Global Trade

[Krcwell]

I love the fact that groupdiy has a member base that damn well covers most of the globe. I'm also fascinated by global trade, economics, geopolitics, etc... and am curious about what other people's experiences are.

Myself, I work for a US subsidiary of a UK company as a demand/supply planner. I've also worked for the same company in accounting, logistics, and sales. All roles have offered fascinating insight into a global company.

Goods are manufactured in SE Asia, sold in US, majority of profits go to UK parent company. While a fascinating global structure, I sometimes find myself at moral odds with all of it, but also don't...

I personally favor seeking out and purchasing US made products when not overtly cost prohibitive and comparatively better quality. I think a domestic manufacturing industry is important, and throughout the last 20-30 years, much of the actual manufacturing has moved overseas, a large part in SE Asia. I guess what can be considered my nationalistic side prefers that money generated in the domestic economy is reinvested as much as possible domestically.

However, I also think that in the past, US organized labor overplayed their hand enough to build up the current SE Asia manufacturing/pacific cargo fleet empire we see today. Many SE Asian countries welcomed this and developed manufacturing capabilities that are the best in the world. For instance, SE Asian manufacturing is light years ahead of the rest of the world when it comes to mass manufacturing quality plastics. They embraced the opportunity afforded them and thrived with it. My free market side says this is the perfect outcome.

I guess this is an open ended question for thoughts on global trade, outsourcing to cheaper labor markets, etc... Like I said above, I love the global perspective this forum brings.

Thanks.

Keith

 

[ruffrecords]

I have lived and worked in the UK all my life. I was in technology consulting for many years (basically posh contract design). We worked for clients all over the world and put many products into volume production creating revenue for companies outside the UK. Certainly from the 80s onwards, UK manufacturing declined quickly and we spent a lot of time working with Chinese manufacturers to transfer the designs we created for our clients to them.

A lot of what has happened to UK industry and innovation is sad, and for much the same reasons as in the USA, and of course I wish it were otherwise. The challenge is to find new and better ways to compete.

Cheers

Ian

 

[Upacesky]

I find it quite an interesting topic. I'm a violin maker in Germany and even though most of my colleagues don't like Chinese instruments they still sell them because they fear to lose ground if they don't.
Here comes a bit of history:
In the 50's-70's was Europas violin making golden age. Germany alone produced over 300000 instruments per year, mostly for the American market. Quality was not something important. Then came China and they overtook this mass-production market, quality was really poor but hey, people were able to buy instruments for 60$! It was the end of Europe's mass production and the consequences were terrible, with nearly all the factories closing. A few managed to survive by modernising their machines and raising quality. If you want a good reliable instrument, it's the best take at the moment.
So a few points:

-China killed the European violin making mass market
- it's a good thing because it made Europe reacts in a quality way
- it's still up to the violin makers to decide if they want to sell cheap instruments, so they are responsible. We decided not to sell those cheap Chinese instruments, people like this and they come to us to get good-sounding, reliable instruments.
- it's long term cheaper for us to sell reliable instruments.
-Germans like quality and music, it's a good thing. It doesn't work as easily in France for example where short term money is more important than long term quality.
- service, and personal connection to the customers is where we make a difference.
-high end products are still Europe made.
-it's hard to convince people that China can also produce high-end.

Now I know it's easier to convince people to pay 3000€ for one violin that will last several lifetimes. If you have 3000€ for recording gears, will you invest in 3 units @1000€ or for one unit @3000€?
I think it's mainly the highend mastering guys who decide for the second.

Another question is how dependent we are toward China. They are cheap at the moment but how long will it last? They may still be cheaper in the future but it will eventually stops, and I can't imagine it being much cheaper when you add transport and taxes.
So if we lose our knowledge because we rely too heavily on them, it might prove to be a problem in the future.

 

[mattiasNYC]

My concern is losing control over progressing society.

Being Swedish my impression is that Sweden gained fame by being very progressive which in turn had a relatively high cost (high taxes). But the high cost was offset by the benefits reaped, enough to be a net gain for that society. While I agree that unions sometimes go too far they played a hugely important role in creating a safe and stable society there.

However, after integrating more with the rest of Europe and the rest of the world I think Sweden lost its ability to create and enforce policies that were progressive. The threat from business to leave the country has kept governments in check for a while, and perhaps more importantly government-owned businesses that used to be sources of revenue for the state has been sold out because of a different mindset having crept into politics.

So while there may be an argument that the west is lifting the third world it's not only at the cost of domestic production but also at the cost of control of progression of society. It takes an outcry in the west for some in the developing markets to change their ways. Foxconn's high rate of suicide is one example. Had that been in Sweden during its progressive era then unions would have worked for improved conditions and compensation. In China? Maybe not so much. And I suspect the same is true in a lot of the world in question.

 

[JohnRoberts]

A timely topic as the fast track trade authority (giving the administration the ability to negotiate trade pacts that congress can then only approve or reject in whole. ) There is a major Pacific nation trade agreement pending, and the concern is if we don't give the president this authority we will not get a good trade deal (China is very aggressive about expanding trade and will gladly take our place). 

The fast track bill was just defeated by democrats in the house mainly over not enough extras added to this legislation to compensate workers when jobs get displaced by expanded trade.

I am not sure how this will end up. It seems tangled up in the house and they may break it apart into two or more bills so the important one can get passed and the difficult ones tweaked.

I am an advocate of expanded trade and repeat my suggestion to read "the Wealth of Nations"  by Adam Smith to get a sense of how my opinions were influenced.

I am frankly a little surprised to see President Obama advocating for the trade legislation. When he first took office, he had the fast track authority left over from President Bush and dragged his feet on approving already negotiated deals with Columbia and So Korea.  He delayed these deals for years before finally approving them.

Global trade is not embraced by unions and the progressive left so Obama seems to be at odds with his base.  Perhaps near the end of his term he is starting to think about his legacy. Who knows. I don't .

======
On the subject of global trade China has gotten more aggressive about making the yuan acceptable in international trade, and even trying to qualify it as a reserve currency with the IMF. This would be good for china and bad for the dollar. The silly strong dollar has allowed us to borrow much too easily (IMO). We need to be looking at Greece for an example of where we could end up of we think borrowing and spending is the only answer to every problem.

Of course maybe I am wrong.

JR

PS: I have a local example of the negative consequences of trade expansion. Peavey who once was the largest or second largest local employer has shifted more than a thousand jobs overseas by shutting down local manufacturing and buying the same goods made by CM overseas. While it would be nice to have those jobs back, I don't think protectionism is ever the answer.  We are getting into the silly season of political primaries where candidates have to veer hard right or hard left to gain traction in single party primaries. Several candidates are advocating for protectionism and opposed to the trade bill. While perhaps populist to gain votes, IMO wrong for the greater good.

 

[G-Sun]

Interesting topic.

How would we look at it if borders and nations was not so prominent in our minds?

 

[JohnRoberts]

Interesting topic.

How would we look at it if borders and nations was not so prominent in our minds?

"Imagine there's no countries
It isn't hard to do
Nothing to kill or die for
And no religion too
Imagine all the people
Living life in peace...  "

John Lennon.

RIP

Still nice to imagine, but we must live in the real world, where life is less idyllic.

JR

 

[ruairioflaherty]

Foxconn's high rate of suicide is one example.

No to derail the thread or in any way minimize those deaths but I believe the suicide rate within Foxconn was and is considerably lower than the Chinese national average.

 

[mattiasNYC]

Foxconn's high rate of suicide is one example.

No to derail the thread or in any way minimize those deaths but I believe the suicide rate within Foxconn was and is considerably lower than the Chinese national average.

That may very well be the case, but the point was that if we keep pouring money into places like that then we're sending the signal that it's ok unless people complain about it. I'm sure other Chinese businesses might indeed have worse averages, and I'm equally sure some of them are selling their goods to us. Not to mention all the other poor countries in similar positions.

 

[mattiasNYC]

I am frankly a little surprised to see President Obama advocating for the trade legislation. When he first took office, he had the fast track authority left over from President Bush and dragged his feet on approving already negotiated deals with Columbia and So Korea.  He delayed these deals for years before finally approving them.

Global trade is not embraced by unions and the progressive left so Obama seems to be at odds with his base.  Perhaps near the end of his term he is starting to think about his legacy. Who knows. I don't .

Or perhaps what I've been yapping about before is actually correct: Obama and the Democratic party is a right-of-center party in favor of Capitalism and big business, just like the Republicans, only slightly less so.

Same with Clinton. The US "right" kept calling him a "leftist" or "liberal" or "progressive" or whatever, all while he catered to the same broad group of business interests.

A lot of Americans support Democratic candidates not because they are what you appear to think they are, but instead because they're perceived as the lesser of two evils. If it's between a Republican and Obama an American true socialist would probably vote for the latter, despite him not representing that voter in the least.

 

[ruairioflaherty]

Foxconn's high rate of suicide is one example.

No to derail the thread or in any way minimize those deaths but I believe the suicide rate within Foxconn was and is considerably lower than the Chinese national average.

That may very well be the case, but the point was that if we keep pouring money into places like that then we're sending the signal that it's ok unless people complain about it. I'm sure other Chinese businesses might indeed have worse averages, and I'm equally sure some of them are selling their goods to us. Not to mention all the other poor countries in similar positions.

My opinions on global trade are not refined enough to bother anyone with but I will say there is abuse of workers both at home and abroad.  I have seen it literally on my own doorstep here in L.A., the gardener hired by my landlord.

I've been to China twice and have seen things that make the Foxconn images I've seen look very nice indeed.

Your point stands.  My point is that Foxconn is a poor example to illustrate your point. According to info I can find they had a worst year suicide rate of  14 staff out of 930,000 as opposed a national average of 186 suicides for the same amount of people.

 

[JohnRoberts]

I am frankly a little surprised to see President Obama advocating for the trade legislation. When he first took office, he had the fast track authority left over from President Bush and dragged his feet on approving already negotiated deals with Columbia and So Korea.  He delayed these deals for years before finally approving them.

Global trade is not embraced by unions and the progressive left so Obama seems to be at odds with his base.  Perhaps near the end of his term he is starting to think about his legacy. Who knows. I don't .

Or perhaps what I've been yapping about before is actually correct: Obama and the Democratic party is a right-of-center party in favor of Capitalism and big business, just like the Republicans, only slightly less so.

Same with Clinton. The US "right" kept calling him a "leftist" or "liberal" or "progressive" or whatever, all while he catered to the same broad group of business interests.

A lot of Americans support Democratic candidates not because they are what you appear to think they are, but instead because they're perceived as the lesser of two evils. If it's between a Republican and Obama an American true socialist would probably vote for the latter, despite him not representing that voter in the least.

nah...

An interesting (perhaps) political story. Bernie Sanders our resident socialist senator from Vermont is having a surprisingly strong response to his populist message so he is having to hire more staff and find bigger venues to spend his new found campaign wealth.  Jokers from the left like Bernie, or jokers from the right like Trump may add some flavor to the political debate but at the end of the day this will settle down to people who are actually electable by the majority of voters.

I suspect to a man of the left both parties here look conservative. But the differences matter, at least to voters like me.

JR

PS: Hon Hai has announced plans to buy or build one million assembly robots to get away from all those pesky human workers with their human frailties.

 

[mattiasNYC]

My opinions on global trade are not refined enough to bother anyone with but I will say there is abuse of workers both at home and abroad.  I have seen it literally on my own doorstep here in L.A., the gardener hired by my landlord.

I've been to China twice and have seen things that make the Foxconn images I've seen look very nice indeed.

Your point stands.  My point is that Foxconn is a poor example to illustrate your point. According to info I can find they had a worst year suicide rate of  14 staff out of 930,000 as opposed a national average of 186 suicides for the same amount of people.

I don't disagree with any of that. I simply think that Foxconn makes a "good" example to the extent that it may be a known entity, or at least known indirectly through its customer Apple. But as I said, I don't disagree with you other than that.

 

[mattiasNYC]

nah...

yeah...

An interesting (perhaps) political story. Bernie Sanders our resident socialist senator from Vermont is having a surprisingly strong response to his populist message so he is having to hire more staff and find bigger venues to spend his new found campaign wealth.  Jokers from the left like Bernie, or jokers from the right like Trump

I just did a brief read on what Sanders supposedly stands for (on Wikipedia) and his views are actually quite centrist when all is taken into account. He may call himself a democratic socialist, but if he favors Sweden's social democracy (of old, presumably), then he's really to a large degree a true centrist, straddling private enterprise with co-owned (through the state) enterprise.

Not sure what the "populist message" is that you're thinking of, but if it's strengthening the middle class then it doesn't sound all that bad.

may add some flavor to the political debate but at the end of the day this will settle down to people who are actually electable by the majority of voters.

As I said earlier, many things go into who is "electable", and a lot of that is either just nonsense or a matter of having a decent budget for the election campaign.

I suspect to a man of the left both parties here look conservative. But the differences matter, at least to voters like me.

JR

But the differences mattering to you doesn't make them truly left/right, or the parties left/right. The gross distortion of the political spectrum in US political discussions only serves to thwart valuable discussions on important topics. This too affects who is "electable".

PS: Hon Hai has announced plans to buy or build one million assembly robots to get away from all those pesky human workers with their human frailties.

They can all start-up some new IT business or something.... there is an infinity of jobs to be created...

 

[JohnRoberts]

nah...

yeah...

An interesting (perhaps) political story. Bernie Sanders our resident socialist senator from Vermont is having a surprisingly strong response to his populist message so he is having to hire more staff and find bigger venues to spend his new found campaign wealth.  Jokers from the left like Bernie, or jokers from the right like Trump

I just did a brief read on what Sanders supposedly stands for (on Wikipedia) and his views are actually quite centrist when all is taken into account. He may call himself a democratic socialist, but if he favors Sweden's social democracy (of old, presumably), then he's really to a large degree a true centrist, straddling private enterprise with co-owned (through the state) enterprise.

Not sure what the "populist message" is that you're thinking of, but if it's strengthening the middle class then it doesn't sound all that bad.

Surely I don't need to explain what populism is.  The appeal to the common man, like Hillary whining about how broke she and Bill were when he left office.  Ignore their millions and cushy house in Chappaqua.

Bernie is flogging the class warfare, blame it on Scrouge McDuck... "All we need to do is get them to pay their fair share", ignoring that we already have a progressive (wealthy pay more) tax system.  BTW Harry Reid was lying when he said Romney didn't pay taxes.

may add some flavor to the political debate but at the end of the day this will settle down to people who are actually electable by the majority of voters.

As I said earlier, many things go into who is "electable", and a lot of that is either just nonsense or a matter of having a decent budget for the election campaign.

it is an unfortunate present day reality that campaign budgets matter. Most of the public complaints about this is a simple power struggle between big business and big unions.  Neither of which deserves much sympathy.

I suspect to a man of the left both parties here look conservative. But the differences matter, at least to voters like me.

JR

But the differences mattering to you doesn't make them truly left/right, or the parties left/right. The gross distortion of the political spectrum in US political discussions only serves to thwart valuable discussions on important topics. This too affects who is "electable".

A semantic distinction I do not care about (still).  I find budgets and ever expanding entitlements an important topic. Both parties make impossible promises, but one is more responsible about spending if only by degrees.

PS: Hon Hai has announced plans to buy or build one million assembly robots to get away from all those pesky human workers with their human frailties.

They can all start-up some new IT business or something.... there is an infinity of jobs to be created...

Yes, we don't need to keep the old jobs, or artificially prop up wages for entry level jobs that will just speed up automation. We need to free up business to create new jobs.  We are in the 6th year of an anti-business climate, and this climate is worse than global warming for our health.

Note: We can help small business while not helping big business. Big business already has too many special deals carved out of the tax code etc. Even increased regulation favors big business over small who can't afford the bureaucracy, crowding out small business. Just look at the banking industry or medicine. There is huge consolidation with big getting bigger in hospital/insurance business... The big banks stopped getting bigger thanks to Dodd-Frank strangling them, while the small and mid sized banks are getting hurt.

Of course maybe I'm wrong.

JR

 

[mattiasNYC]

Bernie is flogging the class warfare, blame it on Scrouge McDuck... "All we need to do is get them to pay their fair share", ignoring that we already have a progressive (wealthy pay more) tax system.

Sure they do. But then at the end of the post you lament how big business isn't paying its fair share of taxes. Wealthy people aren't just wealthy in terms of a bunch of 'cash' in a bank account, they own big businesses, who in turn manage their wealth in a way to pay as little taxes as possible. 6 of one half a dozen of another....

A semantic distinction I do not care about (still).

And, like I said, you thereby stifle debate by virtue of simply discounting anything with which you disagree as essentially "too extreme to bother with". That'd be fine if it actually was proven that basic premise is right. It's not though.

I have to say that the criticism by Chomsky of the media is spot-on in this regard.

 

[JohnRoberts]

Bernie is flogging the class warfare, blame it on Scrouge McDuck... "All we need to do is get them to pay their fair share", ignoring that we already have a progressive (wealthy pay more) tax system.

Sure they do. But then at the end of the post you lament how big business isn't paying its fair share of taxes. Wealthy people aren't just wealthy in terms of a bunch of 'cash' in a bank account, they own big businesses, who in turn manage their wealth in a way to pay as little taxes as possible. 6 of one half a dozen of another....

I have been consistently opposed to "crony capitalism" that IMO is a failure of government. It is natural for business to seek out advantage... politicians shouldn't sell it to them.  If anybody thinks Hillary isn't already weaving a web of crony connections using Bill's "charity" (cough), think again.

A semantic distinction I do not care about (still).

And, like I said, you thereby stifle debate by virtue of simply discounting anything with which you disagree as essentially "too extreme to bother with". That'd be fine if it actually was proven that basic premise is right. It's not though.

I have to say that the criticism by Chomsky of the media is spot-on in this regard.

Alternate forms of governance were rigorously inspected by our founders (see the Federalist Papers). Since then there have been many failed examples of alternate systems. I worry that we are getting away from the recipe that made us great.

I haven't heard a new idea from a politician in my lifetime.. It has always been about impossible promises about the government's ability to help everybody, throwing out the corrupt old guard and replacing them with a new open and honest government.  Then once the new government is seated they magically revert to business as usual.  Our current administration is the least open of any I recall, and we've had some doozies..

JR 

 

[mattiasNYC]

I have been consistently opposed to "crony capitalism" that IMO is a failure of government. It is natural for business to seek out advantage... politicians shouldn't sell it to them.  If anybody thinks Hillary isn't already weaving a web of crony connections using Bill's "charity" (cough), think again.

Yes, but that wasn't the point.

Alternate forms of governance were rigorously inspected by our founders (see the Federalist Papers). Since then there have been many failed examples of alternate systems. I worry that we are getting away from the recipe that made us great.

Bernie Sanders mentioned Social Democracy according to the Swedish model, and no doubt did he have in mind what made Sweden famous for its policies (which was before the 80's by and large). That society was greater than the US has ever been, with the exception of measuring a nation by its cumulative wealth regardless of distribution, size, military power, or something equally meaningless to the general public.

The Social Democratic model "of old" in Sweden was by far better than what the US has had, and has.

Clearly I disagree with you that the US model is the best one. Just because some wealthy white people discussed it centuries ago doesn't mean it was and still is.

 

[JohnRoberts]

I have been consistently opposed to "crony capitalism" that IMO is a failure of government. It is natural for business to seek out advantage... politicians shouldn't sell it to them.  If anybody thinks Hillary isn't already weaving a web of crony connections using Bill's "charity" (cough), think again.

Yes, but that wasn't the point.

Alternate forms of governance were rigorously inspected by our founders (see the Federalist Papers). Since then there have been many failed examples of alternate systems. I worry that we are getting away from the recipe that made us great.

Bernie Sanders mentioned Social Democracy according to the Swedish model, and no doubt did he have in mind what made Sweden famous for its policies (which was before the 80's by and large). That society was greater than the US has ever been, with the exception of measuring a nation by its cumulative wealth regardless of distribution, size, military power, or something equally meaningless to the general public.

The Social Democratic model "of old" in Sweden was by far better than what the US has had, and has.

Clearly I disagree with you that the US model is the best one. Just because some wealthy white people discussed it centuries ago doesn't mean it was and still is.

You are entitled to your opinion and me mine.

JR

PS You forgot to mention that at least some of our founders were slave owners too. Those scumbags.

 

[Krcwell]

Mattias and John,

This is not meant to be a 2016 presidential debate. I realize I said it was an open ended question, but not THAT open ended.  ;D

Anyways, really great input from all around the world.  VERY interesting perspective with the violin business. It seems very applicable to many other businesses.

I would love to see a resurgence to locally made quality items, or even just quality items in general. The US, in my experience, has embraced the price trumps quality mindset the worst. While frustrating, it's also very interesting working for a company where marketing and general strategy are controlled by a foreign parent company. Many senior level positions in marketing and sales in this US subsidiary are held by expats with proven success in primarily the UK and Australian markets. We offer a very quality product backed by a 5 year damn-near-anything-short-of-purposely-destroying-the-machine warranty and far and away the best domestically based customer service team I have ever seen. But, the product costs 3x more than cheap competitors.

It seems that the quality, warranty and customer service aspects are valued more than the lowest price in the UK and Australian markets, at least on a per capita basis. The US consumer has embraced cheap, disposable goods. The expats tend to take about 6 months to finally come to terms with this, then are left without ideas, go to some other market after about a year, and the cycle continues.