China

So, Really Want to Talk About Foreign Intervention?

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Much ink and many photons have been spent discussing Russia’s attempts to influence (or at least disrupt) the American 2016 Presidential campaign.  Meanwhile…

Here’s an appalling story about how anger from the Chinese government led Marriott Corporation to fire an employee who had ‘liked’ a tweet which congratulated the company for listing Tibet as a country, along with Hong Kong and Taiwan….of course, the Chinese regime considers Tibet to be a part of China, not a separate country.

China forced Marriott to suspend all online booking for a week at its nearly 300 Chinese hotels. A Chinese leader also demanded the company publicly apologize and “seriously deal with the people responsible,” the Journal reported.

And boy, did Marriott ever apologize. Craig Smith, president of the hotel chain’s Asian division, told the China Daily that Marriott had committed two significant mistakes — presumably the survey listing Tibet and the liked tweet — that “appeared to undermine Marriott’s long-held respect for China’s sovereignty and territorial integrity.”

He announced an “eight-point rectification plan” that included education for hotel employees across the globe and stricter supervision.

And the Marriott executive said this to China’s most-read English-language newspaper: “This is a huge mistake, probably one of the biggest in my career.”

(More here…according to this article, the Chinese suppression of Marriott bookings was in response to the initial listing of Tibet as a country rather than to the tweet approving of this listing)

The Chinese economy is, shall we say, a little more dynamic than that of Russia, so the government of China has much more ability to strong-arm American corporations (in general) than does the Putin regime.

Turning now from the hotel industry to the movie industry, Richard Gere says that Chinese pressure due to his stand on Tibetan independence has led to his being dropped from big Hollywood movies.  Also:

Gere’s activities have not just made Hollywood apparently reluctant to cast him in big films, he says they once resulted in him being banished from an independently financed, non-studio film which was not even intended for a Chinese release.

“There was something I was going to do with a Chinese director, and two weeks before we were going to shoot, he called saying, ‘Sorry, I can’t do it,’” Gere recalled. “We had a secret phone call on a protected line. If I had worked with this director, he, his family would never have been allowed to leave the country ever again, and he would never work.”

See also How China’s Censors Influence Hollywood.  Because the Chinese market is so large…(Fast and Furious 7 pulled in $388 million in China, more than it made in the US)…the influence of the Chinese regime on US film production and distribution has become immense.

In recent years, foreign filmmakers have also gone out of their way not to provoke the Communist Party. For instance, the 2012 remake of the Cold War action movie,  Red Dawn,  originally featured Chinese soldiers invading an American town. After filming was complete, though, the moviemakers went back and turned the attacking army into North Koreans, which seemed a safer target, at least until last year’s hack of Sony Pictures.

and

Ying Zhu, a professor of media culture at the College of Staten Island at the City University of New York, worries China’s growing market power is giving the Communist Party too much leverage over Hollywood.

“The Chinese censors can act as world film police on how China can be depicted, how China’s government can be depicted, in Hollywood films,” she says. “Therefore, films critical of the Chinese government will be absolutely taboo.”

In the late 1990s, when China’s box office was still small, Hollywood did make movies that angered the Communist Party, such as  Seven Years In Tibet,  about the life of the Dalai Lama, and  Red Corner,  a Richard Gere thriller that criticized China’s legal system. Given the importance of the China market now, Zhu says those movies wouldn’t get financing today.

Plus,  Chinese companies have snapped up Hollywood studios, theaters and production companies.

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Robots of the Week

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Sewing robots.  Although spinning and weaving have long been highly mechanized, the final phase of the apparel-making value chain has resisted automation:

IN 1970 William J. Bank, president of the Blue Jeans Corporation, predicted that there would be a man on Mars before the production of apparel was automated. Almost half a century later, he has not yet been proved wrong.  

But that may change soon, given recent development in robotic sewing. Two companies, Softwear Automation (Atlanta) and Sewbo (Seattle) are pursuing different strategies:  Softwear’s approach is to create computer vision and robotic manipulation which is intelligent and subtle enough to deal with highly flexible fabric, whereas Sewbo’s approach is to temporarily stiffen the fabric in order to make working with it more like metalworking.

Depending on how well these systems work in practice, and how the technology evolves, they may turn out to be not only the robots of the week, but the robots of the year or even the decade.  Apparel-making is a vast industry, concentrated in nations which are not-so-well-off economically, and employs a large number of people. A high level of automation would likely result in much of this production being relocated closer to the markets, thus saving transportation costs and shortening supply cycles.  The consequences for countries like China, Bangladesh, and Sri Lanka could be pretty unpleasant.

Most likely, unforeseen problems will slow the full deployment of these systems and an Apparel Apocalypse will not occur.  It would certainly be wise, though, for the leaderships of apparel-manufacturing-intensive countries to focus on the need to develop a broader employment base.

More here.

See also my post on 3d knitting

Free Trade with a Hostile Mercantilist Empire?

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2017 marks the 200 year anniversary of David Ricardo’s publication on the theory of comparative advantage that underlies the economic case for free trade. Several years later Frederic Bastiat wrote the satirical Candle Maker’s Petition debunking the arguments in favor of protectionism. This was an ironic choice, as candle makers were politically protected by the Founding Fathers as necessary for the Revolutionary War. These protections lasted several centuries, and in 2016 Senator Chuck Schumer sought it re-instated on grounds of unfair competition from China.

President Trump’s trade representative economist Peter Navarro is making both the political and economic case against free trade with China, which he considers a mercantilist trader with military ambitions hostile to the U.S.

Navarro’s political case is an update of that faced by the Founders regarding candle making. China is viewed as pursuing a trading strategy to accumulate wealth and technical know-how to challenge the U.S. militarily in the South China Sea and globally. China’s mercantilist trade practices result in huge export surpluses with the U.S. He argues that China uses this advantage to weaken America’s industrial base and future defensive capability.

While economists can’t reject this political concern out of hand, it does seem several decades premature given the relative size of the two countries’ navies. At present the US could quickly secure sources of supply for military purposes, and protectionism tends to linger for decades or even centuries.

The second case against free trade with a mercantilist trader relates mostly to the loss of jobs due to “unfair” competition, i.e., not due to inherent comparative economic advantages as much as political subsidies, in China’s case a purportedly cheapened currency and weak labor and environmental protections. The standard argument is that such trade generally benefits consumers at the expense of high cost producers, resulting in a less political more fair distribution of consumption as well as a higher overall level.

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Why does Germany do such monumentally stupid things?

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I was reading Arthur Herman’s column in the WSJ Decoding the Zimmerman Telegram, 100 Years Later and I began to think about all the really, really dumb things Germany has done. And it’s not as if the Germans are dumb. A look at the Nobel prize list makes it clear that there are many brilliant Germans. But if we go back in history and look at the political decisions Germany has made, it is a cavalcade of catastrophe. In the 19th century, Germany was the cradle of socialism, not all the ideas, but certainly the movement. Then it decided to unite Germany, not a bad idea in and of itself; but it then led to the idea that it should conquer Europe. In the process, it threatened the US with invasion by Mexico, bringing the US into the war and onto the world stage. And to top it, they put Lenin in a rail car and sent him to St. Petersburg launching the Soviet Union. Hitler then rekindled the idea of conquering Europe, including the incredible decision to invade Russia and then declaring war on the United States directly, creating an enemy that might have sat out the European war.

After suffering a defeat as devastating to Germany’s people as the Thirty Years War, Nato was created to keep the Americans in, the Russians out and the Germans down. And for 70 years it was a success. Germany started well by establishing an economic powerhouse. It succeeded in reuniting Germany after the cold war was won by the US in spite of German handicapping. But since then it has made decisions with terrible consequences, not only for Germany, but for much of Europe. It has used the EU and the Euro to peacefully achieve, with American connivance, what it twice failed to do by violence. And the consequences have become deleterious at best for the rest of Europe. The Energiewende has been a catastrophe, leading to more pollution by increasing the coal and biomass burned to create energy and the highest electricity costs in Europe. Germany’s refugee policy has invited invasion by unassimilabe masses inimical to European culture and values. And a policy of minimal defense expenditures has led the Americans to consider getting out and the Russians getting back in. And now China has become Germany’s largest trading partner.

I have long felt that the EUropeans were more than capable of defending themselves and we should pull out of Nato to force them to do so and to save money. Why should we allow them to freeload? But now with the Americans leaving, the Russians returning, and the Germans rising, I am having second thoughts as I consider the possible consequences.

The Ballpoint Pen as an Economic Case Study

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Chinese Premier  Li Keqiang  has lamented China’s inability to “make ballpoint pens with a smooth writing function.” After five years of research, a state-owned steel company now says it can.

WSJ notes that 80% of the world’s ballpoint pens are made in China…but that thus far, China has not been making all of the pen’s components.  Specifically:

The tip of a high-quality ballpoint demands metal work involving high-precision machinery and very hard, ultrathin steel plates. So 90% of pens made in China have imported tips. China’s leaders want “self-sufficiency,” in pens as in semiconductors. Now they claim they’ll have it.

This little story is interesting from at least three angles.

First–as the WSJ story points out, China’s desire to control the entire ballpoint pen supply chain  indicates that their leaders still value economic autarky, and that Chinese leadership denunciation of President Trump on grounds of his insufficient respect for free trade carry more than a whiff of hypocrisy.

Second–the ballpoint pen example makes the point that the apparent simplicity of a product does not necessarily reflect the complexity or lack thereof involved in manufacturing it.  American economic commentators often fail to grasp this point when they assert that America’s future must lie in producing “advanced high-technology products.”

Third–the example should also clarify the point that the highest value in a product supply chain does not necessarily lie in the assembly of the final product.  The final product assembly is usually the most visible part of the supply chain, but very often the creation of components that go into that chain involves more complexity and requires more skill than the final assembly process itself.  It’s considerably more difficult to make integrated circuits, for example, than to assemble those chips onto circuit boards and to assemble the boards into a plastic or metal case.