Be It Solar Panels, Steel, or Aluminum, Dumping is Unfair Trade. Period.

Dumping, in economic terms, is defined as providing a product at a lower price than the market bears.  Companies, aided often by their country's government, do this to increase their market share by bankrupting their foreign competitors.  The result, long-term, is higher prices for consumers everywhere as competition is artificially thwarted.

Dumping is unfair trade.  It has been often seen and proved in the steel industry.  Aluminum and food products have also been proven to be dumped.

Solar panels now are on that list of proven, dumped products.

A recent U.S. International Trade Commission finding was in favor of U.S. solar panel manufacturers against Chinese dumping of solar panels.  Georgia-based Suniva Solar brought the suit and was joined by others.

The Hill now reports backlash.  "Dump on us," would seem to be the call of a most unusual coalition of right wing and left wing interests.

If this story is to be believed, some environmentalists who favor solar panels fear tariffs that level the playing field in trade will make solar panels less affordable in the U.S.  Subsidies have given solar energy a competitive leg up. They like the subsidies.

If this story is to be believed, these folks have aligned with groups which despise tariffs of any kind on the premise that tariffs are a form of federal subsidies.  They dislike the subsidies.

Both are wrong.

No one should ever say, "Go ahead. Dump on us."  To allow dumping is to permit unfair trade practices that undermine, long-term, domestic manufacturing.

I make no apology for my manufacturing bias.  Be it solar panels, steel, or aluminum, dumping is unfair trade.  Period.

Trend? Chinese Manufacturing Coming to the U.S.

Does three count for a trend?

Three Chinese companies have explored locations in Licking County in recent months.

Could the tends predicted by many, including Boston Consulting Group in 2011, be coming about?

Here's how it goes:

The working age population of China is beginning a decline.  At the same time, the Chinese have grown their middle class.  The result is that the Chinese will be exporting less in time.

It also means Chinese companies will look elsewhere to grow their manufacturing capabilities.

Three could count for a trend.

Surpassed by China? Hold On One Second

A couple of weeks ago, there was  a stir about China surpassing the U.S. in GDP some time this year.  I recall trusted economists telling me "it's not going to happen" and was, at first, taken aback.

I read more.

The Wall Street Journal article "China's Economy Surpassing U.S.? Well, Yes and No" was a good read to explain how the measure of economies can tell a different story.

The fact that China's purchasing power is growing is a sign that they are growing their middle class.  This is predictable and, given the declining working age population, is likely to continue.

The article also tackles per capita economic measures.  China ranks 99th and the U.S. is 12th in that regard.  Interesting.

Bottom line:  Don't give up on the U.S. quite yet.

My Economists on World GDP

Alan and Brian Beaulieu, the "Vistage economists," had a year-end podcast filled with tidbits designed to give a preview of 2014 based on data and facts from recent times.

This 2012 chart shows that the U.S. continues to hold the largest share of World GDP at 22%.  China follows at 11.5%.

It's noteworthy that the U.S. gained in 2012, indicating that China's continued growth did not come at the expense of the U.S.  That's news.

They added that Canada is losing manufacturing GDP to the U.S. and Mexico.  In both a demographic and economic way, they added, "Mexico is young and growing."

A Word From My Economist

If I had an economist on my staff and money were no object, it would be one of the twins at ITR Economics, Alan or Brian Beaulieu.  I've heard both brothers speak at Vistage meetings, caught a couple webinars, and listened in to their radio show.  I also get an RSS feed of their blog.

The blog entry from Alan yesterday was his forecast on manufacturing.  Short and sweet.

While admitting that China has surpassed the U.S. in GDP for manufacturing, Alan forecasts a continuing resurgence in U.S. manufacturing nonetheless.

He notes that manufacturing is at 11.9% of GDP, up from just 11% four years ago.

He's telling his clients to invest in manufacturing.

Good stuff.

My Son's Reshoring Wish

The conversation, not prompted by me, went something like this:

John: This new shelf had a sticker on it that says "Made in China." It seems like everything I have is made in China. I hate it.

Me: Where do you wish everything was made, John?

John: I wish it was all made in Ohio.

That's my boy.

Issue Update: China

I'm updating past issues on occasion over the next few days.

Joel Kotkin predicted it, but I think it's come even sooner than he would have predicted.

Due to demographic challenges and working age shrinkages, China has become very nearly a non-issue.

It was less than a year ago when economists were still predicting China would surpass the U.S. in manufacturing and GDP.  Find anyone saying that now?

Any exec who says they are building a new plant in China in order to export product back to the U.S. might be a candidate for a mental health evaluation now.

It's amazing how quickly an issue can turn.

Is Africa The Next China?

A cell phone factory in Ethiopia.  A packager in Capetown.  Just two examples, but there's growing numbers of cases of manufacturing previously likely to be done in China, instead moving to Africa.

I first heard the concept at a IEDC Conference in January 2012.  John Kaliski of Cambridge Systematics pointed out the logistical advantages of shipping overseas from Africa as one of the reasons he posed the question, "Is Africa the next alternative to China?"

With the improvements to East Coast ports of entry, Africa is no less an option for East Coast shipping than China is to our West Coast.

A Joel Kotkin-esque look at demographics doesn't rule out the concept either.  See a blog posting at Weeks Population for a report on the lower media age and potential doubling of population in Africa.

China's shrinking workforce-aged population and the fact that its heading toward a demographics-predicted decline in population stands in sharp contrast.

Right now, it may sound a bit absurd to think of places that for the past 30 years were the subject of hunger causes and Apartheid issues as competition for the U.S.'s manufacturing capacity.  Who thought about China in that way though 30 years ago?

Reshoring of manufacturing away from China and back to the U.S. could face some competition.  All the more reason for a national manufacturing policy that prepares us to compete better.

Pondering Satellite Overdependency

I attended the recent Ohio Aerospace Jobs Summit sponsored by the Aerospace & Aviation Council with Senator Rob Portman.  I got quite a few business development take aways and some future blog material to boot.

The most intriguing one is not something up my alley, but yet it is.

A panel on the FAA NextGen system was most intriguing. It's a topic not something normally part of our Port Authority business.  We aren't a port authority that owns an airport after all.

It concerns everyone though.  The FAA is moving away from the ground-based radar systems to, some day in the future, a satellite-based system that allows planes to travel more direct flights and be managed via GPS systems instead.

I had a question ready that someone asked before I could ask it: "What are the backup or fail safes for satellite-dependent systems?"  Could we be overdependent on satellite systems?

The answer is not readily apparent and the panel's response made that abundantly clear. 

We are a satellite-dependent society already, something that kind of snuck up on most of us.  We're going to be more so in the future, especially if our entire $1.3 trillion international air travel system is dependent upon it.

The GPS in our cars is more relied upon than paper maps.  Our smartphones and iPads have GPS devices in them too. We know where our freight traffic is thanks to GPS.  Almost all of our television broadcasts and other communications are satellite-transmitted.  So are our weather forecasting capabilities.  So many more things in our economy depend on satellites than was true even 10 years ago.  More is coming too.

Yet, potential attacks on our satellites is a real threat and a real vulnerability.  China showed off its ability to shoot down satellites from the ground in 2007.  That was no subtle message.  Cyber attacks are another area of legitimate concern with multiple such attacks already proven to have happened.

The minds at the Port Authority's Aerospace Center in Heath could possess the answer. 

For 50 years, the Center has had a role in inertial guidance navigation systems.  Inertial guidance systems are already in use in components of aircraft and, ironically, satellites.  They are systems that can run independent of a base station and yet provide a precise geographic location.

Inertial guidance is a more expensive option than GPS for some systems.  But its ability to operate independently from satellites could hold the answer to the FAA's NextGen and other satellite-dependent geographic-based systems. 

Something to ponder.

40 Years Ago Today. . .

. . . President Richard Nixon was aboard Air Force One when it landed in China.

His historic visit to Communist China began February 21, 1972. Who could have thought what was begun then?

See the National Archive photo of Air Force One landing flanked by the Red Army.

Fair Trade With China

One proposed it. The other backed it.

Both of Ohio's U.S. Senators are pushing a bill to impose trade sanctions on China if the Chinese government won't halt unfair trade practices. The Dispatch reports on the surprise backing by Senator Portman to a bill proposed by Senator Brown.

Free trade without fair trade is no trade at all. Best of luck, Senators.

Company Announces China Manufacturing Plant, Stock Dips Sharply

Until this hypothetical headline as the title of this blog becomes more often real, offshoring of manufacturing jobs will continue.

Some haven't gotten the memo, yet.

Joel Kotkin, and others, have been pointing out the reasons why investment in U.S.-based manufacturing makes more sense. His demographics-driven story is a good one that I wish more people were hearing and heeding.

However, Wall Street hasn't quite woken up yet to how bad any manufacturing investment outside the U.S. will be in coming years. Until they do, we have to be preparing and waiting.

Mexico Manufacturing Mucho Buscar

First I heard it on Lou Dobbs on the radio.  Then, I read it in this article from St. Louis Today.

Mexico is growing its manufacturing sector and growing its economy at a pace ahead of the U.S. and ahead of economists' expectations.

Meanwhile, China is seeing double digit inflation on labor costs and predictions of a Chinese real estate "bubble" are becoming more and more commonplace now too.

It would seem Mexico is capturing some of the spin off that China used to get.  And might be capturing some that could have come back to the U.S.  Stay tuned.

China Making Foreign Direct Investment?

At a recent economic development conference I attended, one person told me that West Lafayette, Indiana had seen capital investment from at least one Chinese company there.

The person saying this didn't say the company name, but stated it with credibility nonetheless.

The person added that nervousness in all of China about their future is making the U.S. a "hedge" location for such firms.  Makes sense.

Also, it is becoming a bit of a status symbol for a Chinese company to invest in the United States.  Makes sense too.

The companies also tend to like being closer to their U.S. suppliers.  Again, makes sense to me.

Will we see more of it? 

If this anecodtal story is an indicator, and I hopeful it is, then the answer is, "Yes."

Go back thirty years, when Japan was beginning to notice the shrinking of their working-age popultion, these same things could have been said of Japanese firms.  Japanese foreign direct investment in the U.S. is strong and has been for some time now.

Given the same issue of production age population shortages triggering inflation, China may be on the same track.

China Labor Shortage is Reason to Invest in U.S.

United Nations population predictions at China-profile.com

We've all been conditioned to fear China as a competitor against the U.S. for its growing manufacturing prowess and production abilities fueled by a 1.3 billion population.

Much time has been spent looking at the recent past in China as a predictor of the near future there.  Wall Street followed those predictions and has invested heavily in manufacturing in China.

Now this.

The Wall Street Journal reported on China's labor shortage issue this week.   The issue is gaining steam out there as if it were new news.

It should be of no surprise.  China's shortage of production-age population has been a demographic fact looming large for some time.   The United Nations' population predictions have shown it coming.

The fear of inflation was the focus issue of the report.  Inflation is a legitimate fear, but that's not the point. 

The focus could just have easily been on what it means for manufacturing in the U.S.  The issue is whether Wall Street will see China's growing labor shortage for what it is--a reason to invest in manufacturing in the U.S. instead.

Reshoring: Trend or Not?

I recently took part in a multi-state discussion via conference call on the concept of reshoring.  It's sort of the opposite of off-shoring.  The term implies U.S.-based manufacturers who took production work outside of the U.S. bringing it back home.

Much of the evidence that this is a trend is still very much anecdotal.  Everyone who chimed in and, presumably those that were on the call but didn't chime in, could think of one or more example, but none could confirm it was, indeed, a trend.

I'd like to think it could be a trend in the making.

For 25+ years, one almost never heard of a U.S. company choosing Germany or Japan as a place to take manufacturing for return of the product to the U.S.

In part, I'd say that's because population demographics showed a predictable decline in population in the those nations.  Not surprisingly, in fact, it was Germany and Japan that were choosing to bring production to the U.S. instead.

Could the same be true of China some day soon?  Yes.

With UN predictions of a decline in population hitting there in less than 25 years, it could be.

To me, that's the easiest predictor that reshoring is more than just a collection of stories and, in fact, a trend.

It's also a predictor that Chinese companies will be doing what Japanese and German manufacturers did years ago too--look to move manufacturing to the U.S. with foreign direct investment.  That's a pretty darn good trend too.

Manufacturing Rebound

Who said manufacturing is dead?

Not Jack Schultz.  The author of BoomtownUSA is a frequent speaker with NAIOP, the nation's trade group for commercial and industrial developers.  He presented a webinar entitled "Manufacturing Rebound" last week to NAIOP's membership.  It's available online at http://bit.ly/eL93Z5.

Yesterday, along with a link to his webinar presentation, he sent this Twitter message:  "USA still #1 mfg in world with 22% of market. China #2. Record production in 2008! Who would have thought?"

The number one part is no surprise.  The U.S. is so far above its competition for GDP that any idea of being toppled from #1 is far fetched.
 
Market share isn't either.  The U.S. came into this recession with 21% of the world market share.  That is, more than one out of every five dollars worth of manufacturing is done in the U.S.  That number has been steady and many predict it to rise.
 
China recently passed Japan by in GDP, but that's no surprise either. 
 
The record production in 2008 part is most interesting.  Now, that's something to really write about.
 
Schultz's webinar showed a net gain in manufacturing jobs in 2010 is at 127,000. 
 
More proof.  U.S. manufacturing is on the rebound.