Trade with CHINA IS NOT SUSTAINABLE

[WalkerARCHITECTS]

Is a trade deficit with China such a bad thing? What's going on with all of the U.S. Treasury notes they're holding? What's the impact of China's recent move to unpeg the yuan from the U.S. dollar? Is slave labor a bad thing?

Trade with China is actually costing us too much. We need to reduce the impacts of trade with China on the American wage.

The global economy shows some signs of emerging from the recession and now some confusion exists amidst speculation of a trade war between the U.S. and China, could this be a monkey wrench tossed into the engine of recovery.

The U.S. just slapped a 35% tariff on tires imported from China, beginning Sept. 26. There have been numerous products which were imported and sold and consequently discovered to be toxic, violations of US laws or dangerous to consumers. The Chinese have made allegations that the U.S dumped Auto Parts and spam onto the market place in China.

The reason trade with China is less than desirable is simple for Amercans and Europeans alike to understand. It is not a free nation where workers get paid according to a free market driven value of their labor. The government decides everything and controls the marketplace for labor.

The tension between the U.S. & the free world and China could escalate into a full-blown bout of global protectionism. Maybe it should, but we might need to sacrifice the hope of economic recovery. On the other hand substantially reduced trade with China might have the benefit of reducing the assault the labor competition has on American wages.

The incredibly low cost of labor in China is created by the autocratic government that disappeared Ai Weiwei.

So a trade dispute is in the mix any way you look at it. China has no intention of allowing a free market for labor prices. They still deploy child labor and forced labor and consider this to be legal. The Free trading world is coming up short on jobs. The value of the currency of Europe and the US is being hammered by the disparate artificially induced low wages paid for labor in China and other third world nations. This could be the start of that much-feared double dip into another recession, or the pressure relief we desperately need in the free world.

The idea that trade with China is good, is being challenged. According to Keith Hembre, chief economist with First American Funds in Minneapolis.

"It's not uncommon for the government to side with certain industries to protect American workers," "These tariffs wouldn't be happening if the unemployment rate was substantially lower."

China does not have free labor markets and consequently what we are engaged in is not free trade. The trade deficit with China has soared in recent years, hitting a record high in 2008. This is a concern for obvious reasons: If we continue to buy a lot more from China than we sell to them, more U.S.-based manufacturing jobs WILL be lost. As we have reported here the capacity to buy single family homes already appears to be a thing of the past. For Architects these impacts spell continued disaster for the firm.

Since 2000 when we opened our doors to China the Chinese government has be "talking" about removing the tariffs they have on the US. As soon as the New Year turned 2010, the Asian Free Trade Zone went into effect. China is teaming up with 10 Asian countries (called Asean) to lower tariffs on many different industries. The tariffs will eventually be phased out by 2015. The irony is that China’s tariffs were already low. The heads of state for the 10 Southeastern Asian countries are all optimistic about this free trade agreement. The Association of Southeast Asian countries include Burma, Cambodia, Singapore, Thailand, Vietnam, Brunei Darussalam, Laos, Indonesia, Malaysia, and Philippines. Tariffs are not the problem with China. The problem is that free trade has not happened in any responsible manner yet.

Anytime China does something I must take pause. China’s new age combination of Communism and Capitalism is a constant threat to the world economy, and this current free trade agreement just makes China that much more powerful. In 2010, we may not have the Cold War, but we have economic battles. As the value of the U.S. dollar decreases, Red China’s is increasing and poses a significant threat to the currency markets of the free world.

For some reason, economists and global commentators like to leave out the part that Red China engages in human rights violations at a sickening scale, and any civilized country would consider it to be slave labor. We need to shut the door on trade with China if the labor markets there are not subject to immediate correction. Barry Allen has justified this by saying "China is still learning how to become industrialized, and it is no different than the U.S. in the late 1800′s, when underage workers worked long hours in New York factories". Given that we have to compete with the child labor and forced or government controlled labor rates, those rationalizations are hogwash.

But back on topic: lower tariffs- and by 2015- no tariffs with China, means that hundreds of billions of dollars will be pumped into China’s Big Brother system. China is building a new nuclear navy and developing a stealth fighter. A stealth bomber is probably under development as well. With whom exactly is China preparing to go to war with? Who else?

According to Richard Fisher Jr at strategycenter.net

Recent revelations from Washington that China has launched its first second generation nuclear ballistic missile submarine (SSBN) point to the revival of a very Cold War style of military competition. As it did versus the former Soviet Union and does to a lesser extent against Russia today, the United States can be expected to counter China’s SSBN build up. So too can the Japanese, the Koreans, the spam, the Indians, and others who are directly threatened. Chinese actions to date suggest that it may attempt to use its growing nuclear naval assets to enforce highly dubious territorial claims in her neighborhood, setting the stage for future naval "incidents," or even clashes.

The signs have been there for some time. In 1997, the US Office of Naval Intelligence stated their conviction that a 4th generation stealth fighter was under development in China. Then in December, 2008, the highly respected "Jane's All the World's Aircraft" went on record saying that China has been developing a “heavyweight” stealth fighter for many years.

In 2005, a former Northrup B2 design engineer was arrested for selling highly classified data about the B-2 and its stealth design to China. Noshir Gowadia has admitted to the charges and so there is no question that the propulsion system and stealth design features of the B-2 have been studied intensively by those designing fighters and bombers for China's People's Liberation Army Air Force

We can only hope that one day that more exposure to other cultures and technology will loosen the grip of Red China over Chinese citizens, and they can be paid a fair wage. Until then, thanks to the Great WalMart of China, the balance of economic power continues to shift. this all started with President Richard Nixon seeing the benefit of the U.S. being allowed to trade and set up businesses in China. But it has resulted in the exploitation of Chinese citizens plus the whole outsourcing trend that increases our unemployment rate and adds pressure to struggling businesses all around the world.

We need to sustain OUR economy and trade with China is NOT sustainable. We need to make things for ourselves.

TLW

[88]

We should just stop buying junks we don't really need, it does not matter if they are green or brown.

[toufic]

Excuse me ..but I didn't get the link of the above text with architecture!!

[88]

http://www.businessweek.com/magazine/co ... 719321.htm

[WalkerARCHITECTS]

The short answer... Clearly, falling wages destroy the capacity of US workers to buy homes which reduces the number of homes constructed in a year which substantially impacts Architects and accelerates the unemployment of Architects in the US. Low wages for US workers is BAD for Architects. Low wagest also means less buying power which impacts retail and capital markets. So new construction in industrial, and commercial architecture is reduced. Economic impacts on Commercial Real Estate (CRE) has the US economy on the threshold of a second economic collapse.

That said, off-shoring of Architect jobs is also BAD for Architects in the USA. As the practice of Architecture flounders in the US with massive unemployment among Architects and interns, the quality of housing is also decreasing. Economics is always a forcing vector of the construction industry.

[WalkerARCHITECTS]

Trade with China is the most likely cause of falling wages in the US and the reason why the housing industry is collapsing.

Based on a United States Bureau of Labour Statistics report, it shows that between 2002 and 2008, real hourly wages in China’s manufacturing sector doubled, while they rose by barely 20 percent in the United States. Nevertheless, despite the increase, wages in Chinese manufacturing in 2008 were still only about 4 percent of those in the United States.

http://rogerkerr.wordpress.com/2011/04/15/friday-graph-wages-in-china%E2%80%99s-manufacturing-sector/

According to the US Bureau of labor statistics the industrial sector in China is about 109 million people on average they are compensate at $.82 per hour.

Though manufacturing workers in China are earning more than ever before, average hourly compensation costs were up to only $1.36 in 2008 in the Urban Population. Before the recession in the US.

China’s hourly compensation costs remain far below those of many of its East Asian neighbors like Japan ($27.80) and Taiwan ($8.68), but are roughly on par with those of others like the Philippines ($1.68). (Read: Global manufacturing labor rates, trends and competitiveness)

http://www.ventureoutsource.com/contract-manufacturing/2011-china-manufacturing-hourly-labor-rate-compensation-costs-ems

According to the financial times:

Chinese labour productivity has been rising sharply at about 10 percent a year since the early 1990s and even more quickly in the past decade, due to technological progress, increased capital investment and rising human capital … From exporting mainly footwear and clothing in the 1990s, China’s largest exports have shifted to computers, computer parts and telecommunication equipment. According to the World Bank, the overall proportion of high-tech goods in Chinese exports rose from about one fifth at the beginning of the decade to almost a third in 2008.

[Trout7000]

Walker:

I must agree with you that there exists a multitude of evils associateed with China trade. This is indeed a subject relevant to architecture in that this trade so vigorously affects our entire economy and thus the health of our industry.

So, as you point out, it is in many ways a benefit to our nation to break our addiction on Chinese goods. Especially from a moral perspective. Unfortunately, this trade is indeed an addiction. The low Chinese wages which you cite have enabled the US to avoid yet crippling inflation up until now.

We find ourselves with respect to trade as well as with other economic associations (i.e. debt) unable to simply sever our ties with this unlikely partner.

==Trout7000


Established in 1992, Allegretti Architects in Santa fe, New Mexico specializes in designs appropriate to the unique environment and ancient traditions of northern New Mexico.

[Leoggt]

Really that worse? APPLE earn USD70,000,000,000 currency from the China business, China may got 10% of that profit.

My humble opinion for your gentleman, the only problem is that APPLE didn't share that $ with normal guys. They shall?


Happyiceage
Injection mold maker.

[WalkerARCHITECTS]

In response to the previous post. Low labor prices in China are too low and clearly damaging to the free world economy. We have too much unemployment here. Also true, all the workers here in the us are being damaged by it to some extent. Loss of the American lifestyle attends upon the "accepted" economic oppression that is "normal" in China. Chinese workers should demand free elections and higher wages, they deserve better housing conditions & better transportation and should have the right to free speech and the right to form unions.

Free trade is non existent, when engaged with a work force population in China that is not free. Believe me it is not about the corporate profits, it is about economic forcing vectors that undermine the American workers wage. This current economic environment is not sustainable for any of us.

[Trout7000]

Dear Mr. Walker:

Please be assured that we are on the same page. Chinese authorities today still treat their citizens like dirt. Witness a post in this very forum: Re: Ai Wei-Wei freed, remains under gag order. In my office hangs a photograph of a man with a shopping bag standing down a tank in Tienanmen Square. This photograph still does not exist in China today.

Consider please though this one point: With rare exceptions (the end of apartheid for example), little has ever been gained by embargo. or tariff. or trade war. or boycott. The most potentially effective (though tedious) path to reforming trade relations is through direct negotiations between representatives seeking to find common ground beneficial to the people of both the US and China.

Failing this, all bets are off.

--G. Allegretti, AIA (aka trout7000)
Allegretti Architects in Santa Fe, New Mexico

[WalkerARCHITECTS]

The value of US labor is being substantially undermined. We need to substantially rethink the trade conditions.

[WalkerARCHITECTS]

According to Forbes 9/02/2011 "Wednesday’s news that the California solar cell manufacturer and DOE loan guarantee recipient Solyndra will be declaring Chapter 11 bankruptcy has government critics grumbling about clean tech boondoggles and failed government programs." Republicans wasted no time placing blame. This is unfair after the Busch administration failed to protect domestic manufacturing from the $1.32 an hour average wage rate in Communist China that American start up companies are supposed to compete with against state funded technology and state funded infrastructure and facility in China!

But Solyndra’s failure, while unfortunate, is hardly an indictment of federal energy technology policy. Far from failure this is a success story. Failure is to be expected with emerging, innovative companies, whether they are financed by the government or the private sector.

We can anticipate more failures but if we fund these start-ups with tax dollars, we should be the good Sheppard and guard against the predictors as well!

The success of the Department of Energy’s Loan Guarantee Program (LGP) should thus be judged not by any one investment but by the performance of the entire portfolio. In addition we need to look at the competitor in China these are largely STATE OWNED COMPANIES!

we find it outrageous that politically motivated Republican critics have seized on the news of Solyndra’s bankruptcy to condemn the Department of Energy’s Loan Guarantee Program, which provided a $535 million loan guarantee in 2009. The National Review’s Greg Pollowitz writes that Solyndra’s failure shows “why the government should not play venture capitalist.” That statement is outrageous how are we to compete against the State owned companies in China?

"Yet the fact is that, when judged by its entire diverse portfolio of investments, the LGP has performed remarkably well. Indeed, with a capitalization of just $4 billion, DOE has committed or closed $37.8 billion in loan guarantees for 36 innovative clean energy projects. The Solyndra case represents less than 2% of total loan commitments made by DOE, and will be easily covered by a capitalization of eight to ten times larger than any ultimate losses expected following the bankruptcy proceedings." Forbes reported.

We agree with the Forbes Article; "The broad success story of the LGP shows why federal investment in clean energy is necessary to help early-stage clean energy technologies achieve scale and reach commercialization. The inherent uncertainty in investing in novel technologies, coupled with the high capital costs and long time horizons, prohibits most venture capital funds from investing in large-scale clean energy projects. Financing tools and direct investment from the federal government can help bridge this well-known “Commercialization Valley of Death,” and the LGP is an effective way of doing that." It is however, pointless to chant the mantra of free trade, when this is not a free trade competition!


In place of “picking winners and losers,” as conservative politically motivated critics of the program allege, the program actually reduces risk for a large number of innovative clean energy technologies. This allows venture capitalists and other private sector investors to invest in the best technology. Rather than picking winners, the LGP enables innovative companies to compete in the marketplace, allowing winners to emerge from competition. And while Solyndra is shutting its doors, companies like SunPower, First Solar, and Brightsource Energy, which also received loan guarantees and other support from the federal government, are industry leading success stories. This is a win for America!

Forbes reports "Make no mistake about it, we are going to succeed. With perfect hindsight, it’s all too easy to see why Solyndra proved to be a bad bet: the firm’s central innovation, a thin film technology that avoided the use of silicon, proved to be far less important when refined silicon prices collapsed after Solyndra’s founding; the remaining installation cost advantages provided by the company’s cylindrical solar panels proved too small, and Solyndra was unable to capture the manufacturing cost reductions that have helped other U.S. thin film companies, like First Solar, thrive despite low silicon prices."

Perhaps most importantly, intense pressure from heavily subsidized Chinese manufacturers is driving a surprisingly competitive solar market, forcing Solyndra to get costs down faster than the start-up firm could achieve.

Hind sight is 20/20 but not speculation on unproven technologies. It is possible that these fatal factors could have been avoided by better vetting from DOE, or that removed from the pressures of a fast-paced stimulus environment, DOE may not have made this bad bet. But to assert, as numerous conservative commentators have been quick to do, that Solyndra’s failure is proof positive of the government’s supposed inability to “pick winners” is ridiculous;y absurd.

At Walker Architects we are stunned that the State sponsored, state owned and very well funded Chinese competitors have not been mentioned by the critical press. After all, Solyndra received repeated rounds of investment to the tune of $1.1 billion from some of the private sector’s biggest stars, including Richard Branson, the WalMart family, and leading venture capital firms like U.S. Venture Partners and RockPort Capital. Venture capitalists and the U.S. government both placed a bet, Solyndra’s entrepreneurs took a shot, and unfortunately for all, they missed. We still came out ahead!

We know this s to be expected. The high-risk/ high reward world of early stage technology ventures will include a few set backs. Par for the course but even so, very much has been achieved. The race for the moon with Russia was nothing like this, government made a truly massive commitment,and we doubt that without government funding we would not have today"s technology at all. The loan commitment places the government in a senior position in the result of a bankruptcy, ensuring that DOE will get paid out before the VCs and other investors. Additionally the technology is still valid as the cost of thin film is now falling. Critics be damned, we will achieve the solar age.

In the United states there are political critics who think the government has no place in supporting technology innovation. Clearly they have only a tenuous grasp of U.S. economic history.

The truth is that the government has a long and successful history in helping America’s intrepid entrepreneurs succeed in new high-risk, high-reward technology sectors! We are subsidizing Oil and Coal in similar ways! As Forbes wrote in “Where Good Technologies Come From,” "the government has played a key role, either as an early investor or a demanding customer, in the development of virtually every advanced technology we take for granted today, from aviation to biotechnology, to computers and the Internet, microchips, and now clean energy. Indeed, without a visionary government investing in key strategic industries, world-leading companies like Google, Genentech and Boeing would not exist."

"The United States was able to be the world’s technology leader in these fields because of its forward-looking investments, as well as a relative dearth of competition from economic rivals." Reports Forbes "In today’s clean energy market, however, competition is fierce. U.S. companies compete with low-cost Chinese manufacturers who benefit from generous state subsidies and a robust and comprehensive set of policies to encourage solar manufacturing."

We must stress how huge the Chinese investment is! According to Forbes and UPI "In 2010 the China Development Bank provided more than $30 billion in loans to Chinese solar manufacturers. China’s large clean energy investments have helped reduce the price of solar cells by 42% in just the last nine months, which was one factor in Solyndra’s inability to compete." If you can call this competition, at this stage, you have imagination or perhaps simply a desire to get press with distortions!.

While the United States may not be able to afford the scale of support for clean energy that China can, it can compete by focusing on what it has always done best: innovation. Walker Architects believe that we will still prevail but we urge the government to regulate and protect the market from State owned companies in China!

"In the solar industry, the long-term goal must be to drive innovation so that solar can be cost-competitive without subsidy. Fortunately, the Department of Energy recognizes this imperative and has embarked on a new effort–the SunShot initiative–geared toward dramatically lowering the cost of solar PV." We have great faith in the technological capacity to achieve rapid results based upon leading research. Forbes reports. " The SunShot initiative focuses on bringing down costs by pursuing innovations in four particular areas, including solar cell technology, power electronics that optimize the performance of installations, improvements in manufacturing processes, and installation and system design."

"The Sunshot initiative and other key technology innovation programs like the Advanced Research Projects Agency for Energy (ARPA-E), embody the kind of smart innovation policy that holds the promise of fundamentally transforming the economy and ushering in a new era of U.S. technology leadership."

Forbes summarizes our choices here very well; "In the face of intense competition in the clean energy sector, America faces two choices. We can abandon our entrepreneurs and innovators in this new strategic growth sector, or we can redouble our efforts to invest in energy innovation, support clean energy entrepreneurs and help American firms compete and ultimately prevail in the global clean energy race. If we walk away now, America will lose out on one of the greatest economic opportunities of the 21st century."