23rd Aug 2018 THE HINDU Editorial Analysis ha ii
lting at windmills In Donald Trump's view, slapping tariffs on the U.S.'s main trading partners Canada, China, the European Union, and Mexico will reduce U.S. trade deficits, bring back well-paying manufacturing jobs, and make America great again. This has such populist appeal-some 73% of Republican voters support the tariffs according to a PEW Research Center poll in July China, for instance, exported some $505 billion worth of goods to the U.S. last year but imported only $130 billion, Mr. Trump assumes that China could not match the escalation in tariffs since it has a weaker hand This approach simply ignores the complexity of global supply chains. It also ignores the underlying problems with the U.S. industrial structure. These
underlying problems, rather than globalisation, are responsible for the stagnation of average U.S. wages in real terms for almost 40 years Non-Chinese owned companies account for almost 60% of Chinese exports to the U.S. Much of this consists of very specialised parts required by U.S. factories to make a variety of products ranging from out-board motors for boats to computer routers. Since these non-Chinese companies cannot easily relocate their operations to other countries, the net result is that the burden of the tariffs will be felt by consumers in the U.S The Trump administration's imposition of a 20% tax on washing machines in February led to its price going up in US. stores by 16.4%. U.S. imports from China also include products which contain parts made in other countries
The Peterson Institute for International Economics estimates that 87% of computers and electronics, which constitute thelargest share of Chinese exports to the U.S., includes parts and financing from other countries like South Korea, Japan, and the U.S. itself .So not only does this limit the negative impact on Chinese manufacturin practices, it also affects other countries. Even before Mr. Trump imposed a 10% tariff on $200 billion worth of Chinese goods in July, South Korea's exports of cars and consumer electronics to China fell substantially e According to Syracuse University, U.S. merchandise exports from China account for only 3% of Chinese manufacturing revenue. And the impact of tariffs on a potential reduction of these exports is further diminished by a 7% fall in the value of the Chinese currency. China also has more than $1 trillion in foreign currency reserves to withstand the brunt of a trade war.
with Washington The retaliatory tariffs China has imposed on U.S. products have also had negative impact on German car producers in the U.S. where BMW has its largest factory in Spartanburg, South Carolina rather than in its home country. By raising duties on soybeans and pork, it has struck at Trump's key constituencies of support in the U.S. midwest. Beijing's tariffs even hit Kentucky bourbon to increase pressure on the Senate majority leader Mitch McConnell who represents that State Similarly, the 25% tariff imposed on Mexican steel exports to the US. has had no impact on the Mexican automobile industry. The northern Mexican city of Matamoros produces 90% of all steering wheels used in U.S. vehicles and the city is also the largest producer of windshield wipers in North America. Instead, these tariffs by raising the cost of production compelled..
U.S. companies to reduce employment No tariff can overturn the cost advantage Mexico has over the U.S. in labour costs. The national minimum wage there is a little over $4 a day while the average worker in the U.s. automobile sector earns $18 an hour . The focus on trade crucially ignores changes in the U.S. corporate structure and industrial relations over the last 30 years which have led to th phenomenon of extreme inequalities in income and wealth in the country. Ever since U.S. President Ronald Reagan launched an assault against the air traffic controllers' union in 1981, trade unions have been in retreat In the years that followed, legislation and the courts have made it easier to union organisers, to use protective legislations to break strikes and for employers to campaign against unionisation of workers. As a result, less...
than 7% of private sector employees today are unionised, compared to third in the 1950s Robert Reich, Secretary of Labour under U.S. President Bill Clinton, notes "anti-trust enforcement has gone into remission" and it has become easier for large companies to merge and form giant oligopolies. At its peak in the mid-1990s, there were 8,000 publicly traded firms in the U.S. stock market. In 2016, there were only 3,627 Recently, Apple became the first company to have a $1 trillion valuation and today just 30 companies reap half of all profits produced by all publicly traded companies. In 1975, the corresponding figure was 109. Half of all the gains registered by Standard & Poor's 500-stock index was delivered by just five companies: Apple, Amazon, Facebook, Netflix, and Alphabet, the parent company of Google
The greater concentration of capital allows the giant oligopolies to raise prices which takes more of a worker's pay cheque. Fewer companies means workers have less choice of employers and so have less bargaining power Anti-poaching and mandatory arbitration arrangements further weaken labour's hand . Moreover, the focus on short-term profits leads firms to use their capital to buy back shares, driving up share prices to benefit shareholders and top managers who have an increasing percentage of their compensation in company shares Take Germany as a contrast. Between 2002 and 2008, when the U.S. lost one-third of its manufacturing jobs, Germany lost a mere 11%. Since most n firms are privately owned, rather than buying back shares, they invested their capital in boosting their productivity. German firms include.
.worker representatives on their corporate boards, invest in apprenticeship programmes, and in relevant research and development projects. During the recession of 2008-09, instead of dismissing employees outright, German firms reduced work hours and helped retrain workers. They thus have a deep pool of skilled labour . When computers and numerically controlled machines are progressively inducted into production, constant upgrading of labour skills is vital to preserve well-paying jobs. Washington has made no systematic effort to upgrade skills. Tim Cook, the CEO of Apple, constantly emphasises that his company has shifted production to China not because labour is cheaper there but because it has a much wider pool of skilled labour than does the U.S
Rullina back from the brink A group of scientists have published a paper inthe Proceedings of the National Academy of Sciences deliberating on how the planet might move into a high temperature "hothouse earth" pathway from where the oulel be no return . The Holocene, which began about 12,000 years ago, is the stable epoch during which Homo sapiens settled and developed agriculture and other technological innovations. Human activity, supported by the burning of fossil fuels and deforestation, led to an Increase in greenhouse gas (GHG) emissions that are now causing global warming. This time period, the epoch when humans play a dominant role in shaping the earth systems, is being referred to as the Anthropocene
atmosphere 2 CO2 O2 water N2 O2 COg + H20 H,co, (carbonic acid) weathering products (clays, soluble ions) chemical weathering rock ...longer able to stabilise at intermediate rises in temperature. The authors point out that technology trends and decisions taken in the next decade or two will determine the path of the earth system over the next hundreds of thousands of years
Atmospheric concentrations of CO2 (now over 400 ppm) are responsible for global sverage temperatures that are about a degree Celsius higher than at pre-industrial times. To find another time on earth with these levels, we need to go back some 3-4 million years to the mid-Pliocene, when sea levels were 10-22 m higher. The authors consider this stage to remain accessible only if there is a great deal of concerted effort in a remarkably short period . In the mid-Miocene (about 15-17 million years ago), CO2 concentrations were 300-500 ppm and sea levels were 10-60 m higher than today. This is where the earth is possibly headed with continuing GHG emissions. Even if the Paris Agreement of 2015 is implemented and we managed to keep warming below 20 C or even 1.5 C, the risk of a cascade of feedbacks that pushes the earth into the hothouse path may be unavoidable
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