likely to be in the future when it cools off. It has been estimated that seeking to maintain the current exchange rate could require as much as $400 billion in reserve accumulation in 2007, which would almost certainly lead to rapid asset price inflation as renminbi are printed to buy dollars. And there will not be a better moment to fix problems in the banking system.
Posted by John at 5:07 AM | Comments (0) | TrackBackThese lessons for Chinese economic policy contrast sharply with those drawn by observers in and out of China who attribute Japan's deflation and consequent poor performance to its willingness to accede to American pressure for currency appreciation. This alternative view offers no explanation for Japan's asset bubble and collapse, and no theory about what measures would have spurred domestic-led growth.
Another lesson of the Japanese experience is the need for modesty regarding economic diplomacy. Events and national and political decisions, not international communiques, shape economic outcomes. The effect of events beyond the control of governments — the collapse of Japan's asset markets, information technology's spur to U.S. productivity, the Asian financial crisis — dwarfed the diplomatic debate.
Even in areas in which government policies might have had significant effects, such as housing, finance, social security or retail regulation, there is no evidence that Japan in the 1980s and 1990s made any changes in response to U.S. pressure. If heavy-handed pressure makes it easier for special interests to invoke nationalism as they resist change, high-profile negotiations can be counterproductive. And in a world in which goodwill capital is scarce, heavy-handed pressure engenders resentments that spill into other spheres. . . .
Two of Today's Auto Industry Headlines . . .
. . . ironically capture the state of the U.S. automotive industry; both are from the Wall Street Journal:
Posted by John at 5:05 AM | Comments (0) | TrackBack“Daimler’s Two Big Unions Tangle” (over greater say in the disposition of Chrysler), and
“Toyota Is Expected to Open Assembly Plant in Mississippi” (near Tupelo, the company’s eighth in North America)
Quote of the Day for Tuesday, February 27, 2007
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February 26, 2007
A Few of China's Overseas "Brains" Speak About the "Drain"
BBC News features portraits of four different Chinese, who having studied abroad, have chosen to remain overseas. The perspectives each of the four offer are very interesting. [Thanks to China Law Blog for the pointer.]
Posted by John at 6:33 AM | Comments (0) | TrackBackEarly Positive Results for CAFTA
The Wall Street Journal’s Mary Anastasia O’Grady writes that the early returns on CAFTA are positive:
Posted by John at 6:30 AM | Comments (0) | TrackBack. . . Today, dollarized El Salvador is the most economically liberal Cafta country and may be in a position to benefit the most from the trade accord. Its total exports to the U.S. actually went down in the past year but that seems to be explained largely by the end of the WTO multifiber agreement. Without Cafta, the contraction could have been worse.
Offsetting the pain is an increase in imports, which are helping diversify the economy. According to the Economy Ministry, 60% of non-maquiladora imports from the U.S. last year were in six sectors and accounted for 88% of the growth in imports over 2005. Most were intermediate and capital goods for manufacturing and services. This includes yellow corn and wheat for the agroindustry, polyethylene for plastics, electronic equipment such as telephones and computers, fuels, and paper and cardboard for packaging.
El Salvador is also shifting away from traditional low-wage, garment-assembly operations toward the delivery of value-added, high-end apparel that includes all services bundled in the production process. According to Ricardo Sagrera, president of the textile group Hilasal, enhanced two-way trade is helping El Salvador capitalize on its comparative advantages -- notably its legendary work force and its proximity to the U.S. -- and compete with China. . . .
In Guatemala, which joined Cafta in July, the government says total trade grew by 17% in the second half of last year, compared with 5% in the first half. It also says that foreign direct investment tripled last year. A Guatemalan official I talked to said that the agreement has been good for his country because it has made doing business easier. For example, customs and photosanitary regulations have to be standardized and streamlined in order to comply with Cafta. This is leading to more efficient trading within the region.
That's important for companies like Wal-Mart, which has a substantial presence in Central America and is driving competitiveness in the retail sector. The retail giant taps suppliers in Central America for the perishables it sells. Greens come from Guatemala, El Salvador and Honduras, meat and pork from El Salvador. With Cafta, the distribution process has become more efficient.
Wal-Mart's need for perishables has also helped small and medium-sized farms in the region because the company has a program to develop suppliers. "They get a reliable marketplace and we get reliable suppliers," says a company representative. Wal-Mart's requirement that suppliers must be part of the formal economy could partly explain why business startups jumped by 20% last year. The company says that Cafta has been important also because the region is its largest supplier of apparel for its Western Hemisphere operations.
Nicaragua also is enjoying Cafta benefits. Total trade with the U.S. between last April, when it joined Cafta, and December was up by more than 20% over the same period in 2005. . . .
The Role of States in Innovation
As the National Governors Association convenes in Washington, the theme of their meeting how to effectively compete globally through promoting innovation. The Christian Science Monitor examines the role of the states in the economics of innovation:
. . . states want to play a bigger role alongside corporations and federal research programs. They aim to set policies that will welcome top talent, target industries that are a good fit for their region, and support new businesses often tied to the state's research universities.
"Nobody wants to base their state strategy on low-cost services," [Indiana University’s] Dr. [David] Audretsch says. "Every state makes massive investments [in] higher education.... There's this big potential that's sitting there. They want to get a harvest out of it."
Despite the competitive pressures, one region's success doesn't have to come at another's expense, he says. By its nature, a knowledge-based economy should spawn new industries, not simply a fight over the ones that exist now.
Some economists question whether state policy has much of a role to play in this process. After all, the federal government is likely to remain the big funder of basic research, and large corporations will continue to expand research and development spending, as well as find ways to turn this work into new products.
Still, neither CEOs nor federal agencies have the interest of a locality at heart the way that a governor does. And while mayors share the local focus, the state is the one holding the keys to the institutions driving innovation: large universities.
"You've got to have smart people. You've got to have research. They've got to be turned into a product, a business," says Mary Jo Waits, director of the Pew Center on the States, a research group in Washington that tracks state policies.
"Many of those things are really what I would call created assets," she says. "A lot of those things have to do with public policy."
A state can decide to train and hire talent, promote research, and create networks to connect the innovators with entrepreneurs and investors. This process can make the local economy more dynamic, say proponents of the model. . . .
Georgia’s efforts in this regard, by the way, are highlighted and favorably mentioned.
Just a comment regarding the role of states in funding research relative to the federal government. Competition in the marketplace of ideas is beneficial to innovation; the more the better. I’m all for states giving the federal government (and each other) competition in research, whether related to alternative sources of energy, disease, nanotechnology, or biotechnology. It’s beneficial for all of us, regardless of where we live.
Posted by John at 5:44 AM | Comments (0) | TrackBackQuote of the Day for Monday, February 26, 2007
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February 25, 2007
Bill Gates on Innovation
From the Washington Post: the title is “How to Keep America Competitive”, and Gates’ answer lies in innovation and the people which drive it.
Posted by John at 12:47 PM | Comments (0) | TrackBackDollars in "Little Village" Not So Little
Hispanic buying power fact of the day: Chicago’s “Little Village”, the largest Mexican-American community in the Midwest, generates $900 million a year in sales, and sales tax revenue for the city of Chicago second only to Michigan Avenue. [Source: Mesirow Financial]
Posted by John at 5:40 AM | Comments (0) | TrackBackViet Nam and India Compete with Canada for Citizens
An editorial in the Asian Pacific Post, an Asian publication in British Columbia, laments the exodus of Viet Kieu (overseas Vietnamese) and NRIs (non-resident Indians) back to their homelands. Viet Nam and India are competing for citizens they regard as significantly accretive to their economy:
Vietnam recently announced that it plans to woo the country’s 2.7-million strong diaspora.
These are mainly Viet Kieu (overseas Vietnamese) who fled during and after the war that ended in 1975 to start new lives in about 100 countries, including Canada.
To mark the recent Tet celebrations, the government threw a gala event for more than 1,000 returnees at a new convention center outside Hanoi.
President Nguyen Minh Triet also pledged that Hanoi will soon allow visa exemption for Vietnamese holding foreign passports. . . .
New Delhi acutely aware of the financial and intellectual clout their prodigal children carry has a specialised Ministry of Overseas Indian Affairs to deal with their needs.It has also permitted them to hold dual citizenship for the first time.
So far an estimated 50,000 overseas Indians have applied for the new “overseas citizen of India” status. The actual number of Indian nationals resettling in their homelands is said to be much higher. . . .
Posted by John at 5:33 AM | Comments (0) | TrackBackQuote of the Day for Sunday, February 25, 2007
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February 24, 2007
The Artificial Meaning of "Imports" and "Exports"
Sheldon Richman, editor of The Freeman: Ideas on Liberty, examines the artificial meaning of the words “imports” and “exports”:
What is an export? What is an import? These words are defined in reference to political boundaries of only one kind: national boundaries. If there were no such boundaries, there would be no exports or imports. But political boundaries are just that. They are not economic boundaries. To the extent that they can, people go about their business as though those boundaries weren't there. People cross the Canadian-American and Mexican-American borders to transact business every day. If they give them a thought it is only because governments put up barriers patrolled my armed guards who make them wait in line. People learn early in life that they can gain immensely from trade, and with that understanding comes the insight that it doesn't much matter on which side of a Rand-McNally line your trading partner lives.
So the very concepts imports and exports are founded on an arbitrary construct that has little practical consequence for people's economic activities. Back in the 1980s, when neomercantilists feared Japan's economic success at selling us stuff (seems a little crazy now, no?), I used to ask what would happen to the trade deficit if Japan were made the 51st state. Obviously, the deficit would have disappeared because we don't reckon trade imbalances between states. Why not?
. . . the case for free trade is conceded the moment someone eschews self-sufficiency. After that, we're just haggling over the size of the trade area. But if free trade (read: division of labor) is good, then the bigger the free-trade area the better. Globalization should be the worldwide removal of all barriers to the exchange of goods and services -- rather than trade managed through state capitalism and multinational bureaucracies. Unilateral, unconditional free trade is the smartest policy. . . .
Read Richman’s complete essay here.
Posted by John at 5:36 PM | Comments (0) | TrackBackMexico's Loss of Movie-Making Creatives . . . and the Revenue They Spawn
The Los Angeles Times examines the large and very talented Mexican film industry—the only problem is that it’s based largely in Los Angeles, or “Frijolywood”. The inability to get financing, lack of tax incentives, crime, and problems with unions are all cited as problems. The environment is so inhospitable to film makers that Mexico produces only about 30%-40% of the films it produced in its “Golden Age”.
One producer remarks: “The government has not realized what a great source of revenue film production could bring to the country. They are asleep at the wheel.”
Posted by John at 5:00 PM | Comments (0) | TrackBackTata Buying Chrysler?
Stephen Richter, writing for The Globalist, speculates on what the reaction would be if Tata, India’s largest automobile manufacturer, purchased Chrysler:
MUMBAI, INDIA — Following Tata’s recent $12 billion acquisition of the former British Steel, Ratan Tata, chairman of the Tata Group and Tata Motors, announced today that his group was buying the Chrysler subsidiary from DaimlerChrysler for $1.
Dieter Zetsche, Chairman and CEO of the newly renamed Daimler Group, explained that the sales price was attractive for his group since Tata assumed all health care and pension liabilities for the U.S. employees of Chrysler. These liabilities are estimated to amount to about $20 billion.
Mr. Tata explained that he saw a lot of upward potential in the Chrysler acquisition. “We are proud to have become the owners of one of the Big Three motor companies in the United States.”
He added: “It is true that the company, as well as its two U.S.-based competitors, GM and Ford, have fallen on hard times. But I see this as the consequence of a failed product marketing and development strategy, which we are uniquely positioned to fix.”
“What top car manufacturers need in the future, given all the tremendous pressures on the global environment, is the ability to build small cars that are safe, reliable and technologically advanced,” he said. “That is the traditional strength of our group.” . . .
A leading member of the U.S. Congress, John Dingell, the Chairman of the Energy and Commerce Committee in the House of Representatives, was livid.
“I am deeply ashamed that it has come to this. I am 80 years old now — and have steadfastly and successfully fought for more than five decades to protect the interests of Michigan carmakers. This is a disgrace — one of the crown jewels of the U.S. car industry owned by a bunch of Indians. The President needs to convene the Committee on Foreign Investments in the United States immediately to ban this transaction.”
Faced with the brewing political storm in the United States, Mr. Tata, the head of the Tata Group, was unfazed.
“Success in business requires a long-term view, which is exactly what we bring to this transaction. Yes, it will take years to bail Chrysler out of its current doldrums. Hopefully, we can turn the company around faster than GM and Ford will take,” he said. “In our analysis, there is only room for two of the Big Three to survive.” . . .
Read the entire “news story of tomorrow” here; while Richter’s view of the future is open to debate, the political reaction hypothisized is almost assured, in my view. The reaction would likely be about the same as a Chinese auto company buying Chrysler.
Posted by John at 7:59 AM | Comments (0) | TrackBack
Quote of the Day for Saturday, February 24, 2007
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February 23, 2007
Globalization Set to Confer a $3 Billion Windfall to the Southeast
ThyssenKrupp, the massive German steelmaker and capital goods company, announced it has narrowed its site search for a major greenfield steel mill to Alabama and Louisiana. The total investment this facility represents is almost $3 billion.
This plant, expected to begin operations in 2010, will likely be of the largest private industrial development projects in the United States over the next decade. The construction of the plant will require an estimated 29,000 jobs, and when fully operational, the facility will directly employ 2,700 and indirectly create an additional 38,000 to 52,000 jobs over two decades. It's a game changer for a wide swath of the country.
This project is an important component of ThyssenKrupp's for both the NAFTA market and strategy:
This greenfield project is intended to significantly strengthen ThyssenKrupp’s position in North America. The Nafta market is one of the biggest volume markets for high-grade flat carbon steel, and ThyssenKrupp Steel will be able to leverage the strengths of its range of high-quality products. ThyssenKrupp Stainless is already an established producer on the Nafta market with its cold rolling mill in Mexico and sales/distribution bases in the USA. In the coming years, the new plant will serve the fast-growing US market, while Mexinox will concentrate more on its domestic Mexican market.
The central element of the new plant will be a hot strip mill which will be used primarily to process slabs from the new ThyssenKrupp CSA steel mill in Brazil. . .
Let me see if I have this straight. ThyssenKrupp sees the need to make a $3 billion investment in the Southeast to serve the "fast-growing" U.S. market, furthering its investment in the "Nafta market". One part of this new facility will rely on imported slabs from Brazil, increasing the U.S. trade deficit, by the way. It seems that globalization and an increased trade deficit is not only delivering a huge windfall to the Southeast, but delivering manufacturing jobs as well!
[Thanks to ShopFloor.org, the terrific blog of the National Association of Manufacturers, for the pointer.]
Posted by John at 4:07 AM | Comments (0) | TrackBackImports Crucial to the U.S. Economy and Job Creation
Daniel Ikenson of the Cato Institute's Center for Trade Policy Studies cuts through some of the misinformation and going on in Washington regarding trade, imports, job creation, and a healthy economy. Read his terrific commentary in full; here's a tidbit:
An honest discussion about trade would note that as imports and our trade deficit have increased over the past year, five years, 10 years and 25 years (take your pick), the economy has expanded, creating an average of 1.8 million net new jobs each year since 1981. There is very clearly no inverse relationship between the level of imports and U.S. job creation. And in the sectors that compete most directly with imports, productivity gains (not import competition)account for the preponderance of job attrition.
Posted by John at 4:00 AM | Comments (0) | TrackBackImports are crucial to the U.S. economy. They create competition, which makes businesses more innovative and productive. But imports also keep prices lower, increasing real wages and expanding family budgets.
U.S. industries rely on imported components and raw materials in the production of their final products. Such importation accounts for nearly half of all U.S. imports. According to the research of my Cato colleague Dan Griswold, in periods when the gross domestic product has contracted, the current account deficit has declined. When GDP expanded moderately, the current account deficit increased. And when GDP grew robustly, the current account deficit increased more rapidly. The same relationship holds with respect to the current account deficit and U.S. manufacturing output. Higher levels of imports are associated with more economic activity, which is integral to job creation. The deficit is quite clearly pro-cyclical. . . .
Closing Comments, Tired of the Spam
I've been forced to close comments on Tidbits, thanks to a steady firehouse of spam which has become too much to handle. It's gotten so bad that we've actually deleted legitimate comments in the process of trying to delete the junk.
Responses are still welcome; if you'd like to make a comment, feel free to e-mail me.
Posted by John at 3:49 AM | Comments (0) | TrackBackQuote of the Day for Friday, February 23, 2007
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February 22, 2007
The Entrepreneurial George Washington
Today is actually George Washington’s birthday, which is worth a reminder, since there’s an entire generation or more of Americans who no doubt think Washington was actually born on the third Monday of February. (For the record, Washington was actually born on a Tuesday, 275 years ago today.)
The Wall Street Journal’s John Fund reveals a side of George Washington which I never learned about: his career as a whiskey entrepreneur. After he retired from office, Washington invested in what eventually grew to be the largest distillery in colonial America:
"He thought like an American businessman," says Jim Rees, the executive director of Washington's Mount Vernon estate. "He was a true disciple of the free enterprise system, and he sensed that our new system of government would encourage people to think creatively, take chances and invest."
The business went so well, at its peak selling 11,000 gallons a year of corn and rye whiskey and fruit brandy, that it might well have grown into something quite substantial, says Mr. Rees. Unfortunately, Washington died suddenly at age 67:
"If Washington had lived another five or maybe 10 years, I think one of his descendants would be sitting right there, in this audience, right next to the other CEOs of the nation's best distilleries."
Poor succession planning in closely held businesses obviously has a long history.
Read Fund’s engaging article here.
Posted by John at 2:48 PM | Comments (0) | TrackBack
Shortages of Farm Workers, Rising Costs, and Agricultural Imports
The Christian Science Monitor, in examining the shortage of farm workers in Arizona lettuce fields, comes up with some interesting facts:
—Base pay for day laborers in the fields near Yuma have risen this year from $6.50 to $8.50, over 30%, and may go higher still.
—A 10 percent increase in farm labor costs results in a 6% jump in the price of lettuce
—A 10% increase in the cost of lettuce grown in the United States results in a 3% increase in lettuce imports.
Posted by John at 8:58 AM | Comments (0) | TrackBack
Hispanic Radio and TV Advertising to Hit $5.5 Billion by 2010
Hispanic-oriented television and radio stations, programmers, and cable networks are all expected to grow faster than their English language counterparts, according to a new study by Kagan Reseach.
"Green Acres is the Place to Be"
Demand for corn used in ethanol increased the value of crop land 16 percent in Indiana and 35 percent in Idaho in 2006, government figures show. The price of a Soho loft appreciated only 12 percent, while a pied-a-terre in Islington near London's financial district gained 11 percent, according to realtors.
[Thanks to Paul Kedrosky’s Infectious Greed for the pointer.]
Posted by John at 5:29 AM | Comments (0) | TrackBackA Headline You Wouldn't Have Predicted 30 Years Ago
From the Financial Times: “Stock market mania grips Vietnamese”
Posted by John at 5:25 AM | Comments (0) | TrackBackQuote of the Day for Thursday, February 22, 2007
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February 21, 2007
Would a Chinese Automaker Be Allowed to Buy Chrysler?
The Times of London speculates on possible buyers for Chrysler, in light of DaimlerChrysler’s decision to conduct an auction for the U.S. auto maker:
Car-industry sources say the other possible bidders for Chrysler would be China’s Chery and SAIC, two automotive companies with global ambitions. SAIC has expanded rapidly in recent years, and two years ago made an abortive attempt to buy MG Rover. SAIC withdrew, but not before securing the rights to Rover designs. MG Rover later collapsed into administration.
Daimler seemingly has the right to sell its Chrysler unit to the highest bidder, subject to Washington anti-trust considerations. Such a factor wouldn’t come into play for any Chinese auto maker, but political and nationalistic emotions likely would.
It’s hard to envision, even if Chery or SAIC are interested in Chrysler, that a Chinese auto maker would be allowed to win the bidding for Chrysler. If the China National Offshore Oil Corporation (CNOOC), in spite of a more attractive offer, was so maligned in its attempt to beat Chevron’s attempt to purchase Unocal, why would a Chrysler sale evoke any other reaction from Washington? As with the CNOOC/Unocal deal, wouldn’t the prospect of a Chinese auto maker taking over Chrysler give China demagogues in Washington a made-to-order issue? It’s a calorie-free issue; you get credit for bashing China without actually having to vote on any bill!
While a Chrysler deal would not involve supposed “national security interests” cited in the CNOOC situation, the auto maker is a household brand-name with over 80,000 employees. The argument that such a deal would never get approved in China would clearly be raised. (And with merit: foreign ownership of greater than 50% of a Chinese auto-making facility is allowed only if the plant’s output is exclusively export.)
Despite having lined up a super heavyweight group of advisers, CNOOC couldn’t get any public relations traction at all. Goldman Sachs and J.P. Morgan were hired as financial advisers, and Akin Gump Strauss Hauer Feld and Davis Polk & Wardell were engaged on the legal and lobbying front. It doesn’t get more white shoe than that, yet CNOOC was forced to walk away just two months after publicly unveiling its designs on Unocal. It’s hard to see how a Chery or SAIC or any other Chinese auto maker would fare any differently in a quest for Chrysler.
Further, if GM emerges as a rival buyer, as press reports indicate they might, you can bet that they will be following the Chevron playbook: quietly lobbying Washington to keep a Chinese rival at bay.
Another question, of course, is why any Chinese auto company would want to make a bid for Chrysler in the first place. Buying Chrysler would involved inheriting a bunch of problems such as unions, an under-funded pension plan, and legacy healthcare obligations. Further, the media spotlight would be white hot, and you can bet that any little glitch or any people-related upheaval would receive immediate and widespread attention. By definition, in a deal of this size, innumerable problems are part of the fabric of the deal, so negative post-closing publicity is almost assured.
In the meantime, the smart rivals back in China would be quietly celebrating, thinking of the virtues of Toyota’s long view philosophy and its decision, when it entered the U.S., to come in an understated way. Toyota didn’t need a “big bang” to be successful here, and a well-managed Chinese automaker won’t need one, either.
Posted by John at 5:19 AM | Comments (0) | TrackBackOne Million Latinos Hired in Construction Since 2003
Since 2003, approximately one million Latinos have been hired by the construction industry, and 90% of those workers are foreign born. [Thanks to Hispanic Trending for the pointer.]
Posted by John at 4:01 AM | Comments (0) | TrackBackQuote of the Day for Wednesday, February 21, 2007
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February 20, 2007
Burgeoning Chinese Outbound Investment
In a Wall Street Journal commentary, Lawrence Brainard and Jonathan Fenby of Trusted Sources predict that China’s outbound investment will exceed its foreign direct investment as early as 2010.
Posted by John at 7:14 AM | Comments (0) | TrackBackBreaking Down the U.S. Trade Deficit
First Trust Advisors chief economist Brian Wesbury skillfully breaks down what the U.S. trade deficit really means in a commentary worth your attention. A tidbit follows:
Posted by John at 6:34 AM | Comments (0) | TrackBackI was in Ireland about three and a half years ago. Hillary Clinton's autobiography had just come out, and her book was in the front window of every bookstore on the Island. I started thinking about this. Here was an American author with an American publisher. Do you think we printed those books here and shipped them overseas? No. At best we exported a computer disk to the printer (or a very large e-mail), and they printed the books, maybe in continental Europe, maybe in the U.K., maybe in Ireland, and then put them in the bookstores for sale. So, when you think about the trade deficit in a global, knowledge-based, intellectual economy, what does it in the end really mean? Apple makes about $40 from every iPod it sells. The manufacturer of the iPod--who happens to be in China-- makes about $4 for every iPod that it produces. Would you rather have the intellectual value or the production value?
Now having said that, I want to tell you that the United States in the past year has produced more goods than it has produced in any 12-month period in its history. So, despite the trade deficit, we are still the world's largest exporter and the world's largest manufacturer. The facts do not support the rhetoric of the doom-and-gloomers. The U.S. economy is simply amazing.
Quote of the Day for Tuesday, February 20, 2007
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February 19, 2007
Toyota's Long View
The New York Times Magazine has an extended profile of Toyota which is worth a close reading; the excerpt below is only one selection you could pull from the article to illustrate the difference between how Toyota and the Detroit-based auto companies have operated:
. . . the most obvious example of Toyota’s long view is the Prius hybrid. [Toyota Motor North America President Jim] Press said he believes that every automobile in the U.S. will eventually be a hybrid. I asked how soon. Not in five years, he replied, “but I think at some point in the not-too-distant future.” I asked whether Toyota developed and marketed the technology years ahead of the other major automakers because it possessed better technical skills. Press instead framed the issue as a matter of philosophy. Ten years ago, he said, at about the same time the Prius made its debut, Ford rolled out the huge S.U.V. franchise. “Both of us had the same tea leaves, the same research,” he said. “One of us bet on hybrid, one of us bet on big S.U.V.’s.” In his view, the wisdom of making big S.U.V.’s — Press left unacknowledged that Toyota eventually brought out its own line of S.U.V.’s — seemed dubious: “First of all, long term, is fuel going to get cheaper or more expensive? Is oil going to become more plentiful or less plentiful? Is the air going to become cleaner or more polluted? And so, do you do something proactive and innovative, to be in tune with where society is going? Or do you hold on to where it has been, and then don’t let go, to the bitter end?” It was never a matter of altruism, he seemed to be saying, but an example of how corporations survive in society. “What’s the right thing to do to sustain the ability to sell more cars and trucks?” he asked. The Prius was not about a fast return on investment. It was about a slow and long-lasting one.
By the way, the article also points out some of Toyota’s failures, including its effort over the years to introduce a full-size pickup which captures the fancy of America’s hardcore truck buyers.
Posted by John at 8:52 PM | Comments (0) | TrackBackBrains on the Move Worldwide
We recently highlighted the rise in dual or multiple citizenships, noting that this trend is part of a broader wave of “brains on the move” worldwide, looking for the best locations to flex their creative and entrepreneurial muscles. EvolvingExcellence (worth your regular attention) points to numerous instances of this trend in a post on the subject:
—Experienced knowledge workers, particularly those from the energy industry, are leaving Venezuela in large numbers, turning their back on Hugo Chávez’s socialist “Bolivarian Revolution”. Countries such as the United States, Canada, and Qatar are happy to have these professionals. The Chávez regime is handling this problem with its usual efficiency: “During the presidential campaign last year, PDVSA President Rafael Ramirez told company executives to join Mr. Chávez’s political movement or hit the road.”
—The New York Times reports that “doctors, engineers, architects, and scientists” are leaving Germany due to “a stifling bureaucracy, high taxes, rigid labor market, and plodding economy.”
—France’s rich are fleeing the country’s burdensome taxes [see Paris Link]. Singer Johnny Hallyday proclaimed on television: “Like many people in France, I have had enough of paying these ridiculous taxes we are forced to day. That's it, I've made my decision.” Hallyday is following other wealthy French to Switzerland.
—The number of medical professionals escaping the bureaucratic strait-jacket of Canada’s single payer system to come to the United States equals 30% of the output of its medical schools. [Source: Canadian Medical Journal] Note that Canada’s response to this problem is to raid someone else’s medical system; South Africa has officially complained to the Canadian government about its recruitment of South African physicians.
—Indian scholars, having finished their studies in the United States, are returning to their home country. These individuals, many of which might have chosen to stay in the U.S. in recent years, now see better opportunity in India. [Source: IIE]
Here are a few more similar recent headlines to add to the EvolvingExcellence list:
—Due to poor job opportunities at home, people are the Philippines’ “most lucrative export”, says Bloomberg columnist William Pesek Jr.; “OFWs” (overseas Filipino workers) comprise an estimated 10% of the country’s total population.
—Africa is losing highly educated professional, and Detroit is one of the beneficiaries, reports the Detroit News: "They are smart, motivated, and they do well in this country, and that leads to growth in immigration," said David Wiley, director of the African Studies Center at Michigan State University. "Of all African-born immigrants to the United States, 50 percent have one or more degrees in higher education."
Whether they like it or not, countries and their governments are in competition for the world’s best and brightest.
Posted by John at 8:48 AM | Comments (0) | TrackBackQuote of the Day for Monday, February 19, 2007
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February 18, 2007
The Prosperity and Perils of China's Entrepreneurial Class
As reported in today’s Washington Post.
Posted by John at 5:00 PM | Comments (0) | TrackBackSugar High
In the United States, we pay about twice the world market price for sugar, thanks to a well-organized sugar growers lobby and your elected representatives in Washington who continue to allow this regressive tax. (Yes, it’s a regressive tax which falls heavier on lower income families, since the well-to-do pay pay a lower proportion of their incomes on food.)
Many food and beverage companies use cheaper corn syrup as a substitute for sugar, but now the price of corn syrup is rising. The Los Angeles Times examines the situation in a excellent editorial:
More U.S. food makers probably would use sugar rather than corn syrup if they could pay the real market price for sugar and have access to more of the sweetener. Compounding the awful distortions created by the current quota system is the fact that corn syrup prices are rising so sharply because more of the U.S. corn crop is being diverted to make ethanol, which makes little sense because ethanol can be made much more efficiently from — you guessed it! — sugar. It's hard to even keep track of all the ways in which the nation's sugar protectionism is damaging.
Brazil produces a surplus of sugar-derived, low-cost ethanol. We import very little because, in order to protect corn growers, we slap it with a 54-cents-per-gallon tariff. Meanwhile, to protect our sugar growers, we impose import quotas on Brazilian sugar, which means we can't even make ethanol at home from cheap sugar.
Puts all the Washington pontificating about creating cheaper sources of alternative energy into perspective, doesn’t it?
Happy Year of the Pig!
Happy Year of the Pig!
[I took this picture in a hotel lobby in Wenzhou in early January; they were obviously already gearing up for the celebration.]
Posted by John at 4:06 PM | Comments (0) | TrackBackQuote of the Day for Sunday, February 18, 2007
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February 17, 2007
Georgia Gov. Sonny Perdue Needs an Immunization . . .
. . . or at least that's what you'd think after reading the Atlanta Journal-Constitution's account of Georgia Gov. Sonny Perdue's plans to go to Europe and Asia later this year to further the state of Georgia's business development efforts. Perdue, according to the Journal-Constitution, "has recently succumbed to the globalization bug."
Perdue's efforts, as I've recently commented, are hardly the result of fever-induced hallucinations; they are necessary for Georgia's efforts to attract business (also known as job producers) in a global economy.
At least in this case Gov. Perdue is only thought to be ill. In the world of AJC columnist Cynthia Tucker, who recently claimed globalization was more "insidious force" than al-Qaida, Perdue is a terrorist.
Posted by John at 11:27 AM | Comments (0) | TrackBackWal-Mart's Poverty-Reducing Role
We've highlighted comments from FLOW's Michael Strong on Wal-Mart's role in reducing poverty; here's a recent interview with Strong worth your attention:
[Thanks to Cafe Hayek for the pointer.]
Strong's best comments are at the end of this interview. Wal-Mart's critics, he notes, would serve the world better by creating an alternative instead of just criticizing: "I'd love to see somebody do a better job than Wal-Ma