US Jobs, Trade: In Defense of WTO, NAFTA

This blog post is written in response to complains of US unemployment, manufacturing job losses, WTO, and NAFTA (Source: Robert Kuttner, Not Just Jobs — Good Jobs, http://www.huffingtonpost.com/robert-kuttner/not-just-jobs-good-jobs_b_706209.html)

Opening, liberalizing trade in forms of WTO, NAFTA, or other forms of multilateral or regional trade agreements has not been political agenda of one specific presidency, but the general trend of every administration since the mid-1970s, regardless of republican or democratic presidency. It may have incorporated the political influence of large corporations’ business and profit pursuits via international venues. But also not opening trade and global markets would have had the serious downside of collectively impoverishing American people by reducing their purchasing power of goods and consumption based on their income by, my guess is, one-third or more of their levels under trade. Because not-trading increases prices of products and reduces the choices of products available in the US markets, so we have to buy, consume less with same amount of income and feel more poor or less rich.

There is a reason that Wal-Mart has become the largest US and world corporation; because it has provided those choices of lower prices and more varieties of products through its multinational manufacturing or procurement of goods as much as the WTO, NAFTA or other trade agreement rules allow the corporation to do so. And Americans have “Crazily” enjoyed the “Benefits of Wal-Mart’s international operation while condemning evil Chinese or Mexican workers to take away American jobs. If people complain about WTO, NAFTA or other open trade issue and the consequent losses of US jobs, they should do it while abstainning themselves from going wal-mart or buying any cheap imported goods, or buying Japanese cars to reduce maintenance costs and reduce (the chances of losing workdays or income because of frequent car troubles before go to work) and bear with living with far less. They should put their acts together in belief; they cannot do A while pursuing conflicting B because of convenience.

Flattening American wages for decades. One of reasons is, the world is changing. In the Past, America was often the best or a leader in many manufacturing industries because the Europe was growing old and the Asia was not that much in the picture as it started its industrial infancy in 60’s and 70’s. Now, America is one of those growing old folks as Europe. We have to see where this country is standing in the world, to have correct understanding of the situation.

Chinese Consumers in the Era of China As #2 Super Economy

Recently, China became the number 2 world economic superpower after the United States.

In an article, “The Truth About China as #2″, Dr. Robert Reich talks about China’s production and consumption expansion as below:

“But Chinese wages are so meager relative to China’s productive capacity that it would take a tsunami of labor agitation to push pay up to where it should be.

China is now the world’s largest market for everything from cars to cell phones – but that’s not because these items are within easy reach of the average Chinese. It’s because, out of 1.3 billion people, a couple of hundred million can save enough to buy them.

If the wages and purchasing power of Chinese households continues to rise more slowly than China’s capacity to produce goods and services — more slowly than China’s corporate profits and the government’s share of national income — we’re all in trouble.

Think of China as a giant production machine that’s growing 10 percent a year (this year, somewhat less). The machine sucks in more and more raw materials and components from rest of world — it’s now the world’s #1 buyer of iron ore and copper, and close to the #1 importer of crude oil — and spews out a growing mountain of stuff, along with huge environmental problems.” (source: http://www.huffingtonpost.com/robert-reich/the-truth-about-china-as-_b_684004.html)

I wonder whether Dr. Reich’s view of Chinese consumer is too simplistic. China appears to have huge dichotomy of economic development levels because of extreme urbanization/industrialization in cities while most rural areas suffer lack of infrastructure, industrial/employment sources, unimaginable poverty, resembling African poverty and starvation.

Chinese people in urban areas get along well with fast increasing wages, available modern appliances and lifestyles, the corresponding consumption. Chinese in urban areas or cities imitate lifestyles of people in Taiwan, South Korea, Japan, or New York. While urbanization has been growing fast in China, it is the vast size of Chinese rural areas and their consumers’ extreme poverty, starvation that drag down the overall consumption level of Chinese consumers.

It will change over time depending on the speed of China’s urbanization/industrialization process.
China, in general, is extremely underdeveloped and have to undergo hell of industrialization process couttry-wide for Chinese’s individual average level of consumption to reach the level of other industrializing and industrialized countries. Although China now reached the #2 world economy status after the US, in terms of the level of economic growth or maturity, still the country is in the stage of early teenage level, I would say, which means unimaginable potential for further growth over prolonged period until next super power rises.

In terms of China’s production growth, it will also depend on the world market condition. During recession like this, world demand for Chinese goods either slows down or stagnates, which limit Chinese expansion of production.

“the chinese are coming to kill us”: China becoming the 2nd world economy. “Surprise?”

Regarding the statement, “the chinese are coming to kill us,”

No, Chinese are not going to kill us. Now, China just became the number two world economic power right after the United State, with full expectation of overpowering the US in next two decades. They are just growing fast as has always been predicted. It’s not even a news. It has been a matter of time. Continuous nature’s slapping on the poor chinese’s faces through flooding and droughts, no, actually artifical-manmade-global warming’s meanist weather changes slapping on that country may even more motivate those chinese to work harder and live better. Just the majority of Americans refused to accept the possibility and have lived on denial. Because in their mind, US being the center of Universe is unchallengable religion. If Republican and Democratic politicians continue their political chaos, it may even speed up China’s takeover of US position of world #1 super power for less than two decades. Keep going.

It seems to be the combined role of large sizes of population and land, cultural support for business and industry, less interference of destructive religion into industrialization process, and low economic and wage levels to spurt fast economic growth,  among others. In a simple analogy, starving young cats have far more growth potential than fat old cats which already went through their development.

Small east asian economic tigers like Japan, South Korea, Taiwan, Singapores have strived to become economic power and reached to certain levels of economic development, largely because of dense population and right culture for enterpreneurship despite small land size and lack of natural resources. However, for small countries with just dense population but limited land and resources, their striving for economic prosperity for long-term seems to be limited. It’s like a very short-leged runner trying to outpace a very tall runner with leg length twice or more of that of short-legged runner in marathon. In short-term, the short-legged runner can run twice as fast as the tall runner; but in long-run, the short-legged runner will eventually run out of steam and energy, will not be able to sustain that fast running speed for the whole length of marathon. Being quite is boring. say something.

The Chinese Aren’t Coming: “The Inofficial Reason of Chinese Militarily Not Attacking US.”

My argument: Does anybody fear for the potential military attack to US by China? I have to say that the Era of Military War has been shifted to the Era of Economic war. When? A or two decades ago maybe? When Russian and Chinese started busying themselves with business, commerce and earning money, the nature of “Communism” has changed into that of “Consumerism.”

Have you ever seen any (even communist) riches who yarn for wars to lose all their riches? How long Chinese have clinged to the low value of Yuan so that they can export more goods and earn more money? Do you think Chinese want to destroy their lucrative export markets?

At least, Chinese seem to be wiser than Wall Street Bankers; they don’t kill, don’t wipe out their lucrative market – money/business sources, but rather invest some money on it to prevent its collapse and secure their future harvest from it. Isn’t it wiser than Wall Street Bankers’ ruthless draining of any possible profits from their clients regardless of what will happen in future?

Inofficial reason of Chinese not coming; I heard that in NY or big cities, a lot of sons and daughters of Chinese government officials have attended expensive US universities. Although China’s hourly wage used to be far less than 50 cents per hour years ago, these governments officials often earned huge sum of money through bureaucracy and able to finance their kids to attend most expensive universities in US, live in most expensive US cities and the kids would usually wear Gucci suits, nothing less than that. And I heard that most Chinese people in US (same as Indians), although their appearance may look clumsy and poor, have strong political connections in China that enabled them to come to US.

I don’t think Chinese govt officials will wage war with US to jepadize their kids’, relatives exciting life in US. And who wants to kill their money source?
Read the Article at HuffingtonPost

“Will China’s Revaluation of Currency Boost US Manufacturing and Jobs?”

“Oh, Dr. Reich !,

(regarding the impact of China’s revaluation of currency) So, is China revaluing it’s currency? Will it help US economic situation or hurt it at this point? Usually increasing the value of originally undervalued Chinese currency and making it more expensive should make China’s exports to US more expensive, decrease US imports from China, decrease US export prices to China, and increase US exports to China, right? So, will the revaluation of Chinese currency help both US export and import situation with China and, therefore, US manufacturing and “JOOOOOOB” situation? (since school, figuring out this kind of stuff is getting somewhat confusing…) I heard that even during this serious recession and (near) bankruptcies of US auto makers, still US cars have been hot items in Chinese market and “Very Profitable”!”, very exciting !

Dr. Robert Reich’s blog, “What’s Ahead for the Economy and Politics in 2010”, http://www.huffingtonpost.com/robert-reich/whats-ahead-for-the-econo_b_411640.html

“Obama, China, and American Jobs” by Robert Reich and Global Riches, Poors, and US Corporate Centralism

Former Secretary of Labor, Prof. Robert Reich discussed the limitation of China as a source of boosting US economy and jobs in his blog, “Obama, China, and Wishful Thinking About American Jobs,” at Huffington Post. He points out the limitation of China in boosting US economy and jobs as China’s high savings and investments rates and low consumption rates. These characteristics have been the typical profile of developing countries in the stage of high economic growth before reaching the stage of becoming advanced industrialized countries like US and Western European countries.

Here is one irony that I cannot avoid but noticing. Americans here expect Chinese people to help, save US economy and job conditions while they themselves (or we ourselves) keep damaging our own economy and jobs by scheming / manipulating domestic policies for political advantages or profit reasons that end up providing excessive profits to a few wealth group of people at the costs of screwing up the rest of people and the whole economy. And we look for the solution of our problem from a foreign country which also struggles with its own sets of problems including starving people and high unemployment in parts of the country? Does this make sense?

Regarding Prof. Reich’s blog, I wondered about other reasons of China being a limited source of US export market and boosting US economy:  (a) the huge gap between the riches and the poors in that country; (b) the limitation of US international marketing / business.

Regarding the huge income gap in China’s riches and poores as a source of limiting the country’s potential to help out US economy and job losses, Chinese riches live like the corresponding American riches. Chinese poors live like the correspnoding African poors; they starve like poor Africans. Rather than high Chinese savings and investment rates, I wonder whether it may be the huge income gap between Chinese riches and poores that cancel out the potential of Chinese consumers as a whole to help out US. Years ago, I heard from a Chinese that, in poor rural China, there were even families that owned only one pants for 7-8 family members. So, whenever family members had to go out, each member took turn to wear that pants while the rest of family members stay home naked or without wearing pants. Of course, this is a side story compared to their starvation. This is the story of “Rural China” where there are few industrial bases and job sources to feed people. This Rural China story may be comparable to those of US cities or towns that have declining or disappearing industrial bases, less and less jobs available, and increasing homelessness and starvations, such as the conditions of mining towns or cities of declining car manufacturing. On contrast, in “Urban China” booming industries and jobs exist to support Chinese people to increasingly live like people in richer countries.

In case of my country of origin, South Korea, in the 1980s and early 1990s, the young generations of riches in their 20s lived like the corresponding age group in US, attending universities, partying, drinking, killing times for ultimate entertainments and dating, enjoying such spoiled lifestyles and consumption patterns. In contrast, the young generations of poor Koreans, such as sons and daughters of poor farmers or factory workers, were often involved with underground student/labor/political organizations and demonstrations against the military governments and social/political issues, run away from smoke bombs and got arrested during street demonstrations, blacklisted by the government and often tortured by policies or military, maybe partially comparable story to those of young terrorists in Middle Eastern countries. What I am trying to say here is, the choices of lifestyles and consumption patterns seem to determined by the availability of money, not by nationality. The hierarchy of income levels and choices of lifestyles and consumption patterns within a country is exactly parallel to those across different countries regardless of nationality or different economic profiles of countries but more because of availability of money. I believe, human nature is same all over the world.

Regarding US firms’ limitation of exploring foreign consumers, although US has the finest business schools such as Harvard Business School etc., either many US corporates haven’t utilized these human resources or these human resources forgot what they learned in school after their graduation and run business based on what they feel like or their personalities. Despite  some exceptions, many US companies seem to only target domestic consumer and produce goods at corporate/executives’ convenience and needs (as shown by US auto industries), rather than considering / analyzing what consumers or competitors think and act. Some time ago, I read a review/rating of international travelers by, I think, French employees of tourism. They rated Japanese as most cordial and pleasant travelers, French most obnoxious (French travelers were even disliked by their only country fellows), and Americans being as the only nationality who insist to speak only English instead of learning the local languages even while traveling foreign countries. This attitude of American tourists may also explain the mentality of US corporate executives. The story of US corporate people in doing foreign business often sounds similar to that of American tourists. These American business people in foreign countries often don’t like to learn local languages and cultures. They prefer / expect the local people learn English to communicate with them. I may call it as “US Corporate Centralism” although there may be other terminologies given to this kind of behavioral, cultural pattern. Instead of providing goods that fit to the tastes, sizes, and consumption patterns of people in foreign countries, US corporates expect foreign consumers to adjust, adapt to the ways of American-made goods that US corporates produce and provide as they like.

Along with the role of exchange rates between China and US (which has been another huge issue between two countries over a decade) and China’s country profile, this American style of doing foreign business has been and may continue to be the major barrier of selling American goods in foreign countries. In the past, there had been strong, high demand for American goods all over the world. In South Korea, for example, Korean mothers got crazy to rush to OshKosh clothing stores in Korea if they had heard about those stores’ sales advertizements. Because those OshKosh children clothings were sold in Korea at 200%-300% higher prices than the original US prices and not easily available there, if those clothing store had had sales, their were crowds of mothers around those stores and many people behind the crowd even couldn’t look at the products and just wait until somebody toss behind some unwanted products. That’s what I heard from Korean mothers. US products have often meant status symbols for many consumers in developing countries because of the image of US as world super power and American products were not easily available there. Foreign people wished to have American products to show up to their friends and neighbors, but they couldn’t find them. US corporates probably didn’t know that because they were not interested in foreign markets and didn’t do market research, mainly serving US consumers with products that the corporate people like to produce. Without solving visible barriers in engaging in international business, are we supposed to keep talking about why Chinese consumers would not really help US economy and unemployment problem?

Mr. Reich’s Oroginal Article: http://www.huffingtonpost.com/robert-reich/obama-china-and-wishful-t_b_361492.html