Tuesday, October 19, 2010

Business: Enough with the Protective Posturing U.S.!

Warning: I'm on a tear here...so if you aren't in the mood for a cranky, one sided, very editorial read. Stop now. Maybe read Don't worry be happy.

The U.S. is now investigating China for unfair trading practices through their subsidizing innovation in Green Technology? Really?

10/15/10 From Office of The United States Trade Representative, an Executive office of the President

United States Launches Section 301 Investigation into China’s Policies Affecting Trade and Investment in Green Technologies

"...the investigation has been initiated in response to a petition filed by the United Steelworkers (USW) on September 9, 2010." >>read more

We (Americans) would be so lucky to have a government which promotes and support Green Tech Innovation !(And I'm talking about everyone from the Whitehouse, Congress, State Governments, and even Local Municipalities.) 

Does that mean if the US finally does support Green Tech that 'we' are engaged in unfair trade practices? 
What about if a State (Michigan or California for example) provides tax incentives to Green Tech innovation? Does that mean just California is practicing 'unfair' trade, but the US isn't? Ugggh.

Why? (为什么?Wei Shenme? Porqué, perché?) Why? does the US refuse to learn from the runners at the front of the marathon? Are we just to vain? 
It seems to me the US is acting like Tanya Harding in that 'our'  big plan is to take a pipe to the back of China's leg, thinking that will put them out of the competition. Remember how well that worked out for Tanya?  Perhaps rather than smack down the "competition" we should watch China's technique and learn. (Further reading on this topic: All I Really Needed to Know I Learned In Kindergarten)

Did we not learn anything from the emergence of Japan in the 1980s?
Remember when if something was Made in Japan that meant it was automatically considered junk? Well look at their products now. Products labeled as made in Japan (or even branded by Japanese companies and made elsewhere)  are now synonymous with innovation, superior quality, and beautiful design. The US completely discounted the possibility of a Japanese manufacturing that could grow from tourist trinkets to Electric Vehicles. The United States must learn to move forward and innovate constantly.

Is the US just stuck in the same 'head in the sand' mindset that I witnessed firsthand in the Home Furnishings Industry 10 years ago?
Since my first trip to Asia for product sourcing in 1997, when I returned to the US and traveled to North Carolina to attend the "International" Home Furnishings Market, I felt like I was in a different dimension as I listened to the 'good ole boys' going on and on about how the "Chinese could never produce the quality of the US furniture makers." 
Meanwhile I was traveling to China (not to mention Malaysia, Thailand, Taiwan (in the old days) and Vietnam (since the US restrictions were dropped in 2001) and witnessing factories grow from garage size manufacturing to 2million square foot factories in just a few years. And yes, their growth was helped by supportive government taxes, incentives, and low land lease rates. But isn't that what a good government should do when they are trying to support businesses? 
And since my first trip in 1997 I saw components of major high end US furniture makers in overseas factories. And present day, I see products from roughly 95% of all of the great US Furniture" brands going down production lines all over Asia. 
I don't think most consumers know that even when they buy a $4000 dining table, most likely it was made in Asia somewhere or, at a minimum the parts were made there and brought in and finished and assembled in the US. (That little trick allows a 'Made in the USA' label on the product.)

And how have the protectionist, anti-dumping duties on 'wooden bedroom furniture' benefited US Furniture Makers?
Not much, except for collecting their portions of the duties collected (which ranged from 0.5% to 198%). What have these US Manufactures' who filed the lawsuit and subsequently received their percentage of the collected duties done with that money? (Millions of dollars!) ? I honestly don't know the laws regulating the disbursement of the millions of dollars that are collected. But I assert that it should be divided into a trust and a large portion should be allocated towards worker retraining/education. (Ahhg, but that's a whole different rant of mine).
So, with massive punitive anti-dumping duties, why are 95% of US Furniture 'Manufactures'" still sourcing their products from Asia?
The simple answer is: Because they have switched their production to other countries to avoid the duties, but maintain lower manufacturing costs than they can achieve in the US.
The longer story and history is that it has been relatively easy for manufactures to migrate from China to Vietnam (and elsewhere) to avoid the duties:
  1. Taiwan - a large majority of furniture companies got their start in tiny small factories in Taiwan in the 1970s and 80s. 
  2. China - Then in early 1990s when China opened Southern China into an 'economic development zone' and enticed foreign investment through beneficial taxes, land lease rates, and infrastructure growth, the Taiwanese factories set up a 2nd shop in China. These new factories were 100 times the size of their Taiwan facilities and with lower labor rates they were able to grow through capacity and margin increases. Eventually most shuttered their Taiwan factories, using their valuable land in Taiwan for something more profitable, (like building condos.)
  3. Vietnam - When whispers the anti-dumping duties emerged at the end of the 1990s, those same Taiwanese factory owners built factories 20 times bigger than their Chinese factories (I'm talking huge! 20million square feet. They have their own hotels at these factories for their customers!) Again, aside from hedging against the US anti-dumping duties, this business savvy group were also attracted to Southern Vietnam by their economic development zones, amazing infrastructure building, low land costs, and tax breaks. (Hmmm, seems like a pattern developing huh?)
American's, please consider the advice you would give to your children if they came home with this conundrum.
A rival classmate is better at soccer and math. It's not fair.
Would you reply, "your right honey, it's not fair!... Let's tell the teacher that they have to give that kid more work and not let them play soccer."
No (if you would...please visit Dr.Phil's website).
More likely you would say: "Well honey. I think you should make friends with him and you two can practice soccer and study math together."
So, in conclusion I recommend that we all reread, and even perhaps post in our offices : All I Really Needed to Know I Learned In Kindergarten.

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