How can governments ensure all companies get equal access to China?

[nctnico]

[...] But still, why is anyone entertaining yet another one of treez's tantrums?

The wonky thread is relevant because we all sit back and expect our quality of life to continue despite the obvious fire.
Engineering is higher up the food chain and without local design and manufacturing, there's not much to do.

It has been proven a long time ago that your statement isn't true. Most of the value (and thus profit) in an item is not coming from manufacturing it but selling it. So the last thing you want to do is manufacturing. At least not mass-production. Sure there is room for local manufacturing in developed countries but this needs to have a high added value like making special high-tech products or making something quickly. Anyone who thinks that bringing mass production back to 'the west' is actually good for the economy (=increasing living standards) is a complete idiot.

[Simon]

when all you do is import you have nothing to export. Again I am no financial whiz but surely you can't just keep handing your money over out of the country for tat that goes in the bin. unless there is a balance of import/export you just become a financial desert with no expertise and a workforce that is not capable of doing anything more than driving pallet trucks and using tills.

The US has been doing just that for decades. But still, why is anyone entertaining yet another one of treez's tantrums?

Well he hasn't actually manage to make an intelligent comment after his initial rant. Maybe it will teach him to shut the fuck up next time as clearly he is out of his depth!

[tooki]

when all you do is import you have nothing to export. Again I am no financial whiz but surely you can't just keep handing your money over out of the country for tat that goes in the bin. unless there is a balance of import/export you just become a financial desert with no expertise and a workforce that is not capable of doing anything more than driving pallet trucks and using tills.

The US has been doing just that for decades. But still, why is anyone entertaining yet another one of treez's tantrums?

Well he hasn't actually manage to make an intelligent comment after his initial rant. Maybe it will teach him to shut the fuck up next time as clearly he is out of his depth!

Right. Just after pigs fly.

[Zero999]

basically if a country is way cheaper than you how do you discourage your citizens buying things made in the cheaper country?

You don't.

Putting tariffs on Chinese products won't work. If we do what the US has done and tariff components and raw materials, then was we'll do is kill off our own manufactures. We could tariff ready made goods, but we still get many of the components and raw materials from China, so the Chinese could charge the UK more for them, if they wanted too and get the money back that way.

It's long been proven that tariffs don't work because it results in tit for tat action and harms both parties. Trade wars are like any war: there's no real winner.

Another important thing to remember is more often than not, manufacturing is only a small part of the cost of an item. Design and branding are often far more valuable.  A can of Coca-Cola doesn't cost any more to manufacture than a supermarket own brand soft drink, but it sells for much more because of the branding.

To compete with China we need to make things which are worth the extra money, such as high quality, low volumes with a rapid turnaround. We can't do it purely on cost, more because of the limited access to raw materials. Cheap labour is less of a factor now, than it used to be, since the manufacture of electronics can be heavily automated. Even if we do manage to bring back a lot of manufacturing to the UK, it won't create as many jobs, as many think.

[Simon]

No electronics manufacturing in and of itself is so automated that it would not be a boom in jobs. Finished products could be import taxed. As it stands look at all of the crap a lot of it dangerous that just slips in in individual packages from ebay. I have always advocated the upholding of standards. Rather than just tax everything make sure that it is decent quality. We ship items half way around the world just to throw them in the bin days to months later. With a rush to the bottom in price yes no one can compete.

[SilverSolder]

Most people have a fixed amount of disposable income each month.

That has to mean that if we raise prices by means of tariffs or other methods, people only have one option:  buy less stuff each month.

It is not immediately clear to me how this benefits anybody.

[Simon]

people on the whole end up spending the same money, little often on what turn out to be disposable items or a lot occasionally on items that are tread as investments rather than cast away as soon as the next thing comes out or it breaks.

We also have economies based on having to make more things and get people to keep spending over and over. Many people shy away from the idea of a citizens income but guess what most software licenses are these days? just income so that companies can retain staff that put out minimal updates and added features because there is little more to add.

And again, what does it do to an economy that just keeps giving money to other countries, without a balance in trade you become worthless as a country.

[SilverSolder]

It helps to see the issue more clearly if you think of the planet as a whole, rather than individual countries.

For example, inside the UK, nobody has ever said it was a problem that production of knives in Sheffield prevented the production of knives in Birmingham.  It seemed logical enough to everyone that if they were really skilled at making knives in Sheffield then, by all means, have at it -  meanwhile, we'll make bicycles in Birmingham.

This is the logic behind the economic principle of "comparative advantage".   Sheffield sells knives to the Brummies, who sell bicycles back to Sheffield.

The same thing between different countries. 

The real problem happens if - for example - a city goes into decay (Detroit), or - a whole country goes into decay.  If not enough people are doing or making something worthwhile, something that someone else wants...    that's when the trade balance starts to implode. 

Interestingly, both sides are worse off than before one of the partners imploded.  The Brummies now have to do without knives, or they have to do without bikes in Sheffield... 

[Simon]

Indeed, what do we do in the UK except run warehouses to shift shit and call centers to sell shit? we don't create wealth, we just move around the wealth created by others, my own employer buys in things we used to make ourselves but due to a rush to the bottom we cannot compete with china or even another EU country - you know one of these countries that was supposed to be of similar economic standards to us. The current Covid-19 situation is highlighting just how far down the sewer this country is with nothing of it's own to offer. I recently came across an innovate grant form. Offering £25'000-£50'000 to anyone that could propose and develop something to help with the current situation. Yes that is the state of affairs, we are mid pandemic and we are not just ramping up manufacturing and supply, we are offering people money to design things to make the things we should of had. While ventilators was ruled out and so were vaccines (£50k is nothing for those) PPE was on the list. Yea, the UK needs to think of a novel way to make PPE, otherwise a code for - for god sake can someone start making this stuff, we know that we don't normally do this in this country but for fuck sake please can someone just make this shit, we really need it now and we can't compete with the whole world.

[coppice]

It helps to see the issue more clearly if you think of the planet as a whole, rather than individual countries.

For example, inside the UK, nobody has ever said it was a problem that production of knives in Sheffield prevented the production of knives in Birmingham.  It seemed logical enough to everyone that if they were really skilled at making knives in Sheffield then, by all means, have at it -  meanwhile, we'll make bicycles in Birmingham.

This is the logic behind the economic principle of "comparative advantage".   Sheffield sells knives to the Brummies, who sell bicycles back to Sheffield.

The same thing between different countries. 

The real problem happens if - for example - a city goes into decay (Detroit), or - a whole country goes into decay.  If not enough people are doing or making something worthwhile, something that someone else wants...    that's when the trade balance starts to implode. 

Interestingly, both sides are worse off than before one of the partners imploded.  The Brummies now have to do without knives, or they have to do without bikes in Sheffield...

This is a rather poor comparison. Britain had no problem with knife (actually cutting tools in general) production being concentrated in Sheffield, because numerous companies in Sheffield mastered the technology and competed with each other. If Sheffield had only one monopoly supplier it would have been a big issue, as a lack of competition is very destructive for everyone but the monopolist. From outside Britain, a concentration of cutting tool technology in Sheffield didn't look good at all.  To those outsiders the numerous companies in Sheffield looked much like one, because far too often they tended to face Britain Inc, rather than the individual companies. The various Sheffield companies could act in their collective interest, or the British government could coax/force them to act in the national interest. So, most advanced economies of the time worked hard to match the quality of products from Sheffield, and eventually some left Shefflield behind. With several sources of good cutting tools the remaining advanced economies had sufficiently diverse sources for tools not to worry too much.

The situation now with China is much like this, apart from my last point above. China has numerous companies in each segment, competing with each other. This is often on a province by province basis, so you don't always see the same level of localisation of a technology as with a place like Sheffield. The rest of the world sometimes see these individual Chinese companies competing for their business, but the Chinese national interest is also an important driver. What this wasn't doing until this spring was making other countries seriously consider competing with China. We will have to wait to see if the current rhetoric actually leads to real change, and more diverse sources.

[nctnico]

Indeed, what do we do in the UK except run warehouses to shift shit and call centers to sell shit? we don't create wealth, we just move around the wealth created by others, my own employer buys in things we used to make ourselves but due to a rush to the bottom we cannot compete with china or even another EU country

You are not seeing the big picture here. Most of the profit is made in selling things, not manufacturing them. Just take an example:
material & production cost of a device: $5
Manufacturer markup: 10%: profit is 50cent per piece.
Wholesale importers buys the device for $5.5 and sells it with a 20% markup for $6.60 : profit: $1.10
Shop sells it with a 75% markup for $11.55 : profit: $4.95

Now the shop doesn't end up keeping the entire profit. Some goes to the landlord and the employees but it is clear that most of the profit ends up in the local economy and someone working for a shop adds much more value to the economy compared to someone working in a factory.

[Simon]

Indeed, what do we do in the UK except run warehouses to shift shit and call centers to sell shit? we don't create wealth, we just move around the wealth created by others, my own employer buys in things we used to make ourselves but due to a rush to the bottom we cannot compete with china or even another EU country

You are not seeing the big picture here. Most of the profit is made in selling things, not manufacturing them. Just take an example:
material & production cost of a device: $5
Manufacturer markup: 10%: profit is 50cent per piece.
Wholesale importers buys the device for $5.5 and sells it with a 20% markup for $6.60 : profit: $1.10
Shop sells it with a 75% markup for $11.55 : profit: $4.95

Now the shop doesn't end up keeping the entire profit. Some goes to the landlord and the employees but it is clear that most of the profit ends up in the local economy and someone working for a shop adds much more value to the economy compared to someone working in a factory.

I do see the bigger picture. Retail and warehousing are poorly paid and as you don't need qualifications to do these jobs there is no incentive to offer or require better education. People in the UK have to claim benefits in order to pay their rents even when they are working..... And yet all these people do is push stuff around in circles. Yes a lot of the money is made in the retail side, and look at how that works. If you really want to look at the bigger picture you get into the politics of taxation, wages and tax avoidance whilst the money is slowly leached away to the manufacture of these goods that have to be purchased over and over again while the retailers bosses leave the country and don't pay tax.

If you decide you want more money for you unskilled job you don't get more money. If you were a skilled worker making the thing you would have more bargaining power for better wages. One of my bigger concerns in the lack of skilled jobs is the loss of social filtering, and the lack of need for any education that makes you a better person all round.

[coppice]

Indeed, what do we do in the UK except run warehouses to shift shit and call centers to sell shit? we don't create wealth, we just move around the wealth created by others, my own employer buys in things we used to make ourselves but due to a rush to the bottom we cannot compete with china or even another EU country

You are not seeing the big picture here. Most of the profit is made in selling things, not manufacturing them. Just take an example:
material & production cost of a device: $5
Manufacturer markup: 10%: profit is 50cent per piece.
Wholesale importers buys the device for $5.5 and sells it with a 20% markup for $6.60 : profit: $1.10
Shop sells it with a 75% markup for $11.55 : profit: $4.95

Now the shop doesn't end up keeping the entire profit. Some goes to the landlord and the employees but it is clear that most of the profit ends up in the local economy and someone working for a shop adds much more value to the economy compared to someone working in a factory.

The people making stuff may be getting a raw deal, but if your local economy is creating nothing to send to the manufacturers as payment, eventually they stop sending you more goods.

[floobydust]

I don't agree with your view, because MBA "profit" does not equal economic prosperity. On a macro-scale, manufacturing creates more jobs, more skilled workers,
than just warehouses selling imported shit. china does manufacturing, Walmart does reselling.

[nctnico]

I don't agree with your view, because MBA "profit" does not equal economic prosperity. On a macro-scale, manufacturing creates more jobs, more skilled workers,
than just warehouses selling imported shit. china does manufacturing, Walmart does reselling.

And what use is there for skilled workers in an automated factory? No matter how you look at it: most of the profit is made at the sales side. The place for skilled workers is at the sales side working in R&D; not on the factory floor.

[SiliconWizard]

Most people have a fixed amount of disposable income each month.

That has to mean that if we raise prices by means of tariffs or other methods, people only have one option:  buy less stuff each month.

It is not immediately clear to me how this benefits anybody.

This is of course a very simplified economic "model" here. Things are just a tiny bit more complex.

There's a fine line between regulating economy and making it worse for everyone. But without any form of regulation, you're almost certain the system ends up going bonkers.
Tariffs are one way of regulating worldwide economy, and disposing of them altogether is probably not a good idea.

One thing (among many others) you're overlooking in this little "analysis" is that you're assuming that tariffs (and other means) make no difference to the economy, except higher prices for the consumer. This of course can't be true - if not excessive, it can actually improve things, and people would have more money to spend. Prices alone mean nothing if you don't link them to the standard of living of a given population.

The mere idea that lower prices for goods would lead to people getting richer somehow is completely silly. Doesn't work this way - or it's only very temporary. If you keep dragging prices down, everyone ends up poorer in the end. When you don't actively regulate economy, it just ends up regulating itself. And if everything gets cheaper, wages will mechanically drop too, eventually.

If you think we can just keep getting cheap goods from China (for instance) forever without it impacting our wealth negatively, IMHO you're largely deluded. At best, it would just end up making money have less value, without changing anything much to the overall standard of living. At worst, it would end up making us all poorer because it's just not sustainable as such.

[nctnico]

If you think we can just keep getting cheap goods from China (for instance) forever without it impacting our wealth negatively, IMHO you're largely deluded. At best, it would just end up making money have less value, without changing anything much to the overall standard of living. At worst, it would end up making us all poorer because it's just not sustainable as such.

China has solved that nicely by just lending the money back to countries they export to. Inflation also helps because the amount of money borrowed in the past loses it's value automatically.

[floobydust]

I don't agree with your view, because MBA "profit" does not equal economic prosperity. On a macro-scale, manufacturing creates more jobs, more skilled workers,
than just warehouses selling imported shit. china does manufacturing, Walmart does reselling.

And what use is there for skilled workers in an automated factory? No matter how you look at it: most of the profit is made at the sales side. The place for skilled workers is at the sales side working in R&D; not on the factory floor.

china's main advantage is their sheer population - basically people as cheap robots. The IP is stolen, copied and so they don't really understand product development or the technology in what they are making. But they've leapfrogged into manufacturing in a scale never before seen. Pic related.

If most (other) nations then degenerate down to only being consumers of products, with sales of imported goods as the main revenue generator, this is just the race to the bottom.
Eventually a nation would become impoverished as it can only buy things using debt, and never create revenue. The intangible money, that the bean counters and MBA assholes cannot see, comes from R&D but you don't see that stand alone. Pure R&D is a massive expense only, according to the bean counters and "management by numbers".

[Simon]

The mere idea that lower prices for goods would lead to people getting richer somehow is completely silly. Doesn't work this way - or it's only very temporary. If you keep dragging prices down, everyone ends up poorer in the end. When you don't actively regulate economy, it just ends up regulating itself. And if everything gets cheaper, wages will mechanically drop too, eventually.

If you think we can just keep getting cheap goods from China (for instance) forever without it impacting our wealth negatively, IMHO you're largely deluded. At best, it would just end up making money have less value, without changing anything much to the overall standard of living. At worst, it would end up making us all poorer because it's just not sustainable as such.

I think this is the problem. We have a better standard of living than centuries ago but are we actually any richer? not really. To be better off is relative to your environment. Once upon a time to be very rich meant a huge house and employ servants, now it means to own an island, it's all relative. When governments have to give handouts to working people you have a problem. It's ok saying they can just go buy some cheap stuff made abroad but that is not solving the underlying problem. nations that just consume in the long run will have problems but every government and business that is generally owned by a guy who pretends to live in a different country for tax reasons only thinks of the now, the profit they can make today, what it costs them tomorrow is tomorrows business strategy meeting where they will work out how to make someone else pay or the next governments problem to deal with.

I'll say it again, the covid-19 crisis exposes very well why this is a crisis for the UK and others and not something we just deal with.

[coppice]

And what use is there for skilled workers in an automated factory? No matter how you look at it: most of the profit is made at the sales side. The place for skilled workers is at the sales side working in R&D; not on the factory floor.

A highly automated plant  doesn't need many people of any kind, but, apart from the cleaners, the people it does need are those skilled enough to keep everything running smoothly - maintenance, inwards and outwards logistics, etc.

[floobydust]

china is exposing (exploiting?) flaws in democracy and capitalism. I don't see any corrective mechanism to deal with the 'race to the bottom' driven by the 'race to the top' for profit.

OP expects the government to do something, but we all know this can never happen - you need zero qualifications to become a politician- no education or credentials so they are generally inept morons. There is no understanding of long term planning for economic prosperity for a nation, plus it's a revolving door with a new party coming in every few years changing the priorities. Government can't right the ship. In this sense, the CCP with their initiatives, are superior to the West.

The covid-19 crisis is showing how weak and fragile corporations have become in providing all their profits to shareholders. They have nothing in reserve and cry for bailouts.
The covid-19 crisis is showing how weak and fragile consumers have become with their high debt load, and Mc Jobs. They have no savings either to weather such a crisis.

I can't see a solution to stop the erosion of the West.

[SilverSolder]

I don't agree with your view, because MBA "profit" does not equal economic prosperity. On a macro-scale, manufacturing creates more jobs, more skilled workers,
than just warehouses selling imported shit. china does manufacturing, Walmart does reselling.

And what use is there for skilled workers in an automated factory? No matter how you look at it: most of the profit is made at the sales side. The place for skilled workers is at the sales side working in R&D; not on the factory floor.

You could argue that the split between manufacturer, distributor, and retailer is something the customer doesn't see -  and it doesn't matter to him/her what the split is,  what matters is the final price.

Often the distribution chains are very protective of their turf, working hard to prevent competition from springing up (e.g. forbidding "grey imports" in an attempt to keep prices as high as possible on products that they have the exclusive rights to sell).   We don't really live in a free market economy, when you look under the covers.

[SilverSolder]

Indeed, what do we do in the UK except run warehouses to shift shit and call centers to sell shit? we don't create wealth, we just move around the wealth created by others, my own employer buys in things we used to make ourselves but due to a rush to the bottom we cannot compete with china or even another EU country - you know one of these countries that was supposed to be of similar economic standards to us. The current Covid-19 situation is highlighting just how far down the sewer this country is with nothing of it's own to offer. I recently came across an innovate grant form. Offering £25'000-£50'000 to anyone that could propose and develop something to help with the current situation. Yes that is the state of affairs, we are mid pandemic and we are not just ramping up manufacturing and supply, we are offering people money to design things to make the things we should of had. While ventilators was ruled out and so were vaccines (£50k is nothing for those) PPE was on the list. Yea, the UK needs to think of a novel way to make PPE, otherwise a code for - for god sake can someone start making this stuff, we know that we don't normally do this in this country but for fuck sake please can someone just make this shit, we really need it now and we can't compete with the whole world.

I have been surprised at the lack of interest from local entrepeneurs to start making masks in large quantities.  I do see a lot of cottage industry going on, but nothing "serious".  We are all running in circles waiting to get an order in to a Chinese supplier.  It really is as if we have forgotten how to do basic things...

[SilverSolder]

It helps to see the issue more clearly if you think of the planet as a whole, rather than individual countries.

For example, inside the UK, nobody has ever said it was a problem that production of knives in Sheffield prevented the production of knives in Birmingham.  It seemed logical enough to everyone that if they were really skilled at making knives in Sheffield then, by all means, have at it -  meanwhile, we'll make bicycles in Birmingham.

This is the logic behind the economic principle of "comparative advantage".   Sheffield sells knives to the Brummies, who sell bicycles back to Sheffield.

The same thing between different countries. 

The real problem happens if - for example - a city goes into decay (Detroit), or - a whole country goes into decay.  If not enough people are doing or making something worthwhile, something that someone else wants...    that's when the trade balance starts to implode. 

Interestingly, both sides are worse off than before one of the partners imploded.  The Brummies now have to do without knives, or they have to do without bikes in Sheffield...

This is a rather poor comparison. Britain had no problem with knife (actually cutting tools in general) production being concentrated in Sheffield, because numerous companies in Sheffield mastered the technology and competed with each other. If Sheffield had only one monopoly supplier it would have been a big issue, as a lack of competition is very destructive for everyone but the monopolist. From outside Britain, a concentration of cutting tool technology in Sheffield didn't look good at all.  To those outsiders the numerous companies in Sheffield looked much like one, because far too often they tended to face Britain Inc, rather than the individual companies. The various Sheffield companies could act in their collective interest, or the British government could coax/force them to act in the national interest. So, most advanced economies of the time worked hard to match the quality of products from Sheffield, and eventually some left Shefflield behind. With several sources of good cutting tools the remaining advanced economies had sufficiently diverse sources for tools not to worry too much.

The situation now with China is much like this, apart from my last point above. China has numerous companies in each segment, competing with each other. This is often on a province by province basis, so you don't always see the same level of localisation of a technology as with a place like Sheffield. The rest of the world sometimes see these individual Chinese companies competing for their business, but the Chinese national interest is also an important driver. What this wasn't doing until this spring was making other countries seriously consider competing with China. We will have to wait to see if the current rhetoric actually leads to real change, and more diverse sources.

Yes, the point is exactly what you said - a region ends up as a "center of excellence" where the locals simply know their stuff so well (and have all the supply chains and other resources lined up) that it becomes a very tall order to compete with them in any meaningful way.

China has now ended up as a "center of excellence" for manufacturing many things - they are competing on a broad front.  However, we still do stuff in the West that they don't touch.  When was the last time you saw a Chinese movie? 

Seems to me that engineering is something China is very good at, and our role in the West, as engineers, often ends up being a kind of interface between our own culture and China, to get products adapted to work the way we like them.  That isn't a bad thing per se, of course.

What we really need is a set of niches that we can be very strong in ourselves,  so we have something to trade...

[SilverSolder]

Most people have a fixed amount of disposable income each month.

That has to mean that if we raise prices by means of tariffs or other methods, people only have one option:  buy less stuff each month.

It is not immediately clear to me how this benefits anybody.

This is of course a very simplified economic "model" here. Things are just a tiny bit more complex.

There's a fine line between regulating economy and making it worse for everyone. But without any form of regulation, you're almost certain the system ends up going bonkers.
Tariffs are one way of regulating worldwide economy, and disposing of them altogether is probably not a good idea.

One thing (among many others) you're overlooking in this little "analysis" is that you're assuming that tariffs (and other means) make no difference to the economy, except higher prices for the consumer. This of course can't be true - if not excessive, it can actually improve things, and people would have more money to spend. Prices alone mean nothing if you don't link them to the standard of living of a given population.

The mere idea that lower prices for goods would lead to people getting richer somehow is completely silly. Doesn't work this way - or it's only very temporary. If you keep dragging prices down, everyone ends up poorer in the end. When you don't actively regulate economy, it just ends up regulating itself. And if everything gets cheaper, wages will mechanically drop too, eventually.

If you think we can just keep getting cheap goods from China (for instance) forever without it impacting our wealth negatively, IMHO you're largely deluded. At best, it would just end up making money have less value, without changing anything much to the overall standard of living. At worst, it would end up making us all poorer because it's just not sustainable as such.

You haven't really disagreed with the central thesis,  that tariffs reduce your spending power?

Of course I understand and agree with you that the purpose of the tariffs often is to nudge people into altering their behaviour, encouraging them to buy something else instead.  But whatever the intention of a tariff is, it doesn't alter the fact that your disposable income doesn't go as far as it did without that tariff in place.  No?