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News Analysis: Weak Finish From Europe on Chinese Solar Panels

July 28, 2013 by

But the case ended with a whimper on Saturday and illuminated the deep divisions within Europe — and how good the Chinese are at exploiting those differences. The European Commission announced Saturday that it had settled the case in exchange for a pledge from China not to export solar panels for less than 0.56 euros (74 cents) a watt, a price about 25 percent lower even than when the case began. The commission also decided to forgo imposing the steep tariffs on Chinese solar panels it had originally threatened.

The deal could end up strengthening the fractured Chinese solar panel industry and sending a wave of cheaper Chinese solar panels to the United States.

Trade experts said over the weekend that the European Commission’s meager outcome, in a case covering 6 percent of China’s exports to Europe, showed that while Brussels might have had a very strong case in terms of the law or economics, it was fatally weak from the beginning at the political level. Those political weaknesses increased as China’s leaders traveled repeatedly to European capitals and lobbied aggressively and successfully to divide Europe on the issue.

European makers of solar panels were furious over the weekend at receiving so little after a year of litigation, and vowed to sue. The European settlement also undermined Obama administration officials, who had taken a tough stance toward China on solar panel trade and had tried for several months to persuade the European leaders to side with them.

After nearly a full day of silence from Washington, the administration issued a thinly veiled criticism late Saturday afternoon of Europe’s decision to cut its own deal. “We believe there needs to be a global solution, consistent with our trade laws, that creates stability and certainty in the various components of the solar sector,” said Michael Froman, the United States trade representative.

Li Junfeng, a senior Chinese government energy policy maker, said that the trade deal was good for both China and the European Union. China has captured close to 80 percent of the European market for solar panels over the last several years, with exports that reached $27 billion in 2011, before the trade battle began. China has expanded its industry using huge loans from state-owned banks as well as cheap land and other incentives from government agencies. Industry executives say they expect China’s market share to fall to between 60 and 70 percent with the minimum price agreed on Saturday.

The politics of the solar trade case within Europe were highly unusual from the start. In most European trade cases regarding an imported product, the main country in Europe making the same product energetically favors protection from subsidized imports. Other European countries tend to like low-cost imports and be less enthusiastic about imposing tariffs.

The European solar panel industry is concentrated in Germany, and has felt the brunt of the impact of lower prices, yet the German government emerged as the biggest critic of confronting China on solar panel exports. Chancellor Angela Merkel of Germany opposed the trade case from the very beginning, saying that it would be preferable to continue talking with Chinese officials about the issue. Solar panel manufacturers in Germany tend to be independent companies that are not part of the country’s big industrial powerhouses like Volkswagen or BASF.

Germany has had far more success in exporting to China than any other European country, particularly in shipments of factory equipment, and Ms. Merkel has sought to cultivate a special relationship with Beijing. Most big German companies were unenthusiastic about the trade case, fearing that it could lead to a broader trade war that might hurt German exports.

“A tit-for-tat policy will more destabilize than help us,” Martin Brudermüller, the vice chairman of the German chemicals giant BASF, said at a news conference in Hong Kong last month.

Article source: http://www.nytimes.com/2013/07/29/business/global/weak-finish-from-europe-on-chinese-solar-panels.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

U.S. Retailers Offer Safety Plan for Bangladeshi Factories

July 10, 2013 by Leave a Comment

The proposal calls for the retailers to inspect the estimated 500 factories that the American companies use within 12 months, and then develop plans to fix any substantial safety problems that are found, one official involved in the planning said.

Under the effort, called the Alliance for Bangladesh Worker Safety, the participating companies would contribute money — from a modest amount up to $1 million a year, depending on the level of business each does in Bangladesh. This would create a total fund of $40 million to $50 million during the plan’s five years.

While details of the proposal have yet to be fleshed out, it differs from the European-dominated plan in the way the participants take responsibility for safety violations. The Europeans pledge to ensure that there are funds to fix serious fire and building safety problems in any of the factories they use in Bangladesh.

Under the American plan, there is talk of “shared accountability” – the companies would work closely with the factory owners, the government of Bangladesh and various governments and aid agencies to figure out ways to finance safety improvements. If serious safety problems were found at a factory, the plan’s director would inform the Bangladesh government, the factory owner and what the group calls the factory’s “worker participation committee,” a group to be elected by a factory’s workers.

The American retailers plan to develop a common safety standard for the factories by October and to create a clearinghouse to share information among themselves about which factories have been approved for production and which need safety improvements. One retail executive said the American companies would pledge $100 million in loans and other financing to upgrade safety in Bangladesh’s apparel industry.

The 70 companies in the European-dominated effort announced details of their plan on Monday, saying they would have all of the factories they use in Bangladesh inspected within nine months and would have remediation plans developed for those with safety problems. They pledged “to ensure that sufficient funds are available to pay for renovations and other safety improvements.”

Bangladesh is the world’s second-largest apparel exporting nation, after China; Europe buys about 60 percent of its exports and the United States around 25 percent.

The chief executives in the alliance made a joint statement Wednesday, saying: “The safety record of Bangladeshi factories is unacceptable and requires our collective effort. We can prevent future tragedies by consolidating and amplifying our individual efforts to bring about real and sustained progress.”

The beginning of the American effort was announced in May, as Walmart, Gap and other American retailers felt pressure to act because the European-dominated accord was gathering momentum and because of the outcry to do more to ensure safety after 1,129 workers died in a factory building collapse in Bangladesh in April.

The plan announced Wednesday includes J.C. Penney, Carter’s and the Children’s Place and was reached with the help of the Bipartisan Policy Center and two former United States senators from Maine, George Mitchell and Olympia Snowe.

Supporters of the European-dominated plan, known as the Accord on Fire and Building Safety in Bangladesh, have pre-emptively criticized the American plan, saying it would achieve less in improving safety because the companies have made a less ambitious commitment to finance safety upgrades. Several American companies have joined the European-dominated plan, including Abercrombie Fitch and PVH, the parent company of Calvin Klein and Tommy Hilfiger.

Critics have faulted the American effort for not including the views of unions or workers in their plan. The Bipartisan Policy Center had invited several labor rights groups to attend a meeting to give their views, but the labor groups boycotted, seeing the American effort as one that was undercutting the European-dominated plan.

Article source: http://www.nytimes.com/2013/07/11/business/global/us-retailers-offer-safety-plan-for-bangladeshi-factories.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Economic View: Fed Monetary Policy Drives Best at Higher Speeds

January 19, 2013 by Leave a Comment

First, what has the Fed done recently? Until September, its bond-buying program was explicitly limited in size and duration. Fed policy makers then replaced it with an open-ended program, whose pace was to be determined by progress in healing the labor market. And they adopted simpler, more positive explanations for their actions — jettisoning the gloomy, expectations-killing language that cited wretched economic prospects to justify every expansionary move.

Then, in December, the Fed surprised markets by replacing its somewhat confusing predictions for interest rates with numerical guidelines. It said it would keep the rate it controls — the federal funds rate — near zero at least until the unemployment rate fell below 6.5 percent or inflation rose above 2.5 percent.

Under the circumstances, it was significant that the policy makers took these actions at all. The economic data that came out before the September meeting were actually better than expected. And, based on forecasts released after the meeting, members of the Fed’s policy-making committee were slightly more optimistic about prospects for employment and output growth than they had been three months before. That they nevertheless adopted a more expansionary policy can be read as an admission that they hadn’t been doing enough earlier.

The pledge to keep rates low, even if inflation edged above 2 percent, is particularly consequential. For the last several years, the Fed has acted as if 2 percent were not just a target but a ceiling that should never be breached. But coming out of a terrible recession, with unemployment excruciatingly high, a period of very rapid growth is needed to repair the damage — and it wouldn’t be surprising for such growth to push inflation a bit over 2 percent. A Fed acknowledgment that 2.5 percent inflation would be tolerable for a short while isn’t a sign that it has lost its commitment to price stability. Instead, it’s a strong statement that it is committed to ensuring a faster recovery.

The more positive language, along with the “we’ll do whatever it takes” approach to bond buying, seems designed to reassure Americans that conditions will improve. This, too, is important. With short-term rates close to zero, the Fed’s main tool is expectations management. If it can persuade people to expect more growth — and yes, a little more inflation — it may help encourage companies to stop sitting on cash and start investing again.

The new policies are improvements, but I don’t want to oversell them. As I suggested in a previous column, a more definitive policy shift — like adopting a new target for monetary policy — would likely have a greater impact on expectations and in stimulating the recovery.

And the new policy’s numerical parameters are too conservative. According to the Fed’s own assessments, normal unemployment over the longer run is well below 6.5 percent. If inflation remains low and unemployment gets down to 6.5 percent, there’s no reason to rush to raise interest rates.

The most pressing problem, though, is that the Fed’s commitment to its new policies appears shaky. Soon after the December meeting, some members of the policy-making committee spoke out against the action — killing some of the positive buzz created by the policy statement and by a spirited news conference by the Fed chairman, Ben S. Bernanke. Also, the minutes of the December meeting showed that some who had voted for the new guidance on the fed funds rate were skeptical about the complementary action on bond-buying.

No one of the Fed’s recent actions is particularly powerful on its own, but together they create a sense of aggressive expansion and commitment to recovery. If the Fed now stops some of them, giving the public a mixed message, the positive effect on expectations could easily evaporate.

So why has the Fed moved slowly, and why are some policy makers threatening to undo the recent actions? In a recent paper, Prof. David Romer of the University of California, Berkeley (my husband), and I found that pessimistic views about the effectiveness and costs of expansionary actions have played a major role in limiting Fed moves over the last few years. Policy makers worry that such actions will do little good and that they could cause inflation, distortions in financial markets and losses on the Fed’s portfolio.

I can’t say for sure that those views are wrong today. We just don’t have enough experience with situations like the current one to have conclusive evidence one way or the other.

But our paper shows that in two periods when the Fed made terrible errors, the same kinds of pessimistic views were present. Faced with the Great Depression of the early 1930s and the high inflation of the early and late 1970s, monetary policy makers did little because they were convinced that action would be ineffective.

Subsequent events proved both decisions wrong. In the 1930s, a propitious gold inflow allowed the administration of Franklin D. Roosevelt to conduct monetary expansion without the Fed. Real interest rates plummeted, expectations improved and investment spending and consumer purchases of durable goods took off — jump-starting the recovery. At the end of the 1970s, a new Fed chairman, Paul A. Volcker, concluded that monetary policy absolutely could reduce inflation, and he led the Fed to raise interest rates to historic highs. The recession that followed was painful, but inflation did come down — and it has been low ever since.

WHEN monetary policy makers meet again at the end of this month, they should keep these historical lessons in mind. At the very least, the Cassandras on the committee might want to reread the policy record from the 1930s. The degree to which some of them sound like their Depression-era counterparts might shock them — and give them pause.

The Fed’s new more aggressive policy shows every sign of being helpful, and there are no indications that the feared costs are materializing. So rather than trimming the policy before it can bear fruit, why not give it a chance?

Even better, why not give it some extra oomph? Rather than just continuing the bond-buying program, accelerate it somewhat. Instead of just reiterating the numerical guidelines on the funds rate, policy makers could follow the suggestion of Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, that they lower to 5.5 percent the unemployment level at which the Fed starts to consider raising interest rates. And if Mr. Bernanke wanted to be truly aggressive, he could broach the idea that in a weak economy, a strong dollar isn’t necessarily desirable.

The important thing is that hypothetical fears shouldn’t stop the Fed’s evolution. History is on the side of doing more, not standing on the sidelines.

Christina D. Romer is an economics professor at the University of California, Berkeley, and was the chairwoman of President Obama’s Council of Economic Advisers.

Article source: http://www.nytimes.com/2013/01/20/business/fed-monetary-policy-drives-best-at-higher-speeds.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

U.A.W. Urges Automakers to Raise Entry-Level Pay in New Labor Deal

August 30, 2011 by Leave a Comment

The U.A.W.’s president, Bob King, said on Monday that the union had made a formal proposal for an increase in the $14-an-hour wage for entry-level workers, also known as second-tier employees. Full U.A.W. wages are about $28 an hour. “We are very concerned about the entry-level member having a higher standard of living,” Mr. King told reporters after a speech to the Detroit Economic Club.

The entry-level jobs were created in 2007, when the companies negotiated their current contracts, which expire on Sept. 14. Only about 3 percent — or fewer than 4,000 workers — of the 112,000 union workers employed by the Big Three automakers are paid the lower wage.

But Mr. King said he was mindful of the need to improve the second-tier wages as part of a broader effort to win gains from the Detroit companies, which are now healthy financially.

He stopped short of saying that the union had asked General Motors, Ford and Chrysler for any base-pay hikes or cost-of-living adjustments for its full-paid workers.

“What we have to do is figure out how we raise income in whatever way is possible, whether it’s cost of living or base wage or profit sharing,” Mr. King said.

Executives at the auto companies have indicated a willingness to improve profit-sharing formulas to avoid across-the-board pay increases that add long-term structural costs.

It would be difficult, however, for the companies to resist a specific wage increase for entry-level employees, analysts predicted.

“The lower tier is only slightly above eligibility for food stamps if you have a family,” said Harley Shaiken, a labor professor at the University of California, Berkeley. “It’s the working poor rather than the middle class.”

Over all, Mr. King described the tenor of negotiations as “upbeat,” and reiterated previous pledges that the union did not want to cripple Detroit’s comeback with an onerous contract.

“We are committed to the long-term success of Ford, General Motors and Chrysler,” he said. “The facts are that our companies face a lot competition.”

The negotiations traditionally accelerate after Labor Day, and the union often chooses one of the companies to bargain with exclusively until a deal is reached.

This year’s talks are colored by no-strike clauses agreed to by the union as part of the government’s bailout of G.M. and Chrysler. Ford, which turned around financially without the benefit of federal aid, does not have such a clause, and its workers are voting this week on whether to authorize a strike if an acceptable contract cannot be reached. One of the first votes was taken at a Ford plant near Kansas City, Mo., where workers voted 3,049 to 18 in favor of the authorization.

“I think it sends a pretty strong message,” said Jeff Wright, president of U.A.W. Local 249.

But Mr. Wright added that he thought a strike was unlikely. The last national walkout at Ford was in 1976, and Mr. King said he was hopeful that Ford workers would support a contract that offered parity with G.M. and Chrysler.

“I’m confident that if we get a good contract, we’ll get it ratified,” he said.

Analysts expect the companies to entice workers to approve a deal.

“There’s going to be a signing bonus and it could be significant,” said Arthur R. Schwartz, a former G.M. negotiator and the president of Labor and Economic Associates, a consulting firm. “If that money is hanging out there it will be very hard for members to vote no.”

If a deal cannot be reached at G.M. or Chrysler, their contracts would be settled by an arbitration process. Because of the uncertainty in an arbitration proceeding, Ford may choose to wait until G.M., for example, sets a pattern on economic issues like profit sharing before agreeing to the same terms.

And although both management and labor have said talks were moving smoothly so far, analysts discounted the notion that the talks would wrap up before the Sept. 14 expiration date.

The union needs to extend the discussions to the last minute to prove it has achieved the best deal possible, Mr. Shaiken said. “An early deal,” he said, “implies that if you’d been at the table a few more days, then you could have gotten more.”

Article source: http://feeds.nytimes.com/click.phdo?i=72083866e6f44565aea458eb0009c6df

Filed Under: Business News Tagged With: , ,