April 23, 2018

Tariff Dodgers Stand to Profit Off U.S.-China Trade Dispute

“If you talk China, I’ve watched where the reporters have been writing 2 percent of our steel comes from China. Well, that’s not right,” Mr. Trump said last month. “They transship all through other countries.”

The scale of such tariff-dodging isn’t clear. Based on available data, many economists don’t believe that it plays a major role in American trade. For example, the United States imports only modest amounts of steel from Malaysia, Vietnam, Indonesia or other Southeast Asian countries that are popular stops for freight forwarders like Settle Logistics.

Still, the shadowy world of transshipments and other trade trickery is set to get a much closer look. Transshipments are likely to be a major part of any negotiations between China and the United States aimed at settling their trade dispute. They could also figure into conversations with Europe, South Korea, Canada and other major partners looking to extend their exemptions from Mr. Trump’s steel tariffs. The governments may need to be on alert to make sure they do not become way stations and anger Washington.

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Rolls of aluminum at a factory in Zouping, China. Transshipments meet Chinese regulations when they go to places like Malaysia, one broker said, but after that, “it is the U.S. government’s role to judge which country the products are originally from, and whether this business is legal or not.” Credit -/Agence France-Presse — Getty Images

Prime Minister Justin Trudeau of Canada announced on March 27 that his country would enact a series of regulatory measures to block transshipments. By contrast, South Korea has insisted that it makes sure the true origins of cargo are accurately identified and that tariffs are paid.

Transshipments are perfectly legal in most cases. The problems occur when somebody disguises the country of origin, which is illegal in the United States and elsewhere.

“Products requirement: Do not have a ‘Made in China’ logo,” says the website of one Chinese freight forwarding company, CT-Chan, that promises it can help manufacturers avoid American tariffs.

Transshipments and relabeling aren’t the only trade dodge out there, and China by no means has a monopoly on them. American steel and aluminum companies complain that some basic metal is sent to other countries for minimal processing before it is shipped to the United States. Critics say big multinational companies use an accounting trick called transfer pricing — a common way to dodge taxes — to avoid paying higher tariffs when shipping goods between their international subsidiaries.

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The network of Chinese brokers that bypass tariffs in the West by shipping goods through other countries is extensive and highly developed. The company websites boast of sending steel, aluminum foil, clothing, solar panels and even stainless steel sinks to the United States and Europe while evading tariffs.

Many of the brokers try to shield themselves from any criticism in China by wrapping themselves in nationalism. Top Profit International Forwarding in Shenzhen says on its website that it is “breaking the barriers of international trade and anti-dumping to let Chinese products enter international markets successfully.”

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CT-Chan, based in Guangzhou, advertises that “transshipment is the only way to avoid high tariffs and import limits.”

Top Profit, CT-China and China’s Commerce Ministry, which oversees trade, declined to comment.

The freight companies say they use a variety of techniques. Settle Logistics, in Hangzhou, says on its website that its works with a factory in Malaysia and can obtain Malaysian certificates of origin for goods made in China.

Brokers also describe breaking up larger orders into a series of shipments from ports scattered around China. The goal is to reduce the odds that American trade associations would detect big shipments and report them.

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A clothing factory in Beijing. Exporting goods from China to the United States by way of Malaysia can cost twice as much as shipping them directly. Credit Bryan Denton for The New York Times

On its website, Settle Logistics says it encourages companies to comply with trade regulations. John Zhao, one of the owners of Settle Logistics, said he was providing a needed service by creating alternative routes to the American market.

“If Chinese enterprises cannot export their products to the U.S. and they are not qualified to build factories overseas, we can offer help to them,” he said.

The shipments meet Chinese export regulations when they go to places like Malaysia, Mr. Zhao said. After that, he said, “it is the U.S. government’s role to judge which country the products are originally from, and whether this business is legal or not.”

American customs officials said in a written reply to questions that the United States had “a sophisticated targeting process to identify countries, manufacturers, importers and shipments that are at high risk.”

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The services aren’t cheap, but high tariffs can make them appealing. Shipping goods from China to the United States by way of Malaysia costs $3,000 to $4,000 per 40-foot shipping container, at least $2,000 more than shipping directly to the United States, brokers said. The extra costs include $500 for a Malaysian certificate of origin, at least $950 for unpacking goods in Malaysia and repacking them in a different container and $600 or more for the additional sea freight.

Malaysian trade officials said the country did not have a specific law against tariff circumvention. Still, it has laws against the falsification of documents and requires companies to manufacture products there in order to obtain local certificates of origin.

A new era of tariffs could make transshipments even more appealing. Brokers described receiving up to 10 times as many phone calls for price quotes as usual in the past several weeks as trade tensions between Washington and Beijing heated up.

Stamping out such transshipments could prove difficult. The United States made a big effort in the late 1990s to address the relabeling in Hong Kong of garments that had been made in mainland China, said Patrick Conway, a textiles trade specialist.

But after American officials gathered enough evidence to put companies on a watch list, the companies quickly disappeared, said Mr. Conway, who is the chairman of the economics department at the University of North Carolina at Chapel Hill. Some of the same people involved emerged later, but at other companies.

“We can anticipate a game of Whac-a-Mole,” Mr. Conway said.

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Article source: https://www.nytimes.com/2018/04/22/business/china-trade-tariffs-transshipment.html?partner=rss&emc=rss

Public Servants Are Losing Their Foothold in the Middle Class

Short of money, many states have also privatized services like managing public water systems, road repair, emergency services or prisons, transferring jobs from the public sector to private companies that have reduced salaries and benefits to increase their profits.

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The government employment pinch especially hurts in small and rural counties, where President Trump and other Republicans are popular. These areas tend to lack the number and diversity of private employers found in larger cities, and are therefore more dependent on government jobs.

Oklahoma is one of several Republican-led states where persistent anti-tax sentiment and severe budget cuts have guided policymaking, particularly since 2010, when many candidates supported by Tea Party voters won local offices.

Then, the newly elected governor, Mary Fallin, led the charge to reduce the state’s top income-tax rate and shrink the tax on oil and gas production to 2 percent from 7 percent for new wells. But a sharp drop in oil and gas prices in 2014 delivered an unexpected wallop. Tax revenue evaporated, leaving huge budget shortfalls since then.

Justin Fortney, 41, was one of 200 employees laid off by the state health department this year. “It’s getting more difficult to be a public employee — whether that’s a teacher or public health officer — and see yourself as part of a thriving middle class,” he said.

Mr. Fortney, who lives with his wife and son in Guthrie, 30 miles north of the capital, was forced to start job hunting. “We always made it work,” said Mr. Fortney, who was employed by the state for 12 years and earned about $50,000 annually. “But if you’re going to choose to be a public servant, you have to have in mind that you will live in a small home and drive a sometimes unreliable vehicle.”

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He said he worried that talented workers will opt for the private sector. Staffing shortages are common in states across the country.

In Houston, pinched by a property tax cap, the police chief has said his department is short 1,500 to 2,000 officers. In North Carolina, a federal report blamed a 25 percent job vacancy rate at a state prison in Elizabeth City for four deaths that occurred during a breakout attempt.

Back in Oklahoma, state prisons are at 153 percent capacity, while the corrections department has lost a tenth of its staff since 2009. “Our folks are only armed with their self-defense training, a can of pepper spray, and a wing and a prayer that someone will come and help them if they get in trouble,” Joe Allbaugh, the director of the corrections department, has said publicly.

Since 2009, staffing at the state mental health department in Oklahoma is down more than 20 percent, and at the Office of Juvenile Affairs by nearly a quarter. The state Office of Fire Marshal once employed 30 workers, but now has 18.

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A report on 2017 state compensation in Oklahoma found that average salaries were 27 percent lower than for comparable jobs in the private sector.

Many government workers take a second job to make ends meet. Eldon Johnson, 40, who cares for children with cerebral palsy and autism at a group home in Norman, works from 2:45 to 10:45 p.m., earning $12.50 an hour, less than some clerks at 7-Eleven. He then drives directly to his better-paying second job at a private mental health center, where he works until 8 a.m.

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Article source: https://www.nytimes.com/2018/04/22/business/economy/public-employees.html?partner=rss&emc=rss

In a Trade War, China Might Boycott U.S. Goods. That Could Backfire.

William Zarit, the chairman of the American Chamber of Commerce in China, said a boycott “is one of the many tools that the Chinese have in their toolbox.”

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“Because of the structure of the government and the political power of the party, they can call for a boycott and get a pretty good response,” Mr. Zarit said. “So that concerns me.”

Taicang, a 90-minute drive from Shanghai, underscores how interdependent the two economies are.

Some of the biggest names in corporate America, like Honeywell and Exxon Mobil, have converged on this city of close to a million people. Its economy is growing faster than the country’s as a whole. It is richer than Shanghai on a per-capita basis. Last year, Taicang topped a list of China’s 10 happiest “county-level cities” for the second year in a row.

In a sprawling factory, Procter Gamble makes its Head Shoulders, Pantene and Vidal Sassoon shampoos and then distributes them along with other cosmetics and skin care products. When the factory opened, the company said it would provide 1,500 jobs for Chinese workers. Across town is a 200,000-square-meter Nike logistics center, which that company has also said would employ 1,500 people.

In total, 42 American factories are in the Taicang economic development zone, with a total annual output value of about $4.7 billion, the government of the much larger city of Suzhou, which administers Taicang, said in February.

The influx of money can be seen in the relative affluence of the Procter Gamble employees, most of whom drive Japanese-made cars to work. One female employee, surnamed Li, said workers were confident that what they made in the factory would appeal to Chinese consumers, who she said were rational about what they bought.

Analysts say Beijing is aware of the importance of American companies to China’s economy. Ernan Cui, a consumer analyst at the research firm Gavekal Dragonomics, said a boycott could have many victims.

“Due to the integration of the economies, whatever China does to the U.S. will end up hurting itself,” Ms. Cui said.

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Article source: https://www.nytimes.com/2018/04/19/business/china-trade-us-boycott.html?partner=rss&emc=rss

If the World Economy Is Looking So Great, Why Are Global Policymakers So Gloomy?

For now, this remains more a theoretical risk than a cause of major disruption to economic expansion.

The Trump administration has threatened a withdrawal from the North American Free Trade Agreement, a steep tariff on steel and aluminum imports, and the intention to tax $50 billion (or maybe $150 billion) of Chinese imports. But it has then backed away, entering Nafta renegotiation, granting exceptions to the steel and aluminum tariffs to many countries, and delaying tariffs on Chinese imports.

Essentially the Trump administration pattern so far has been to pair belligerent language with comparatively restrained action. Trading partners have worked to find resolutions rather than let a full-scale trade war erupt. There is a tentative deal to renegotiate the United States’ trade agreement with South Korea, for example, and Nafta negotiations are continuing.

A World of Financial Imbalances

Global policymakers are worried about more than conflict over trade. They also see an emerging series of financial imbalances and risks that could cause, or worsen, the next downturn.

For years, for example, some countries — Germany, Japan and China prominent among them — have persistently run current account surpluses, meaning they export more than they import and essentially export capital to the rest of the world. Others, including the United States and Britain, have run persistent current account deficits.

Over time, these patterns can create vulnerability to financial shocks; they helped fuel both the 2008 global financial crisis and the 2010 eurozone crisis. And the I.M.F. projects that they will worsen in the next couple of years, despite steady economic growth.

For example, Germany’s current account surplus is set to rise from 8 percent of G.D.P. in 2017 to 8.2 percent in 2018 and 2019, according to the World Economic Outlook. The United States’ current account deficit is forecast to rise to 3 percent of G.D.P. from 2.4 percent.

Article source: https://www.nytimes.com/2018/04/19/upshot/world-economy-trump-worries-imf-trade-debt.html?partner=rss&emc=rss

California Lawmakers Kill Housing Bill After Fierce Debate

Later, a long line of opponents portrayed the bill as a threat to neighborhoods and low-income residents and at one point began chanting: “827, what do we say? Kill the bill, kill the bill.”

Despite the disagreement, there was a broad consensus — among senators on the raised dais, among the constituents and lobbyists in the room — that housing costs remain a central issue.

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Local governments argued that the housing-density bill amounted to a power grab that would strip them of ability to design their neighborhoods and central areas. Credit Jim Wilson/The New York Times

“This issue isn’t going away,” Mr. Wiener said.

The public reaction to the bill seemed to underscore that. Ever since Mr. Wiener introduced S.B. 827 on Jan. 3 — the first day of the legislative session — it has dominated the state’s conversation about housing. The bill came up in political debates and candidate interviews, and cities across the state had votes on whether or not they supported it.

Mr. Wiener added amendments to reduce the bill’s height limits and strengthen protections for lower-income residents who might be displaced by demolition of older, more affordable buildings. But that did little to move the most entrenched opponents, and introducing it in an election year made it tough for lawmakers to support something so polarizing.

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Some of the fiercest opposition came from local governments arguing that the bill would strip them of land-use decisions. The bill was also opposed by groups concerned about gentrification in neighborhoods already pummeled by rising rents.

“This bill will exacerbate an already perilous situation for tenants throughout the state,” said Damien Goodmon, director of Housing Is a Human Right, a division of the AIDS Healthcare Foundation in Los Angeles.

More than anything else, the bill showed the political challenges of building housing in places where people already live — something California will almost certainly will have to do to make progress on this problem.

But there seems to be little consensus on how to go about that. Mr. Wiener’s bill split a number of constituencies.

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Mr. Wiener pitched his bill as a way to combat climate change by fostering neighborhoods that allow more people to commute to work without car — a goal that almost every conservation group supports. But the California chapter of the Sierra Club opposed the bill, while other groups, like the Natural Resources Defense Council, stood in favor of it.

Even with the committee action, the idea of state intervention in what has historically been a local problem is unlikely to go away. Mr. Wiener vowed to bring back the bill. So this may be remembered as the start of a long negotiation over how to make cities less hostile to new construction.

In an interview earlier this year, Gavin Newsom, a former San Francisco mayor now running for governor, said that California was in “code red” for housing affordability and that he liked the “spirit” of Mr. Wiener’s bill, but he would not support it as written. “I told him point blank, ‘I would not sign this bill, but I love what you are doing. How can I help?’”

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Article source: https://www.nytimes.com/2018/04/17/business/economy/california-housing.html?partner=rss&emc=rss

Divides Over Trade Scramble Midterm Election Messaging

Minnesota is a key political battleground this year, with several competitive House seats and two Senate elections because of the resignation of Al Franken after a sexual-misconduct scandal last year. Mr. Campbell said that he was still likely to support Republican candidates, but that he was frustrated by the party’s shift toward protectionism and support for increased government spending.

“I blame Republicans for that,” Mr. Campbell said. “A very significant portion of Republicans in Congress are not really conservative when it comes to spending.”

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Jeffrey Campbell, a Minneapolis lawyer, said he liked the Republican tax bill but not President Trump’s tariffs, saying they may hurt the economy over all. Credit Jenn Ackerman for The New York Times

The re-emergence of trade as a central political issue has scrambled traditional partisan alignments in ways that carry risks for both parties. Mr. Trump won the presidency partly by tapping into voters’ concerns about the impact of globalization on jobs and wages, particularly in the industrial Midwest.

But free trade still receives strong support among business groups, which have historically backed Republican candidates, and among big-dollar conservative political donors such as the Koch network. As recently as 2015, three-quarters of House Republicans voted for a measure meant to open trade even further — so-called “fast track” negotiating authority for President Barack Obama.

Reflecting those tensions, congressional Republican leaders have criticized Mr. Trump’s tariffs as potentially harmful to businesses and consumers while also praising the president’s broader goals on trade.

Representative Kevin Brady of Texas, the chairman of the Ways and Means Committee, opened a hearing on the effects of tariffs on the economy last week by saying the measures “curtail economic growth, discourage new investment, delay new hiring, and put American workers at a huge disadvantage to foreign competitors.”

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But he added, “I remain committed to working with President Trump and the White House on strong, enforceable trade policies that will target bad actors and encourage economic growth here at home.”

Democrats face their own challenges on the issue. As Republicans have shifted away from supporting free-trade agreements, Democrats have embraced them: In the Times poll, 73 percent of Democrats said they thought free-trade agreements helped the United States, compared with 51 percent of Republicans. But union members, long a key source of mobilization and support for Democrats, retain the party’s longtime skepticism of free trade.

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“It’s not an ideal issue for either party,” said Robert J. Blendon, who directs the Harvard Opinion Research Program at the Harvard School of Public Health. “It makes the issue slightly more complex because their voters’ views don’t correspond to their interest groups.”

For Republicans, Mr. Trump’s trade battles pose an additional risk of undermining the party’s core economic message. Republicans have tried to emphasize the tax law they passed in December, which cut taxes on businesses and most households. But trade has largely pushed the tax law from the headlines, and support for the law, which rose early in the year, now seems to be ebbing.

“You’re starting to certainly complicate the message,” said Jon Cohen, chief research officer for SurveyMonkey.

The trade fight has also roiled financial markets, which had risen steadily during Mr. Trump’s first year in office. If that volatility continues, it could erode consumers’ confidence in the economic recovery. There are hints that could already be happening: The University of Michigan’s measure of consumer sentiment dipped slightly in April, with many respondents citing trade as a source of concern. SurveyMonkey’s consumer confidence index also ticked down in April, with the largest declines coming among higher-earning households, which are much more likely to own stocks.

“It’s possible the war of words over trade, tariffs and sanctions, and the financial market turmoil we had has led to some setback in consumer confidence,” said Chris Rupkey, chief financial economist at MUFG Union Bank.

Losing Confidence?

SurveyMonkey’s consumer confidence index, which combines five questions on Americans’ financial and economic outlook, ticked down in April after holding steady earlier in the year.

Note: Partisan categories include people who lean toward a particular party. | Source: SurveyMonkey

Consumer confidence remains high over all, however, and there is little evidence that the tariffs have hurt the economy so far. Retail sales rose in March, according to data released by the Commerce Department on Monday, and the job market continues to make steady progress. Economists say an outright trade war could derail the economy, but the tariffs announced so far fall well short of that.

Ethan Brackenbury, a cost estimator for the federal Department of Energy in southeastern Washington State, said that he didn’t like the idea of a trade war, and that he hadn’t noticed any gain from the tax cut in his paycheck. But the economy seems strong in his area, he said, and he views any declines in the stock market as an opportunity to buy, not a signal to sell.

“I’m certainly not worried, nor am I excited,” Mr. Brackenbury said. “I don’t see long lines of unemployment or those kinds of things. Everyone seems to be gainfully employed.”

Follow Ben Casselman on Twitter: @bencasselman.

The data in this article came from an online survey of 10,533 adults conducted by the polling firm SurveyMonkey from April 2 to April 8. The company selected respondents at random from the nearly three million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus 1.5 percentage points, so differences of less than that amount are statistically insignificant.

About the survey: The data in this article came from an online survey of 10,533 adults conducted by the polling firm SurveyMonkey from April 2 to April 8. The company selected respondents at random from the nearly three million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus 1.5 percentage points, so differences of less than that amount are statistically insignificant.

A version of this article appears in print on April 18, 2018, on Page B3 of the New York edition with the headline: President’s Trade Policies Hold Perils For Both Parties in Midterm Election.

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Article source: https://www.nytimes.com/2018/04/17/business/economy/trade-midterm.html?partner=rss&emc=rss

Trump’s Annoyed About Russian and Chinese Currencies. Should He Be?

China and the ‘Currency Devaluation Game’

In the case of China, the accusation is outdated. China has allowed the value of its currency to rise in the last year — to 6.3 yuan to the dollar from 6.9 yuan to the dollar last April. That is the opposite of a currency devaluation game.

But the president’s statement has greater validity if you look over a longer period. China has used management of its currency to shape its economy. A decade ago, it was doing exactly what the president suggests — pushing the value of the yuan downward to give an advantage to Chinese exporters.

That was implicitly acknowledged in a Treasury Department report last week that declined to name China a “currency manipulator,” as Mr. Trump often argued it was on the campaign trail. That report listed China along with Japan, South Korea, Taiwan, Germany and Switzerland as countries the United States is monitoring for their currency practices.

“China has a long track record of engaging in persistent, large-scale, one-way foreign exchange intervention, doing so for roughly a decade to resist” currency appreciation, the report said.

China has then allowed the currency to appreciate only gradually, the report said, and “the distortion in the global trading system resulting from China’s currency policy over this period imposed significant and long-lasting hardship on American workers and companies.”

Article source: https://www.nytimes.com/2018/04/16/upshot/trump-currencies-russia-china-interest-rates.html?partner=rss&emc=rss

Economic Scene: Facebook Is Creepy. And Valuable.

We don’t know.

“We don’t understand the value to us of the new data economy nor the risks it entails,” said Leonard Nakamura, an economist at the Federal Reserve Bank of Philadelphia who has studied the economic impact of data. “We just let it rip and now are trying to catch up.” Unfortunately, we have only rudimentary tools to measure the good and the bad.

As the data-driven economy continues evolving at breakneck speed, catching up may be beyond our reach; we will build the guardrails by trial and error. The risk is that policy will be driven mostly by fear.

What is the problem with Facebook? Clearly Moscow’s use of the platform to spread fake news and warp the 2016 elections is one problem. Allowing data from tens of millions of users to flow, without their knowledge, to a political consultancy working for Donald Trump is another.

But the raw business models of the colossi of the data economy are creepy in and of themselves. Start with the sheer scale of personal data scooped up by Facebook, often without users’ knowledge. The platform not only harvests the data you share with the platform, but also collects information about you from the files of other Facebook users you know. It buys data about your offline lives from data brokers — including sensitive stuff like your income and the credit cards you own. And testifying in the House, Mr. Zuckerberg admitted that Facebook sucks up information about people who are not even on Facebook, so it can aim ads at them.

Mr. Zuckerberg noted that this data is what makes Facebook valuable for its advertisers and its users, enabling the network to offer them only relevant ads. But it also gives it inordinate power over people’s lives. It wouldn’t be impossible, for instance, to use Facebook’s sophisticated models to send a deluge of ads for weight-loss pills to overweight teenagers with a fragile self-image. We know that Facebook can determine, and manipulate, its users’ emotional states.

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Facebook’s headquarters in Menlo Park, Calif. “We don’t understand the value to us of the new data economy nor the risks it entails,” said Leonard Nakamura, an economist at the Federal Reserve Bank of Philadelphia. Credit Jason Henry for The New York Times

Data can also be deployed for virtual redlining. And what about price discrimination? Amazon and others have already experimented with mining our data to charge “personalized” prices for a given item — the maximum price each of us is willing to pay — a practice that can leave many consumers worse off.

But policy cannot be determined only by the potential creepiness of what corporate America might do with our data. Maybe perfect price discrimination will never take off because consumers don’t like it.

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Indeed, it is unclear to what extent consumers are repelled by any of this. Though surveys repeatedly find that Americans are concerned about their privacy, they rarely take action to stop cookies and other tools deployed to gather their data — leading scholars to coin the term “privacy paradox.” As Sinan Aral of the Sloan School of Management at the Massachusetts Institute of Technology has noted, “Lots of the things that depend on ads we want as public goods.”

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Critically, to regulate the data-enabled world, we must first figure out what we stand to lose if the data goes uncollected. For instance, research found that privacy rules introduced by the European Union in the 1990s reduced the effectiveness of online advertising. What, then, is the social cost?

Mr. Nakamura and two colleagues at the Bureau of Economic Analysis calculated how much of the nation’s gross domestic product came from the “free” digital economy powered by advertising that drives Facebook’s and Google’s business. From 1995 to 2005, they found, it added 0.07 percentage points to the economy’s annual growth rate. From 2005 to 2015, it added 0.11 percentage points.

But this must understate the data economy’s contribution to our well-being. Facebook is an immensely valuable mode of communication and interaction for two billion people around the world. The company has published in-house research suggesting that people who do lots of sharing on the social network are happier and healthier.

Facebook’s advertising tools — the ones that use your data to figure out whether you should see an ad from the small shop in Connecticut that sells organic yarn — provide mom-and-pop operations with cost-effective marketing opportunities once reserved for large corporations.

More broadly, Mr. Nakamura points out, the online economy powered by data collection and advertising is improving welfare in a way not properly captured in standard measures of economic output. This includes reams of “free” music and the potential benefits from the artificial intelligence that will be trained using personal data. The consumer surplus — the benefit that we get from a good or service above and beyond the price we pay for it — is bigger than it ever was. And it will grow further.

And yet if this sounds like an argument against touching the data-driven digital economy with even the slightest regulation, it is not. Worries that Facebook and some of its brethren may have become large enough to squelch innovation are legitimate. So are suspicions that it plays fast and loose with consumer data.

Regulations to curb the power of the digital behemoths — say, barring them from buying up rising companies like Instagram and WhatsApp that might threaten their dominance in the future — make sense. So do policies that ensure responsible stewardship of the data they gather.

”I don’t think the right policy position is to totally eliminate the business model, but instead to introduce some restraint,” said Terrell McSweeny, the lone Democrat on the Federal Trade Commission. “The idea is to give people more control over the uses of their data and ensure companies are responsible for what is happening to it.”

Summoning Mr. Zuckerberg to testify suggests that Congress is no longer happy doing nothing. Hopefully, it can do better than simply overreact to its fears.

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Article source: https://www.nytimes.com/2018/04/17/business/economy/facebook-regulation-privacy.html?partner=rss&emc=rss

China’s Economy Grows, and Its Trade Gap With the U.S. Widens

The trade figures present a mixed picture of how painful those tariffs could be for China. Over all, trade is not as important to China’s economy as it was a decade ago, suggesting the country could better weather a trade fight. But the data also suggests China’s exports to the United States, specifically, have become more valuable to China’s economy as it increasingly makes most — or even all — of the parts that go inside what it sells abroad.

Sizing Up the Surplus

By The New York Times | Source: China’s General Administration of Customs via CEIC Data 

Mr. Trump has focused on China’s trade surplus with the United States, or the difference between what it sells to America and what it buys. And in the first three months of the year, the trade surplus for goods hit a new high of $58 billion, according to Chinese data. Trade in services, in which the United States is stronger, is tiny compared with the trade in goods, and offsets only about a tenth of the deficit in goods.

China’s surplus on goods with the United States last year totaled $375 billion, according to Washington, or $276 billion, according to Beijing. The United States includes Chinese goods shipped by way of Hong Kong, a Chinese city that operates under its own laws, while Beijing’s statistics do not. Either way, China’s surplus has been rising.

By The New York Times | Source: China’s General Administration of Customs and United States Census Bureau, via CEIC Data 

Mr. Trump wants China’s annual trade surplus to shrink by $100 billion — a reversal that could lower China’s entire economic output by nearly a full percentage point if the Chinese factories producing those goods simply shut down.

Xing Zhihong, the spokesman for China’s statistics bureau, said on Tuesday that China did not try to have a trade surplus with the rest of the world, and noted that it was narrowing overall. He also dismissed the idea that trade frictions with the United States could stymie growth.

“Sino-American trade frictions cannot cause a slowdown in the Chinese economy, nor change the good momentum in China’s economic development,” Mr. Xing said.

Strictly by the numbers, China’s trade surplus with the United States helps Chinese economic growth figures, though the reality of the relationship between the countries is more complex. Many American consumers and companies benefit from Chinese-made goods, and a number of economists doubt that Mr. Trump’s focus on lowering the trade surplus with a single country will help the United States.

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Home Grown

On their face, the numbers suggest that American businesses have become dependent on China. And in fact, China’s trade surplus with the United States is growing even as its surplus with the rest of the world has shrunk.

By The New York Times | Source: U.S. Census Bureau, U.S. Bureau of Economic Analysis, China’s National Bureau of Statistics, Haver Analytics, via Brad Setser at the Council on Foreign Relations

But something else is going on: China is depending more on itself.

China was once famous for assembling goods made from parts that had been bought elsewhere. A smartphone that is made in China, for example, might have a screen from Japan, memory chips from South Korea and a main processor from the United States. In fact, those parts and components long accounted for a sizable chunk of what China bought from the United States.

Today, China can do all that entirely within its own borders, making everything from advanced electronic components to car parts and assembling the final product.

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“In the last 10 years, you’ve seen China become considerably more developed and sophisticated in terms of its own supply chains,” said Gordon Styles, the founder and president of Star Rapid, a company in Zhongshan, China, that does rapid prototypes and low-volume test manufacturing runs for everything from auto parts to medical equipment.

“It is now easier than it ever was before to produce the entire product here,” he said.

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Global automakers and other multinational companies have moved much of their supply chains to China to avoid Chinese tariffs, tap the country’s vast work force and move closer to a big new market.

Brad Setser, a Council on Foreign Relations economist, calculated that imports of manufactured goods from the United States are becoming steadily less important to the Chinese economy. He estimated that China now produces within its borders up to four-fifths of the value of each dollar of exports. That share had been as little as two-thirds in 2011.

Nadim Ahmad, the head of the trade and competitiveness statistics division at the O.E.C.D., said that China has been expanding in areas like research, design and development that had previously been done overseas. “You’re basically creating a lot more in the economy” as goods are manufactured, he said.

That means China gets more bang from its buck from its exports to the United States — and suggests American tariffs could be more painful than trade’s shrinking share of the economy suggests.

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Article source: https://www.nytimes.com/2018/04/16/business/china-economy-trade-gap-united-states-grows.html?partner=rss&emc=rss

Senate Bill to Curtail Labor Rights on Tribal Land Falls Short

The congressional legislation would have denied employees of casinos and other enterprises on tribal trust land recourse to federal labor law if, for example, they were fired for trying to organize a union or collectively protesting work conditions.

More than half a million people are employed by casinos and affiliated resorts on tribal trust land, and a vast majority are not citizens of tribes. Thousands employed in other tribal enterprises could have been affected as well.

“It’s a very, very troubling step at a moment when we should be doing everything we can to try to protect people’s collective rights and when there are so many people who feel so disempowered in this economy,” said Sharon Block, a former member of the National Labor Relations Board who is executive director of the Labor and Worklife Program at Harvard Law School.

Among those voting to move forward with the bill was Senator Tammy Baldwin, a Wisconsin Democrat who faces a tough re-election campaign this year. Her vote angered groups with which she had frequently aligned herself in a state where the Republican governor, Scott Walker, led a fight to roll back collective-bargaining rights for public employees.

“The fact that we have to work somebody from Wisconsin, where workers’ rights were decimated by Walker — that she’s even in play — says a lot,” D. Taylor, president of Unite Here, which represents about 10,000 workers employed by tribal casinos, said in an interview before the vote.

Ms. Baldwin’s office did not respond to a request for comment. But Pete Kirkham, a lobbyist who represents several tribes, noted that Indian sovereignty issues tended to loom large in Wisconsin. Some Democratic House members from the state have also supported the measure.

Supporters, including a coalition of business groups and Native American tribes, argued that the measure would simply restore the longstanding principle of tribal self-government, and that tribes shouldn’t be treated differently from state and municipal workers, who aren’t covered by federal labor law.

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The argument is that a tribal government operating a casino is akin to a municipality generating revenue from a golf course.

“It merely seeks to treat tribal employers like any other public employer,” Dan Mahoney, executive director of the Native American Enterprise Initiative at the U.S. Chamber of Commerce, said in a statement. “This is an issue of parity. It is not an effort to deunionize but to clarify the paradigm under which unionizing could occur.”

At other times, supporters of the legislation have been more overtly antagonistic to federal labor rights. In 2015, Jefferson Keel, the lieutenant governor of the Chickasaw Nation, said one reason he opposed applying the National Labor Relations Act to tribal enterprises was that it protected the right to strike, potentially damaging casino operations.

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“I would liken it to what happened with the air traffic controllers’ strike a number of years ago to this country,” he said at a congressional hearing. “We obviously are not on as large a scale, but that is the type of activity that would interfere with what we are doing.”

The Chickasaw Nation did not respond to a request for comment, but Mr. Kirkham, who counts the Chickasaw as a lobbying client, said that “tribal leaders across the country would share that view.”

In its bipartisan 2004 ruling, the National Labor Relations Board said that while the federal government often granted Native American tribes a special status, federal labor law did no harm to that status as long as it didn’t interfere with tribal self-government or violate treaty rights.

“Running a commercial business is not an expression of sovereignty in the same way that running a tribal court system is,” the board concluded. “The tribe’s operation of the casino is not an exercise of self-governance.”

Another tribe, the Little River Band of Ottawa Indians, later appealed to the Supreme Court after the labor board and a federal appeals court affirmed the logic of the ruling, but the Supreme Court declined to hear the case.

The tribes have pressed Congress for over a decade to pass legislation that would restore their exemption from federal labor law, but the effort gained momentum when Republicans took control of the House in 2011. Since then, tribes have spent millions of dollars on lobbying, at least in part with the goal of advancing the legislation.

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For example, lobbyists working for the Chickasaw Nation, based in Oklahoma, have reported receiving more than $1.6 million in payments from the tribe on federal disclosures that cite the Tribal Labor Sovereignty Act as among their “specific lobbying issues” during that time. Over the same period, the tribe has contributed at least $3 million to federal candidates and committees.

In 2015, the House passed the legislation, which the Senate did not vote on during that session of Congress. Three-quarters of the 24 Democratic representatives who voted for the bill had received campaign contributions from the Chickasaw Nation.

The Chickasaw Nation has also contributed at least $4,000 to Senator Baldwin since 2014.

And the Chickasaw Nation is only one of more than half a dozen tribes that have employed lobbyists to work on the issue. Holly Cook Macarro, a lobbyist who has worked on the issue for the Pechanga Band of Luiseño Indians in California, raised over $400,000 for a committee supporting Hillary Clinton’s 2016 presidential campaign, according to The Washington Post.

If the National Labor Relations Act were no longer to apply to employees of tribal enterprises on tribal lands, it wouldn’t necessarily leave a vacuum. Many tribes have labor codes of their own that seek to govern relations between workers and management.

But the rights under those codes are often narrower than under federal law, and labor officials say they are laxly enforced.

Unite Here is trying to organize several hundred workers at Foxwoods Resort Casino in Connecticut, operated by the Mashantucket Pequot tribe. The labor group said the casino had unlawfully suspended three workers over their support for the union. It said one had since been reinstated.

“The Mashantucket Pequot Labor Relations Law protects the rights of Foxwoods employees to be represented or not by any union, and we have always accepted the outcomes of union elections under tribal law,” Foxwoods’ vice president for human resources, Dale Merrill, said in a statement.

Correction: April 16, 2018

An earlier version of this article misstated how many more votes were needed to end a filibuster blocking a package of bills that included the Tribal Labor Sovereignty Act. The number was five, not six.

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Article source: https://www.nytimes.com/2018/04/16/business/economy/senate-tribal-labor.html?partner=rss&emc=rss