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Bring the Jobs Back Home!
Before we race to slap tariffs on imports from China, before we insist that it’s possible to “bring those jobs back” to the United States, let’s first ask: which jobs?
The ones in China — at least the ones around iPads and iPhones and the like — don’t seem all that promising. From the Observer:
The world’s largest electronic contract manufacturing company is replacing more than half of its workforce with artificially intelligent robots.
Foxconn—known for manufacturing iPhones, iPods and iPads as well as select products for Sony, Microsoft, Amazon, Dell, Google and Nintendo—laid off 60,000 employees, which will reduce the workforce in a single Taiwanese factory from 110,000 to 50,000.
Okay, well, that’s in Taiwan, where the company is based. But the company, Foxconn, operates facilities in mainland China, too, and those are about to face the same robotic replacements. From Tech in Asia:
Foxconn responded to questions by Tech in Asia and issued a statement. In part, it states: “We are aware of media reports about automation operations at our facilities in China, including Kunshan, and can confirm that Foxconn has been investing in the automation of many of the manufacturing tasks associated with our operations throughout our facilities in China for many years.”
It gets worse — for people, not for robots:
The huge shift to robots at Foxconn and other producers could begin a wave of job losses in Kunshan, which is just outside Shanghai in eastern China. Other areas like Shenzhen in the south might be next.
Taiwan-headquartered Foxconn employed 1.4 million people across mainland China in 2015.
It’s probably more useful to think about ways to develop new jobs and new skills in new technologies, and help develop a smarter and more technologically-skilled workforce, than slapping tariffs on smartphones. Because robots — at least right now — don’t need passports or visas to come into the country.
Published in Culture, Economics, Science & Technology
But I’m going back to the 1990’s when the knockoffs raised eyebrows.
Of course there is incentive. Incentive is not the issue. The question is how to satisfy demand. There is a reason China has those confiscatory tariffs. They realize that, absent the tarriffs, there will be large numbers of foreign cars sold in china rather than Chinese cars.
Okay so they impoverish a large number of their citizens to enrich a few. That’s kind of their problem.
That says nothing about where those cars would be built. Yeah, communist countries nationalize their businesses. It is stupid and inefficient, but that’s just what they do. It’s a big jump from there to say that the only other choice would be to buy cars built in the US.
Because of labor costs, legacy health care costs, inefficient UAW work rules, and government regulation, American cars are just going to be much more expensive to build than cars built in other parts of the world. That’s just a fact. If markets were allowed to be truly free, I have serious doubts about the ability of American car companies to compete. I certainly wouldn’t assume that, just because China has been overcharging for knock-offs, it automatically follows that American built cars would flood the Chinese market if they were given a chance.
Haven’t those same tariffs also been keeping out Toyotas, Nissans, Hundais, Kias, and a dozen other brands located much closer to China?
But it clearly would be a big part as would importing US auto parts.
It all depends on things like economies of scale. Likely, things would more resemble what BMW and Mercedes do in the US with a mix of imported cars and local plants using a large amount of imported parts.
Probably Koreans more than Japanese due to taste in cars and WW2.
Our problem in two ways: 1) lost sales to China in the short run; 2) unfair competition from China in the long run. As previously discussed, they can use their protected domestic market for economy of scale to outcompete us elsewhere.
That kind of begs the question of why, if protected domestic markets are so good for a country’s industry, countries that try it always fail. Like Bernie Sanders stumbling and stuttering when he is asked about Venezuela, there’s a reason that we aren’t all driving Soviet cars right now. Or using any other Soviet products, for that matter.
Japan leveraged its protected markets in motor vehicles into international dominance.
Japan leveraged the oil crisis and its superior technology into international dominance.
Its protected markets have left its economy a basketcase for over 20 years.
I don’t see it that way. Japan just builds really good cars. But Japan has no tariffs on auto imports. It’s not that they don’t import cars. They just don’t import American cars. Volkswagen sells more cars in Japan than any American company. In fact, so does Porsche.
#BuildARobotSaveAJob
Two problems:
They built that quality car industry with a more closed market.
The top selling foreign brand in Japan is Mercedes-Benz with just over 1% share. Hardly a sign of an open market that: the numbers are so low; and the leaders include premium brands such as M-B and Porsche.
Yeah, so? They built that car industry during a time when they were rebuilding their entire country from scratch after WWII. During that same period, the US had the enormous advantage of being the only industrial country with an infrastructure that had not been destroyed. Which advantage would you prefer?
Besides, what do you want to do, go back in time and tell Japan that they had to import cars from the US instead of building their own?
I will certainly concede that temporary trade protections can help a fledgling industry get started in a country. Europe did the same for Airbus, but now Airbus competes with Boeing in a more or less free market (as free as it can be when most of your customers are governments). How long are you going to hold a grudge about that?
I have listed some of the competitive disadvantages that affect American auto manufacturers. Higher labor costs, legacy health care costs, inefficient UAW work rules, government regulation, higher taxes, etc. You have just ignored those factors, except to say “economies of scale” and “auto parts.”
First, any manufacturer building cars in China is going to be able to take full advantage of economies of scale. If foreign manufacturers were allowed to compete freely, Toyota would be opening plants in China post haste. In fact, Toyota would probably be building cars in China for export to Japan. How are you going to get an economies of scale advantage over the world’s largest automaker?
Regarding parts, the reason American manufacturers outsource parts whenever they can is to avoid the UAW and its labor costs. If they were manufacturing in China, they would likely build those parts themselves, or outsource to local manufacturers. They would no more need to schlep parts halfway around the world than they would need to schlep finished cars.
Pick a car. For example the Chinese Buick Regal at 203900 Yuan to $30585 to 269,900 Yuan or $40485 vs. US MSRP of $27k to $34k for corresponding trims.
First, because they violated all international norms in waging aggressive war does not let them similarly cheat on the peace.
Second, aren’t you always saying how protectionism hurts? You now seem to be saying it can benefit. Are you warming to the Trumpers?
If I had a time machine, that would be on the list of things to do.
What market? As previously discussed, Japan and now China uses protectionism at home to then outcompete in free markets abroad.
Airbus was launched in 1970 but is still getting subsidies and other preferences.
Basck in the 1990’s, Boeing and airbus were considering making superjumbos. One reason Boeing did not was that European countries basically said we will not let your customers build gates to accommodate your superjumbo at our airports. They then bent over backwards for the home team A380.
Ok. You get working on that, and let me know how it goes.
A war they started because of (wait for it…) a US trade embargo! Excellent strategy. Let’s do that some more.
First, they had already started the war. They just waited to attack us until we established the embargo.
Second, It’s nice to see you go beyond the Trumpers in now asserting the embargo justified military action not just a trade response.
I didn’t say it was justified. I only said that it happened. It could happen again.
FWIW… from Forbes in 2013:
Donald Trump is living in the past and wants to drag the country back to the past…because he’s lazy intellectually and doesn’t read or keep up on changes in the economy or foreign policy or national security. But he is current on who criticizes or insults him.
That’s irrelevant.
How many jobs would be involved if US brands were selling those cars or if US brands had the same effective access to the Japanese market that they have to ours? Your golden retriever would have told you about that if he still was proofing your comments.
Wow…way to get personal. I guess I’m fortunate that I don’t really know who you are.
The Japanese made an entry into the market because they made cheaper, reliable compact cars in the early 1970s that American manufacturers refused to make. They were phenomenally successful in capturing market share and American manufacturers were caught flat-footed. Now, the Japanese have established plants here in America and provide hundreds of thousands of jobs. So, what is the Trump solution? Spark a trade war with Japan? Would Japan retaliate by moving manufacturing to Mexico? How would that benefit Americans? Add additional high tariffs on Japanese imports made in Mexico…like Trump wants to do with Ford? How will that benefit the American worker? Or the American consumer? Restricting competition and availability would make the cost of cars more expensive. I don’t think that’s a wise policy. Of course, that Trumpian thinking also leads to other tariffs in other market sectors – consumer electronics making the price of TVs, cell phones much more expensive than they are currently. Yeah, great policy.
Your former avatar produced much joy on Ricochet. I resent you depriving us of that.
There are several problems with that analysis.
The oil embargo created demand for small, high mpg, cars where there had been little before. Hardly a case of the big three “refusing to make” cars for which there was demand.
Quality came later. In the early 1970’s, the best Japanese cars rusted like the worst American cars.
If the big three had had access to the Japanese market in the 1950’s and 1960’s, perhaps they would have been in a better position for that oil shock.
Trump may be wrong on a number of specifics about trade policy, but he’s correct in noting there are problems at a time when others deny there are any problems. It is more likely that Trump can be refocused on the real problems than someone else can have their near-religious trade views changed.
I have a wife that lost her six figure job to India and that can not get hired now because current trade law makes make hiring Indians in IT preferable to hiring Americans. Trump says we need to do something about American jobs going over seas. Everybody else wants to talk about transsexual bathroom policy. Score one for Trump.