U.S Manufacturing: U.S. Production Costs Catching Up With China

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Manufacturing in the U.S. has become more competitive over the past decade compared with rivals such as China and Russia. Shown here at workers in an American Apparel garment dye factory in Southgate in 2012. (GARY FRIEDMAN / Los Angeles Times / April 3, 2012)
Another win for The Made in America Movement!  A new report found that U.S. manufacturing in the past decade has become much more competitive compared with low-cost manufacturing rivals.

U.S. factories can make goods at the same cost or even cheaper than those made in Eastern Europe, according to a Boston Consulting Group report on Friday. And it is now less than 5% cheaper to make goods in China compared with the U.S.

Global shifts in manufacturing costs can be seen beyond America’s borders, the report said. Manufacturing in Mexico is more cost effective than in China, for example, while Brazil has become one of the most expensive manufacturing centers in the world.

These kinds of changes have prompted American businesses to rethink their supply chains in the aftermath of the global recession. Faced with rising wages in China and high oil prices, many are reconsidering the appeal of manufacturing close to home.

Wal-Mart Stores Inc. and Apple Inc. are just some of the companies that have committed to manufacturing some of their products in the U.S.

But Hal Sirkin, a coauthor of the BCG report, said many firms are still making production decisions “on the basis of a decades-old worldview that is sorely out of date.”

“They still see North America and western Europe as high cost and Latin America, Eastern Europe and most of Asia — especially China, as low cost,” he said in a Friday statement. “In reality, there are now high- and low-cost countries in nearly every region of the world.”

SOURCE:  LA Times

TPP: What's At Stake With The Trade Deal?

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The Trans-Pacific Partnership (TPP) will cover 40% of global trade

 

It is poised to be the world’s biggest ever free trade deal and possibly its most ambitious. A dozen countries are negotiating the Trans-Pacific Partnership (TPP), which if successful, will account for two-fifths of world trade.
Those countries are the US, Japan, Brunei, Malaysia, Vietnam, Singapore, Australia, New Zealand, Canada, Mexico, Chile and Peru. But will pushing through such a pact prove too gargantuan a task? And will China continue to be left out of talks? Four experts give their views on what’s at stake for the US, Japan, China and Vietnam.
US: ‘Strategically significant’
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President Obama, together with Japanese Prime Minister Shinzo Abe, are the main TPP negotiators

 

Joshua Meltzer, Brookings Institution:

US President Barack Obama’s trip to Asia this week and his meetings with Japanese Prime Minister Shinzo Abe and South Korean President Park Geun-hye present an important opportunity to refocus attention on the TPP.

It is the most significant trade agreement the US is negotiating, representing 40% of world trade and a destination for over 60% of US exports.

As importantly, the TPP is strategically significant as it is the economic dimension of a broader US rebalancing towards Asia.

The two largest economies involved in the TPP are the US and Japan. Their intensive bilateral discussions have been aimed at liberalising each other’s markets for a range of goods in sensitive areas such as agricultural products and cars.
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Joshua Meltzer

 

“It is the most significant trade agreement the US is negotiating”
Successfully resolving US-Japan market access issues will place pressure on other TPP members to liberalise their own sensitive sectors, creating momentum in the negotiations towards a high-standard agreement.

Progress in US-Japan discussions will significantly improve prospects for concluding the TPP. Mr Obama should use his trip to Tokyo this week as an opportunity to push Mr Abe to liberalise faster.

More countries may also potentially join the trade grouping. South Korea is not a TPP member, but Ms Park has indicated the country’s desire to join.

China’s views of the TPP will also be discussed in Tokyo and Seoul. The US has made it clear that China is welcome to join the TPP if it can demonstrate a willingness to live up to the rules being negotiated.

This reflects the strategic dimension of the TPP – to be a template for economic growth in the region.

Japan: ‘Compelling national interest’
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Rice is one of the five “sacred” agricultural products in Japan.

 

Takuji Okubo, Japan Macro Advisors:

Over the last 12 months, most of the sticking points that Japan had against joining the TPP seem to have been resolved.

On the five so-called “sacred” agricultural products, the US has already agreed to let Japan keep its tariff on rice, wheat and sugar in exchange for Japan taking non-tariff measures to increase the imported quantities. On beef, Japan seems to have gotten away by agreeing to lower tariffs by 9% in the distant future. Negotiations are still ongoing about the tax restrictions on pork.

The domestic political climate also favours Mr Abe. The rival opposition party, the Democratic Party of Japan, promoted the TPP while it was in power. Among major opposition parties, the Japanese Communist Party is the only one who has been consistently against the TPP.

According to a poll by Japan’s public broadcaster NHK, 31% of people supported joining the TPP, while 14% were against it and 45% said they were indifferent.
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Takuji Okubo

 

“Is the TPP beneficial for Japan in the first place? From an economic point of view, there is no room for doubt”
Is the TPP beneficial for Japan in the first place? From an economic point of view, there is no room for doubt.

Japan’s government estimates the economy will expand by 0.66% as a result of the elimination of tariffs. When we include non-tariff deregulation, the economic benefit will be much larger, probably to the tune of 2% to GDP.

Beyond economic pluses and minuses, the TPP brings forth a much broader and compelling national interest as far as Japan is concerned. With geo-political pressure from China intensifying, it is also in Japan’s interest to solidify its alliance with the US and other Asia-Pacific nations.

While I believe any political arrangement to isolate China would be neither wise nor feasible, a strong economic alliance among Asian countries would be a good bargaining chip to convince China towards a friendlier and mutually beneficial relationship with Japan.

Japan should and is ready to embrace the TPP.

China: ‘Reputational benefits’
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China is in the middle of an ambitious programme of economic reform.

 

Brian Jackson, IHS Global Insight:

China stands to gain considerably by joining the TPP. Most immediately, it would add China to a growing coalition of countries co-operating to increase trade and investment across dimensions that have been frustrated in traditional multilateral forums.

Moreover, joining negotiations with high ambitions provides China greater scope for defining its own form of participation than abstaining and joining later, after an agreement is reached by earlier members.

An omission as notable as China’s weakens the total benefits of any agreement reached. In addition to helping the TPP build momentum, Beijing throwing its weight behind the TPP would also help frame China as a meaningful advocate for reform and positive change.

Over the past few years economic growth in China has slowed by about one-quarter as debt ballooned.
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Brian Jackson

 

“China joining the TPP would offer immediate reputational benefits, and plant the seeds for boosted economic activity”
China’s new leadership has correctly laid out an ambitious reform agenda to spur the economic restructuring necessary to secure another decade or more of growth, although implementing those lofty ideals is not guaranteed.

The TPP’s focus on services, investment and government procurement, among other trade issues, would dovetail nicely into China’s current efforts to reform its economy. This includes managing local government debt while growing social services offered to a larger share of rural-urban migrants.

China joining the TPP would offer immediate reputational benefits, and plant the seeds for boosted economic activity once an agreement is reached.

Given China’s ambitions, abstaining from the TPP would not only be a conspicuous omission, it could also sow the seeds for slower investment and services trade activity in the future, given stronger policy incentives elsewhere.

Vietnam: ‘A clear winner’
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Vietnam is already the second largest exporter of clothing to the US.

 

Jack Sheehan, DFDL Legal and Tax Services:

Vietnam is set to gain the most from the TPP due to the potential for a greater share of the apparel and footwear market, particularly in the US and Japan.

In 2012, Vietnam exported almost $7bn (£4.2bn) worth of apparel to the US, which accounted for 34% of US apparel imports. Vietnam also exported $2.4bn worth of footwear.

The TPP will allow Vietnam to export apparel to the US at a 0% tariff rate, which will make Vietnamese exports even more competitive.

Vietnam enjoys several competitive advantages, such as low labor costs, and benefits from being closer in proximity to major textile exporters China and South Korea. It also enjoys strong government support such as subsidies on financing, energy and trade promotion.
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Jack Sheehan

 

“The TPP will allow Vietnam to export apparel to the US at a rate of 0%, which will make Vietnamese exports even more competitive”
However, a key concern for Vietnam is the Rules of Origin (ROO) on apparel. Vietnam is pushing for the more liberal “cut and sew” ROO, which only requires that cutting and sewing of finished products originate in TPP countries.

This is unlike most US free trade agreements which adopt a “yarn-forward rule”, which states that yarns used to make the textile or apparel must have been produced in the TPP country.

The yarn-forward rule benefits the US yarn and fabric industry because it exports yarn and fabrics to TPP countries like Vietnam. The industry accounts for two million jobs in the US.

However, the “yarn-forward rule” does not benefit Vietnam since most of its yarns and fabrics are sourced from China and South Korea, which are non-TPP countries.

There are other challenges that would have an impact on Vietnam. TPP rules relating to state-owned enterprises may affect the government’s dominance in the garment industry.

According to the US Congressional Research Service, Vinatex, which is owned by the Vietnam government, reportedly accounts for 40% of apparel production and 60% of textile production.

It remains an open question as to whether the TPP rules will prompt greater privatization of the sector.

SOURCE:  BBC News

Adidas and Nike Supplier Goes on Strike in China, Halting Output

Yue Yuen Industrial Holdings Ltd., the world’s largest branded shoemaker, fell the most in nine months in Hong Kong trading after the company said it plans to increase factory workers’ compensation in a bid to end a strike.
Yue Yuen fell 5 percent, the most since July 2013, to close at HK$24.80, extending the stock’s decline this year to 4.3 percent. The Hang Seng Index has lost 2.5 percent in 2014.

Workers at the shoemaker, a supplier to companies including Adidas AG and Nike Inc. continued to strike for a seventh day, disrupting output, spokesman George Liu said today. Yue Yuen, based in Hong Kong, offered to add a monthly living allowance of 230 yuan ($37) at its factories in southern China starting May 1, Liu said yesterday. It also agreed to bring forward to next month a social-security benefit plan originally scheduled for 2015, he said.

Workers have disrupted production in Yue Yuen’s Dongguan factory complex, which employs more than 40,000 people, since April 14 in a dispute over pay, benefits and the right to pick their own union. More than 50 percent of the workers were on strike today, Liu said. China Labour Watch, which estimated the striking workers at about 30,000, said a small number had returned to work, without quantifying it.

Employees were seen coming to the plant, clocking in and then leaving yesterday. Some workers, who asked not to be identified because they or their family members could lose their jobs, said yesterday that they were still on strike.

Rising CostsThe labor dispute adds challenges to Chinese manufacturers faced with disruptions as wages climb and workers demand better compensation. Rising costs have also prompted some employers to move production abroad.

Employees interviewed at the factory yesterday and on April 19 said the company had failed to agree on demands for more pay, a change in contract status and reimbursement for unpaid benefits contributions. Some demanded no punishment for strikers and the right to elect their own union leaders.

At least 80 percent of the workers won’t take the offer, said Xiang Feng, 28, a worker in the factory’s finance department. The company’s plan to raise monthly contributions for social security would make it compulsory for employees to boost their own share of payments, she said.

“Workers may end up with a take-home salary almost unchanged or maybe even lower than before,” Xiang said.

More DemandsThe strikers expanded demands after an initial dispute over contributions to government-mandated social security and housing benefits for workers. The local government is fully aware and supportive of Yue Yuen’s proposed plan, Liu said.

Monitoring group China Labour Bulletin said on its website strikers at the Dongguan facility numbered at least 10,000, while Yue Yuen said April 16 that more than 1,000 were striking. Wal-Mart Stores Inc. and International Business Machines Corp. faced strikes earlier this year in China by workers demanding better compensation.

China’s wages are set to increase by 10 percent or more in 2014, driving more low-cost manufacturers out of the country and boosting consumption, according to analysts at firms including Bank of America Corp.

Nike has produced more shoes in Vietnam than in China since 2010. Adidas said in 2012 it would close the last factory it owned in China.

Riot PolicePolice with riot gear and dogs were present outside Yue Yuen’s 1.4 million-square-meter (15 million square-foot) Dongguan complex yesterday. Dozens of workers were taken away by police last week, the official Xinhua News Agency reported April 17, without saying why the workers were taken. No one was injured and there were no clashes, Xinhua reported.

Police have told workers not to congregate around the factory, said three workers who asked not be identified because they or their family members could lose their jobs.

Taiwan-based Pou Chen Group, the shoemaker’s parent company, is in discussions with the local government to resolve the striking workers’ concerns and an investigation will be conducted as soon as the strike ends, Adidas China said in an e-mailed statement April 18.

Nike is aware of and concerned by the events and is “continuing to monitor the dialog between factory management and the workers, as well as production at the factory,” the Beaverton, Oregon-based company said by e-mail on April 18.

Operations at a Yue Yuen factory in Jiangxi province in eastern China have returned to normal today after a production disruption, Liu said. Workers began a strike April 18 because they didn’t want to pay social security insurance, he said.

Yue Yuen, which had 423,000 employees as of 2012, was founded in 1988 by Taiwanese owners and has factories in China, Vietnam and Indonesia, according to its website.

SOURCE:  Bloomberg News

Learn How One American Manufacturer Is Fighting to Keep Jobs in the USA

POMONA, CA–(Marketwired – April 04, 2014) – Coleman® Spas is a company that understands the importance of keeping jobs in the United States. Committed to keeping over 200 workers employed, this leading spa manufacturer believes in the American Dream “the opportunity for prosperity, success, and upward social mobility achieved through hard work.” This message ignites drive and determination in the hearts of all who work to keep production going in the Southern California factory each day.
Coleman® is a brand with a strong legacy of innovation and American Tradition determined to do their part in strengthening the economic and social structure of American families. The Coleman® story started over 114 years ago when W.C. Coleman saw a new type of lamplight that burned with a strong, steady white flame. It was unlike anything available at the time. His vision was to bring this new form of light to farms and ranches across America. In that same vein Coleman® Spas is still working to enhance the lives of American people by creating jobs and continuing to be innovative in designing well built products at affordable prices. “Built Strong in America, for America” will resonate through communities across the country as the spa manufacturer spreads their message to dealers and consumers alike; Coleman® Spas is investing in the American economy one spa at a time.

When an American made product is purchased by a consumer it means they have given manufacturers a reason to keep jobs in the USA. Keeping Americans employed means working class families have money for education, homes, and yes home resort items such as spas that were not previously afforded. It is amazing how buying American made products can trigger a positive economic cycle which will eventually have an upward effect on the quality of life for Americans across the nation and it all can be done by purchasing products that are Made in the USA.

Small or large any purchase of products Made in the USA helps a member of an American community flourish. By encouraging consumers to make a conscience decision to buy American made products, Coleman® Spas will help build the economy and rejuvenate the strength and determination of the American spirit.

To learn more about Coleman® Spas visit www.colemanspas.com. Members of the media interested in speaking with a Coleman® Spas representative contact Amy Malone, amalone@colemansale.com or 909-620-0480.

About Coleman® Spas

The Coleman® story began over 114 years ago when W.C. Coleman began manufacturing lanterns in Wichita, Kansas. Since then, Coleman® has built its trusted reputation based on its beliefs that nothing is really sold until it gives 100% satisfaction and that every Coleman® product must be the best of its kind. Customers trust that Coleman® products will provide all the comforts of home on any dark and cool night under the stars. Coleman® has been a respected name in the world of outdoor recreation for decades and has gained a solid reputation with consumers by manufacturing the world’s best camping products.

The same innovation and exploration that ignited Coleman® lanterns has inspired the creation of the Coleman® Spas collection. Coleman® Spas are manufactured in the United States with cutting-edge technology and affordability. Coleman®Rugged Rotomold Spas, Acrylic Spas and Swim Spas are built with quality and can be trusted to last from generation to generation. Buy Coleman® Spas and buy with confidence.

Dam Shame: Hoover’s Workforce Nears Retirement – Gov’t Scrambles To Fill Jobs

WASHINGTON –  More than 80 years ago, during the Great Depression, thousands of unemployed Americans traveled from far and wide to the border of Arizona and Nevada, hoping to land a precious job building and operating one of the nation’s great engineering wonders, the Hoover Dam.
Today, however — even with millions of Americans unable to find a job — that lasting symbol of worker pride and strength no longer is attracting the attention of America’s skilled workforce.

A wave of retirements is about to hit Hoover. Two-fifths of the dam’s current employees will be eligible for retirement in the next five years, leaving the government scrambling to fill 40 upcoming vacancies.

The Interior Department agency that oversees Hoover is moving to fast-track hiring for its department-wide openings. But the dam’s aging workforce, mostly baby boomers closing in on retirement age, are part of a specialized group of hydroelectric engineers and electricians with a skill set not widely taught or available across much of the country, spokeswoman Rose Davis told FoxNews.com.

“It’s an interesting choreography at the dam,” she said, noting the next batch of workers will have to ditch their high-tech training tools and approach fixes using classic engineering techniques.

“It’s hands-on training,” said Davis, with the department’s Bureau of Reclamation. “We teach mechanics and hydro electricians how the dam works. If the signals go off, this is what it means. Do you hear something funny? Do you smell something funny? We teach them to fix generators from the 1930s.”

Hiring at the massive dam-turned-tourist attraction has slowed significantly in recent years, with the biggest blows coming during last year’s partial government shutdown and the sequester — a series of automatic budget cuts that went into effect on March 1, 2013.

The Hoover Dam, located 30 miles southeast of Las Vegas, was constructed in the 1930s and is considered one of the country’s finest engineering and architectural achievements. Located on the border of two states, the structure harnesses the power of the Colorado while creating America’s largest reservoir. It provides billions of kilowatt-hours of hydroelectric power to residents of Nevada, Arizona and California — and the lake supplies water to those states.

Towering at 726 feet high and 1,244 feet long, the dam was one of the largest man-made structures in the world when it was constructed. Contractors were given seven years to construct the 6.6 million-ton barrier. They finished it in five, with a total workforce of 21,000.

But the folks tasked with keeping the site operational today are dwindling – a stark reminder not lost on Interior Secretary Sally Jewell when she visited the area in December.

During a tour of the control center for the Hoover, Parker and Davis dams, Jewell, 58, noticed it was being run by two men – the younger being her age.

“I’d like to say that was a good thing, but it really isn’t very good,” The Las Vegas Review-Journal reported her saying.

Instead, engineers who have retired are now being rehired as consultants to teach a new generation of workers how to handle turbine generators and other equipment crucial to the day-to-day operation.

“The older (worker) had retired and was brought back as what we call a returning annuitant,” Jewell said. “Lives in Alabama. Flies back once a week to take his turn running Hoover Dam.”

At Rowan University in New Jersey, which houses a popular engineering program, spokesman Joe Cardona explained that the Nevada site is “a very niche industry.”

“You are not going to find someone teaching 1930s technology so what’s happening at the Hoover Dam is that they are partnering with local universities in Arizona and Utah to find fits for these spots,” he said.

It’s not to say that the Hoover Dam hasn’t received any upgrades. It has.

Most recently, the government commissioned a new wide-head turbine for the dam’s N8 unit which almost immediately produced a 2 percent efficiency gain. Other improvements include replacing old cast-steel wicket gates with new stainless steel ones that open wider to allow more water in with more force.

Six of the dam’s 17 turbine generators have gotten upgrades since 2005.

But another problem plaguing the Reclamation department is retention.

As of December, 140 of the 800 employees working in the Reclamation’s Lower Colorado Region were eligible to retire in less than five years.

“The millennials are hardest to keep,” Davis said. “We lose a lot of people to the private sector. This includes everyone from human resources to engineers, who may think, ‘I might need to move to the private sector to get my next raise.’”

Some of the engineering jobs — including those in the mechanical, civil and electrical fields — listed under the Bureau of Reclamation on USAJOBS.gov offer salaries exceeding $90,000 for workers with more experience. The jobs, though, can pay as low as roughly $40,000 for those with less experience, depending on the position and location.

Still, Davis said finding workers for the Hoover location – a national landmark only a short drive from Las Vegas – is much easier than filling spots in more remote areas. Next door in California, state officials have been struggling to fill posts and retain workers for the vast State Water Project, a massive water and power system.

Chris McManes, a spokesman for the Institute of Electrical and Electronics Engineers, told FoxNews.com that making sure specialized jobs like the ones at Hoover are backfilled is pivotal.

“When it comes to hydroelectric power generation and power engineering in general, IEEE-USA is concerned that we have an adequate supply of younger electrical engineers ready to fill the jobs of people who are retiring,” he said.

SOURCE:  Fox News