Wed Feb 20, 2013, 02:20 PM
Newsjock (11,733 posts)
US Exec to France: "Keep Your So-Called Workers"
The head of U.S. tire maker Titan launched a vitriolic attack on French productivity after the country's socialist government suggested he buy a tire factory in the north of France.
"How stupid do you think we are?" wrote Maurice Taylor, in a letter to French Industry Minister Arnaud Montebourg, obtained by French business newspaper Les Echos on Wednesday.
... "I have visited that factory a couple of times. The French workforce gets paid high wages, but works only three hours. They get one hour for breaks and lunch, talk for three and work for three hours," he wrote. "I told this to the French union workers to their faces. They told me that's the French way!"
... "Titan is going to buy a Chinese tire company or an Indian one, pay less than one Euro per hour wage and ship all the tires France needs," he wrote. "You can keep the so-called workers. Titan has no interest in the Amiens North factory."
Read more: http://finance.yahoo.com/news/us-exec-france-keep-called-153817339.html
29 replies, 7590 views
US Exec to France: "Keep Your So-Called Workers" (Original post)
|Teamster Jeff||Feb 2013||#10|
|Sen. Walter Sobchak||Feb 2013||#14|
|Gormy Cuss||Feb 2013||#24|
|PD Turk||Feb 2013||#29|
Response to Newsjock (Original post)
Wed Feb 20, 2013, 02:26 PM
dlwickham (3,191 posts)
2. Titan Tires
The Titan Tire Corporation was formed in 1993 by Maurice M. Taylor Jr., the then owner of Titan Wheel, when Titan purchased the Dyneer Corporation, which manufactured various off-road tires. Titan is the third largest manufacturer of off-road tires in North America. They continued expanding their product offering and reach by purchasing the off-road tire assets of Pirelli Armstrong Tire Corporation in 1994. The Titan Tire Corporation was split off as a subsidiary of Titan International (NYSE: TWI) in 1997.
The assets of Fidelity Tire, based in Natchez, Mississippi, was purchased from Bankruptcy Court in 1998, and the company refocused with the sale of its golf-cart, all-terrain vehicle, and lawn tractor tires and facilities in Clinton, Tennessee, and Slinger, Wisconsin to the Carlisle Tire & Wheel Company in 2000.
In 2005, Titan purchased the farm tire business of Goodyear, and continues manufacturing Goodyear agricultural tires under license. This acquisition included the plant in Freeport, Illinois. Titan again expanded in 2006 with the purchase of Continental AG's off-the-road (OTR) tire assets in Bryan, Ohio.
In 2010, Titan purchased the assets of Leavittsburg, Ohio based Denman Tire in bankruptcy court for US$4.4 million. This purchase includes the consumer-related tires (on-road) as well, which Titan is considering to divest.
In November of 2011 Titan Purchased Goodyear's Union City, TN plant four months after Goodyear closed it. It initially will be used for mixing raw materials for other Titan production facilities.
Titan announced that they have purchased the assets of Goodyear's Latin American off-road tire business for US$98.6 million. This includes the plant in Sao Paulo, Brazil, and a licensing agreement that allows Titan to continue manufacturing under the Goodyear brand, similar to its 2005 purchase of Goodyear's US farm tire assets.
Titan has manufactured tires for Caterpillar under the Caterpillar brand since 1999. OEM customers include John Deere, AGCO, Case IH/Case Construction, New Holland, Caterpillar and Kubota.
Titan manufactures under the Titan and Goodyear brands.
at least I know now what NOT to buy from this company
Response to Sancho (Reply #6)
Thu Feb 21, 2013, 01:31 PM
aint_no_life_nowhere (21,925 posts)
25. Michelin and those French unions built the first radial tire
the greatest breakthrough in tire technology. Tires almost never blow out anymore but when I was a kid in the 1950s, my dad was pulling over to replace a bad tire every few thousand miles. That "know how" that the CEO talks about must involve some improvement beyond the radial tire as no one could be that clueless and arrogant, could they?
Response to Newsjock (Original post)
Wed Feb 20, 2013, 02:44 PM
pampango (24,362 posts)
9. Same story - UK Guardian: US v France: where is it best to be an employee - or an employer?
Titan has money and the know-how to produce tyres. What does the crazy union have? It has the French government.
Response to Newsjock (Original post)
Wed Feb 20, 2013, 02:52 PM
AnotherMcIntosh (11,064 posts)
11. "pay less than one Euro per hour wage" -- And he's proud of this?
He's obviously planning to "ship all the tires" America needs after buying "a Chinese tire company or an Indian one."
His insults towards French workers doesn't negate that.
Response to Newsjock (Original post)
Wed Feb 20, 2013, 06:51 PM
DisgustipatedinCA (12,530 posts)
15. France Isn't the Titan CEO's Biggest Problem
I went to Twitter to see what I could find about this loudmouth. Someone linked to this Wall Street Journal article, in which Maurice Taylor whines about the lack of protectionism in the US and in France. In other words, he's a typical Republican hypocrite.
A colorful letter from Maurice Taylor, CEO of tire maker Titan TWI -1.30%, has generated plenty of comment today. The most noted part of the letter is the lively swipes at the French government (“nothing but talk”), French unions (“crazy”) and the French workforce (“gets paid high wages but works only three hours”).
But beyond the critique of France, there is a more interesting subtext to the letter, which hints at a deeper frustration driving Mr Taylor. Governments in France and America, he says, are not doing enough to protect his businesses from low-cost Asian competition.
“The Chinese are shipping tires into France – really all over Europe – and yet you do nothing,” he tells French industry minister Arnaud Montebourg in the letter. China subsidizes its manufacturers, he says, while Western states aren’t fighting back. “The US government is not much better than the French”
Response to Newsjock (Original post)
Wed Feb 20, 2013, 07:34 PM
harmonicon (12,008 posts)
16. So, the point here is - correct me if I'm wrong - that workers shouldn't be treated well.
If it's possible to treat workers well - you know, like human beings - and still make a profit, that's not ok, because you could treat them like shit and make a greater profit.
Response to Newsjock (Original post)
Wed Feb 20, 2013, 08:15 PM
happyslug (14,779 posts)
18. Is Titian actually Anti-union or is Titian demanding that the French Government do something
Last edited Wed Feb 20, 2013, 08:51 PM - Edit history (1)
Here is page one of the letter, the last two paragraph, which are on page two of the letter I had to type in manually, and they are in the excerpt below:
The Second page goes this way:
February 8, 2013
The US government is not that much better then the French. Titan had to pay Millions to Washington Lawyers to sue the Chinese Tire Companies because of their Subsidizing. Titan won. The government collected the duties. We do NOT get the duties, the government does.
Titan is going to buy a Chinese tire company or an Indian one, pay less than one Euro per hour and ship all the tires France needs. You can keep the so-call workers. Titan has no interest in the Amiens-North Factory
Maurice M. Taylor Jr.
Chairmen and CEO
I have read the letter, yes he attacks the Workers and the Union that represent them, but thrust is at the Government and its refusal to either put down the union OR put up protections from foreign imports. Basically he is looking at a situation where, within five years, he will have NO profit margin due to the Chinese and Indian imports. Thus he can NOT continue to pay the Union the Workers are entitled to under the Union Contract AND make a profit for the Chinese and Indian imports will be cheaper.
In short, the French Government and to a lesser extent the Union has to do one of two things, either destroy the Union by massive wage cuts OR restrict imports from law wage countries. France is refusing to do either, and thus Titian can NOT see how it can sell tires made in France at a profit.
The worse part is, while he mentioned the Union, the letter is addressed to the FRENCH GOVERNMENT. Thus the thrust is against the Government and its refusal to decide which way to go. The French Government wants "Free Trade" and it wants "Strong Union" but you can NOT have both. France has has to give up on one. The French Government has refused to make a decision so the market will, and that means the destruction of the French Unions by the destruction of their jobs via cheap imports.
I actually see this as an OFFER, if the French Government wants to take it as one, an offer that he would take over this plant with its Unionized Work Force, if the French Government is willing to put up the import protections needed to keep the plant profitable. If the French Government makes such a decision, even if it means dropping out of GATT, then he would re-think his refusal, but unless the French are willing to do that he will NOT even think about taking over this tire company.
Response to happyslug (Reply #18)
Wed Feb 20, 2013, 08:51 PM
pampango (24,362 posts)
19. Or an industrialist wants tariffs to protect his profits from competition.
Sounds like the reasoning that republicans passed high tariffs in the 1921, 1922 and 1930 at the behest of American corporations. FDR had to undo these high tariffs in the 1930's and pushed for the creation of GATT after WWII to help prevent high tariffs from coming back.
You can have trade and strong unions. It has been true in Europe, Canada and Australia for decades.
An American industrialist coming along and telling the French government that he can't operate under the French system of strong unions and lots of trade is hardly a reason for France to abandon its policies. And if the French really wanted to enact high tariffs they would have elected the far-right National Front in the last election. Higher tariffs and limited immigration were two of the key policies of the National Front. For better or worse, the Socialist party won the election.
Response to pampango (Reply #19)
Thu Feb 21, 2013, 12:56 AM
happyslug (14,779 posts)
20. GATT is a serious of post WWII agreements, FDR had little to do with them
Now, FDR was tied in with the Breton Woods Accords of 1944:
The problem with Breton Woods is that it assumed a situation that was NOT in place in the post war era, thus the Marshall Plan had to be implemented, just to give US Money away to Europe. In the Post WWII era the US was running huge trade surpluses and thus slowly bankruptcy Europe and most of the rest of the World (The Soviet Bloc seems NOT to be affected, but that was due to a refusal to import anything from the US as part of the Cold War then anything to due with actual trade).
Thus massive influx of Money into Europe permitted Europe to turn itself around. Fear of a Communist takeover of any of the NON-Soviet occupied country force the US to encourage not only strong European unions (more to undermine support for Communism then being pro-union) but accepted some very significant trade restrictions (One side affect of VAT taxes for example was to encourage exports and discourage imports, thus the US did NOT adopt a VAT tax for it wanted to encourage imports, and did not object to VATs of other countries even through it encouraged exports).
Once the Marshall Plan had run its course and Western Europe was secure from Communist Take over, the US then started a policy of running a trade deficit to further support Europe. This was complicated by the fact that the US had been the #1 oil exported up to that time and would continue till the late 1950s and remain a net oil exporter till 1970. Thus the 1950 Deficit was NOT driven by oil importation (as has been the case since 1970) but to encourage industrialization of Europe and Japan. Instructions was a US policy and the US was willing to agree to treaties that hurt its ability to export to countries, so that such countries could develop and NOT fall into Communism.
The problem with this policy of agreeing to trade deficits and treaties that were disadvantage to the US in terms of actual trade (but made up for that in expanded support for the US in those same countries based on the export trade to the US) was that if the US had a true trade problem, the only way to correct the problem was to change the whole trade system, not fine tune it. As long as the US was expanding more then it was exporting, trade was NOT a problem. The imports could undermine US prices to a degree, but as long as the US was still the #1 exporter as well as the #1 importer, not a problem. The US in the 1940s, 1950s and into the 1960s accepted these unfair trade treaties as the price of fighting the Cold War.
Old saying in war, countries fight wars, till they go Bankrupt, then they sign peace treaties. Come the 1960s the US was facing some serious problems:
1, The War is Vietnam was costing the Government a lot of Money. This was complicated by the use of a lot of WWII equipment the US still had in storage, but was reaching the end of their service lives. A lot of it was dumped in Vietnam, a lot of it was dump elsewhere, but much of it was just scraped (for example this is when most of the WWII era Essex class Carriers were mothballed and later scrapped). These had to be replaced by much more expensive equipment (Admiral Zumwalt actual proposed the adoption of 30-40 Essex size carriers instead of the plan adopt of the Nimitz size carriers, on the ground 40 carriers would cover more of the ocean then 12 super carriers for about the same price, his plan was shot down).
2. Europe was no longer willing to buy US Tanks and Planes, instead were making their own. For example in the 1950s, Germany, France and Italy all used the M47 and later the M48 series of tanks, but come 1960, instead of adopting the M60 as the replacement for the M48 and M47s, instead build they own national tanks. Similar even occurred with Planes,
3. US cease being a net oil exported and became a net oil importer. In many ways this is the most important part of the crisis of the late 1960s and early 1970s, the US now had to IMPORT oil.
4. The Six day war of 1967 was followed by an Arab Oil Boycott. The US was a net oil exporter so the only effect in the US was higher prices at the pump. In Europe and Japan you had massive lines at gas stations (The US would have similar line after the 1973 Yom Kipper war, when the US was a net oil importer).
5. The Russian under Khrushchev had started a policy of moving away from the massive army Stalin favored to a more balanced, mechanized military force. New Tanks, Mechanized Infantry Fighting vehicles (MICV) and even a real Navy. This occurred as the US was getting even more involved with Vietnam,
6. The Six day war also showed how dependent the US Army in Europe was on Middle East Oil, and thus as a part of the Defense of Europe the US had to be able to defend the Persian Gulf (in many ways the eventual reduction of US forces in Vietnam and then the withdraw of funds for the South Vietnam Government is tied in with the need to protect Persian Gulf Oil. The money, troops and ships to protect the Middle East had to come from some place, and that place was NOT Europe or Korea in the late 1960s. In many ways the US lost Vietnam on the Suez Canal. The US had a choice in between 1967 and 1973, support Israel and re-supply Israel, or save those supplies for Vietnam. The US could not do both and the decision of easy. Vietnam fell).
7, Japan had been a source of Cheap crap (very similar to what is being imported from China today) in the 1950s, but by the 1960s were moving into higher value goods, including high end cameras, Televisions (and later in the late 1970s VCRs), better quality radios etc. By the 1970s Taiwan had moved into the Cheap junk market and Japan had clearly moved into Automobile and other high end good market. US trade law encouraged this. Japanese trade law did not actually prevent US imports, but how business is done in Japan when it comes to getting items to market, was and is almost as good as any tariff. The Japanese Government said it would reduce these non-tariff barriers but never did, for most of them were tied in with the large Japanese Banks who were the main supporters of the Japanese Politicians.
8, The US and its allies had adopted a new method of shipping starting in the late 1950s, but not really into actual use till the 1960s, the Cargo Pallet. Instead of loading items on a truck, taking them to a train, unloading the truck onto the Train, then by train to a port, then unloading the train to a ship, and a reverse once the items crossed the ocean, you loaded the items onto a pallet at your factory and then shipped it to where it was going. These 8 feet by 8 Feet by 40 feet palettes were designed NOT to be opened between the Factory and where they would be sold. These pallets could be moved quite cheaply by cranes from ship to truck to train as needed. This reduced the overall cost of transportation for most items, for the largest cost had been loading and unloading from one mode of transportation to another. This permitted increased trade between nations of goods previously only traded locally due to high cost of packing and unpacking.
The US constant trade deficient and the increase imports from Japan and Western Europe hurt the US, but the real two killers were the War in Vietnam and the US switch from an oil importer to an oil importer. The Vietnam war was like most wars, paid on Government Deficients. The problem is this produced to many dollars. The system that existed from 1945-1965 was based on to few dollars and thus the US trade deficient return dollars overseas where such dollars were in short supplies to pay for imports from the US. The problem by 1965 the US was now exporting more dollars with its trade deficit, then it was taking in with its various exports. The switch in Oil from exporter to imported made this even worse, for most Americans saw gasoline as gasoline not realizing the gasoline in 1965 had been 100% US produced, but by 1973 it was 10% produced overseas.
The switch from an oil exporter to an oil importer was a real killer. 10 Cents of every dollar spent for fuel went over seas (refining cost and fuel taxes were the same if the oil was produced in the US or overseas). When the US became a net oil importer in 1970, Nixon even removed a tariff on imported oil to keep the price of oil low (By 1970 a gallon of gasoline was 35 Cents a gallon, that sounds low, but in 1966 it had been only 25 cents a gallon, this was a 40% increase in the price of oil, It is like $3,59 gallon of gasoline went up $1.45 to $5.19 a gallon today).
Given the US Dollar was fixed to gold at the price of $35 an ounce of gold, something had to give. Nixon was unwilling to withdraw from Vietnam (Something Congress agree with till 1974). Congress was unwilling to have widespread unemployment (something Nixon agreed with). And Europe and Japan were unwilling to renegotiated GATT that they considered to have already been settled, something had to give, thus the problems of the 1970s.
In many ways the problems of the 1970s could be traced in the decision in 1959 to continue a trade deficient, even as price of gold in London reached $40 an ounce. Patches were made to make the system work, but the War on Vietnam, the expansion of the Soviet Military and the US response to that expansion, and the fear that if the trade deficient was reduced to quickly it would lead to a major recession (and this is right after the major recession of 1957, the worse recession between the Great Depression and Reagan's recession of 1982). JFK's decision to reduce the highest rate of income tax from FDR's 91% to 70% (and retaining the 50% long term capital gain deduction) and the subsequent financial deficient did not help reduce the trade deficient.
JFK, LBJ, and then Nixon all refused to address the above. Inflation was getting out of control due to this problem, but Nixon was NOT about to add tariffs to get the trade deficient down for he was a Cold Warrior and one of the price to pay for the Cold War was deficients with our allies. LBJ had put some trade restrictions in ("The Chicken tax") but LBJ wanted his Great Society adopted and thus was NOT willing to sacrifice it on the alter of keeping the Value of the Dollar at $35 an ounce of Gold. Much of the economic problems of the 1970s (and the huge Federal budget deficients starting under Reagan) was how the US "Solved" the problems on the 1960s. At first the US withdrew from Vietnam and reduce spending, then we demanded that our allies reduce exports, then we under cut wages in the US. Reagan started the undercutting wages, thus while the US economy had grown since 1980, wages have been stagnate. Europe kept its wages up, for the system favored them, but what caused the problems for the US in the 1960s, now lead to problems not only in the US, but Europe and Japan. It is call the Triffin Dilemma.
In many ways the present system is much like the US in the 1960s and 1970s, it is a "Triffin Dilemma".
The key to the Triffin Dilemma is that what even country is the source of evey other nation's "Reserve Currency", that country MUST run both a Trade Surplus and a Trade Deficit. The Dilemma is two part
1. It has to run a trade surplus to withdraw extra reserve currency from the international market place or face the possibility that the value of your currency comes to be viewed as over valued and loses its ability to buy things overseas, thus stopping all trade.
2. It has to run a a trade deficient to provide extra reserve currency to other countries to use, or face one's currency becoming so expensive, no one can buy it anymore overseas and all trade stops.
In the 1950s the reserve Currency was the Dollar and it was pegged to $35 an ounce of Gold. The US in the 1940s, 1950s and early 1960s ran trade deficits to supply dollars for use overseas, so such countries could trade between themselves AND with the US.
Come the mid 1960s, the US was running huge budget deficients, building up forces not only in Europe, but in Japan, Korea, Israel and more then any other one stop Vietnam. The US was just dumping dollars onto the world stage. At the same time the US was beginning to IMPORT oil for the first time in its history, thus causing an even larger out flow of dollars from the US. This lead to a surplus of Dollars that had to be withdrawn, but you withdraw excess dollars by going from a trade deficient to a trade surplus.
The problem was the US had entered GATT with the intention to always run a trade deficient, for that was the best way to build up Europe and Japan. Now come the 1960s, the US needed to stop such importation and start to withdraw dollars from the international market place, but Europe and Japan wanted nothing to do with that for both had become dependent on exports to the US as part of their economic recovery from WWII.
Thus the US could NOT withdraw the excess dollars from the world economy unless it adopted Tariffs, and given the Cold War (and the large Communist Parties in France, Greece, Turkey and Italy) the US feared such a Tariff would rip NATO apart and thus NOT an option. The Chicken Tax as an attempt to get Japan and Europe to work together with the US, but it failed for what the US needed Europe and Japan were NOT willing to give. Thus from the 1960s onward you have slow, but steady inflation (yes it went up to 18% under Carter, but that was a temporary push due to the Iranian crisis, the real problem was the steady 4-6 % inflation the US had from the 1960s till the late 1990s).
Now, due to the end of the Cold War, the US was able to reduce its military expenditures (So did Russia and the rest of the World, all to much higher degrees then the US). Due to the fall of the Soviet Union and thus the need to fully man oversea US bases, the US trade deficient even dropped (this was helped by the drop of the price of oil to its lowest price since the 1960s). The Fall of the Soviet Union helped the US in another way, the Russians gobbled up most of the excess US Dollars (as its own economy went from bad to worse) and thus US inflation disappeared for they was no longer any excess dollars in the world.
Come Bush II, he slashed the taxes and cause a large federal budget deficient, and then his wars helped the price of oil to go through the roof and with it the US trade deficient mushroomed again. Putin managed to straighten out the Russia Economy and then started to sell any dollars he collected for gold (Not so much to buy gold, but to sell dollars).
In many ways Putin is betting the US, Japan and Western Europe and entering another Triffin Dilemma, but this time it is NOT just the US, but all of this first world allies. China, India and much of the third world is to the US, Japan and Western Europe, are roughly what Western Europe and Japan was to the US in the 1960s. All three need to keep the Dollar, Euro and Yen up in value by restricting imports, but doing so in such a way as NOT to restrict imports.
Worse, all three are all net oil importers, and all three run deficients with China, India and even Russia (Through with Russia it is mostly energy products).
The problem is China and India both have some severe internal economic problems that only get worse if the amount of exports is NOT expanded. Thus they will be unable to help the US, Japan and the EURO nations to keep imports down. This is very similar to the situation in the 1960s (through at that time it was the US vs Japan and Western Europe, while today it is US, Japan AND Western Europe against China, India and the third world). Something has to give. In the 1960s, tariffs were avoided, but at the cost of a huge cut in wages in terms of percentage of the economy starting under Reagan in the 1980s. The Cold war is over, Al Queda is NOT that big a threat (in fact Al Queda is like the Communist Parties of Italy, France, Greece and Turkey in the 1960s, best undermined by giving them what they want, while friends of the US stay in actual control of each of those countries, i.e. give in to what Al Queda is demanding, but not officially and make sure Al Queda gets no credit).
Thus in many ways what is the problem today, is the same in the 1960s, Japan, Europe and the US has to make a decision, either adopt tariffs and protect domestic industry OR cut wages. The US took almost 20 years to make up its mind, and then more by non-deciding then deciding (remember a decision NOT to make a decision is a decision). We are under that decision today, seeing the 99% slowly lose income. I do not know if Western Europe wants to join in a similar decision, but I suspect Japan will.
The opposite decision, that is to increase tariffs to protect domestic industry (or at least set up a RAPID system of imposing sanctions for subsiding exports) would require ACTION on the part of our Government (and the Governments of Japan and Western Europe).
Brazil, Russia, India and China (BRIC) have entered into agreements using each other currencies in trade between each other, rather then use the US Dollar or the Euro. That is step one is breaking up of GATT.
Please note the above cite is another cite saying the US will have hype inflation soon, I doubt that. the US did NOT have hyper inflation in the 1970s, it will NOT have it today. A Country only has hyperinflation when it has excessive debts in another country's currency not its own currency. The US debts are all in US Dollars thus hyper inflation is NOT a threat, but economic problems like the 1970s and 1980s are more then possible.
The real question is what is the Intentions of each member of the BRICS (the BRICS is a group of people who meet and talk and decide issues between each other then any formal organization)? Is it to break the US? or is it to safeguard themselves? I suspect the later and thus they agreement is not an attack on GATT. On the other hand the mere fact that these nations have decided NOT to use dollars in trade with each other undermines GATT big time. I suspect they see the US, Japan and Western Europe in a new Triffin dilemma, and they want to see what the three do. In the 1960s the fear of the Soviet Union prevented the US from adopting Tariff to protect itself, that threat is long gone. US wages, as a percentage of GDP is the lowest it has been since the 1920s, and any further decline may lead to social unrest (One commentator made a comment that both Occupy Wall street AND the Tea-party shows the US population is in a pre-revolutionary mode, they want CHANGE, they do NOT know what change they want, but they want CHANGE and that is all you need to start a revolution. This demand for change is the product of the decline in income since 1980 and thus anyone who addresses that issue can use this demand for change for some radical action on the part of the people of the US).
Thus to avoid a revolt the US, Western Europe and Japan may impose tariffs in imports, to protect current income and to get income up. This can lead to problems in China and India (like similar tariffs would have caused problems for Japan and Western Europe in the 1960s) which can lead to severe problems in each of those nations (Both have a huge segment of their own population, like segments of the US population in a pre-revolutionary mode) and thus US, Western Europe and Japan imposed tariffs can lead to unrest in China, India and many other third world nations.
People tend to forget the 1930 Tariff, while it made the Depression worse, actually helped the US. i.e. the Depression was made worse in Europe, Japan and the rest of the world, but it made the US better able to deal with the Depression. Thus without the fear of the Soviet Union, I can see increase demand for protectionism, even in the US just to put off any support for a revolution in the US, Japan or Western Europe.
Thus, if you look at things as a whole, the US, Japan and Western Europe are still in the Driver's seat of the world Economy, but they have to make a choice, protect local businesses and thus put up tariffs, OR accept that China and India will subsidize they industry and thus destroy the industries of the US, Japan and Western Europe, leading to lower prices but also lower wages. The US in the 1950s-1980 ended up selecting the later action, for the first option was not acceptable to them given the existence of the Soviet Union. Will the US, Western Europe and Japan make the same decision the US made in the 1960s or will they opt for tariffs? Iceland decided riots were to big a risk, Greece decided riots were acceptable for now. The real Issie what will Europe, Japan and the US do as a whole?
Response to happyslug (Reply #20)
Thu Feb 21, 2013, 09:28 AM
pampango (24,362 posts)
21. GATT was "was built on the Reciprocal Trade Agreements Act of 1934" which FDR pushed through
a Democratic congress.
In the 1940s, working with the British government, the United States developed two innovations to expand and govern trade among nations. These mechanisms were called the General Agreement on Tariffs and Trade (GATT) and the ITO (International Trade Organization). GATT was simply a temporary multilateral agreement designed to provide a framework of rules and a forum to negotiate trade barrier reductions among nations. It was built on the Reciprocal Trade Agreements Act, which allowed the executive branch to negotiate trade agreements, with temporary authority from the Congress.
The ITO, in contrast, set up a code of world trade principles and a formal international institution. ... The ITO represented an internationalization of the view that governments could play a positive role in encouraging international economic growth. It was incredibly comprehensive: including chapters on commercial policy, investment, employment and even business practices (what we call antitrust or competition policies today). The ITO also included a secretariat with the power to arbitrate trade disputes. ...The ITO missed the flurry of support for internationalism that accompanied the end of WWII and which led to the establishment of agencies such as the UN, the IMF and the World Bank. The US Congress never brought membership in the ITO to a vote ...
GATT and the ITO were developed under Democratic presidents and congresses to 'expand and govern trade among nations'. As proposed by FDR and implemented by Truman was a temporary framework to reduce trade barriers. The ITO as envisioned by FDR and negotiated by Truman was to be a stronger trading body than the WTO is today with a strong dispute resolution mechanism removed from the control of national governments, antitrust powers and involvement in national employment and investment policy. Unfortunately republicans took control of the Senate in 1947 and rejected the ITO treaty on national sovereignty grounds.
"Now, FDR was tied in with the Breton Woods Accords of 1944:
"The Conference also proposed the creation of an International Trade Organization (ITO) to establish rules and regulations for international trade. The ITO would have complemented the other two Bretton Woods proposed international bodies: the IMF and the World Bank. The ITO charter was agreed on at the U.N. Conference on Trade and Employment (held in Havana, Cuba, in March 1948), but the charter was not ratified by the U.S. Senate. As a result, the ITO never came into existence.
How the RTAA was different from other trade agreements
Before the RTAA, if Congress wanted to establish a lower tariff for particular imports, it would act unilaterally, taking the foreign country’s tariff rate as fixed. Congress would choose a tariff rate that was either a little higher or lower than the median preferred tariff, depending upon the composition of the Congress. Generally, a Republican controlled Congress would prefer higher tariffs and a Democrat controlled Congress would prefer lower tariffs. Thus, tariffs were chosen based on the domestic politics of the United States. Individual members of Congress were under great pressure from industry lobbyists to raise tariffs to protect them from the negative effects of foreign imports.
After the Civil War, Democrats were generally the party of trade liberalization, while Republicans were generally for higher tariffs. This pattern was clear in congressional votes for tariffs from 1860 until 1930. Democrats were the congressional minority in the majority of Congresses between the Civil War and the election of Roosevelt. During their brief stints in the majority, Democrats passed several tariff reduction bills. Examples include the Wilson-Gorman Act of 1894 and the Underwood Tariff Act of 1913. However, subsequent Republican majorities always undid these unilateral tariff reductions.
By the Great Depression, tariffs were at historic highs. Members of Congress commonly entered in informal quid pro quo agreements where they voted for other members’ preferred tariffs in order to secure support for their own. At no point did anyone take into account the aggregate toll on American consumers or exporters. This practice is commonly referred to as logrolling. President Roosevelt and key members of his administration were intent on stopping this practice.
Democrats voted for trade liberalization far more often than Republicans...
I agree with the background on the reasons that the US promoted the Marshall Plan, strong unions, the VAT and progressive government in general in Europe was out of fear of a communist takeover rather than out of a commitment to strong unions and progressive government per se. (Of course, Democratic administrations could have supported unions and progressivism on principle and Eisenhower was not anti-union like current republicans are.)
It is perhaps ironic that the USSR brought progressive social democracy to the European continent - not directly through military or political victories - but indirectly by scaring the US into supporting strong unions and progressive policies for Europe that have survived the demise of the Soviet Union itself.
You referred several times to GATT as if it still exists. For better or worse it is long gone, replaced by a much stronger organization - the WTO (itself a version of the ITO that Truman negotiated but was repeatedly rejected by a republican Senate).
We probably share some common ground that the importance of the WTO is fading. The current Doha round of negotiations has gone on for 12 years and is going nowhere:
The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001. This was to be an ambitious effort to make globalization more inclusive and help the world's poor, particularly by slashing barriers and subsidies in farming. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.
My reading is that Obama is consistent with Democratic presidents (like Wilson, FDR and Truman) throughout history in favoring low tariffs and (like FDR and Truman) is committed to a multilateral approach to international issues including trade but also climate change and other issues. He is much less of a unilateralist than his republican predecessors and unlikely to go down a "the US can do whatever it wants to do" policy whether that involves higher tariffs or anything else.
But he also sees that the WTO is headed nowhere good with outdated rules and a proven inability to update them. Rather than withdrawing from the WTO (an action favored by much of the republican base and tea party types) he is negotiating two major trade deals with Asia/Australia and Europe to circumvent the WTO while using the WTO to penalize China when possible.
As you say "the US, Japan and Western Europe are still in the Driver's seat of the world Economy". The countries involved in these trade negotiations represent 3/4 of the world economy and trade. (This will not always be true because these same countries represent only about 20% of the world's population.) Obama seems to want to take advantage of this fact to negotiate treaties that will supersede the WTO and make its outdated rules much less important.
Likely components of the administration's economic policy towards China
The first will likely be more complaints about Chinese subsidies and trade practices filed with the WTO, given the president’s campaign promises and his record during his first term. Washington has been relatively successful with such cases in the past, and pursuing multilateral dispute settlements has the added advantage of avoiding a direct bilateral confrontation with China.
The second will be the pursuit of trade agreements that notably do not include China. One of these is the Trans-Pacific Partnership (TPP), a trade agreement among a growing list of nations bordering the Pacific. It is the Obama administration’s avowed aim to construct a TPP with standards so high — especially rules regarding behavior by state-owned enterprises — that China could never join without transforming its economic system. At the very beginning of the negotiation, the United States reminded other members that the U.S. Congress would not accept a TPP without strong labor and environmental measures. Obviously, the United States aims to lower the comparative advantages of developing countries so as to create more job opportunities for itself.
The 2013 launch of a U.S.-European Union free trade negotiation — effectively a Trans-Atlantic Partnership, a bookend for the TPP — primarily reflects majority (58%) sentiment in the United States that increased trade with Europe would be a good thing for the United States. But it can also be seen as an attempt to establish U.S.-European, rather than Chinese, technical and regulatory standards as global business norms.
The Obama administration is unlikely to label China a currency manipulator, which is something Mitt Romney promised he would do on his first day in office. In Obama’s first term, the White House had multiple opportunities to do so and declined, even though the renminbi was weaker against the dollar than it is now.
Obama's policy seems to be that successful negotiation of these trade agreements will change global trading rules to include labor and environmental standards that will favor the US, Europe, Japan and other countries with strong labor and environmental laws to the detriment of low-cost, low-regulation countries. (Of course, the US may have to then upgrade its own labor laws which are the worst in the developed world.)
Thanks for the detailed post, happyslug.
Response to pampango (Reply #21)
Thu Feb 21, 2013, 10:59 AM
happyslug (14,779 posts)
22. The Democratic "opposition" to Tariffs had little to do with Democrats embracing "Free Trade".
From the 1860s to the 1930s, the Democrats wanted tariff lowered, but to bring in more money for the Government. The GOP wanted tariff's so high, that the revenue from the Tariff actually DROPPED. Thus whenever the Democrats controlled Congress (and that was more important then who was President at the time) the Democrats would reduce the Tariff and with the extra money helped Democratic sections of the country (#1 rule in Politics, support your supporters).
The GOP would get elected and raise those tariff to a high amount that the revenue from the tariff actually declined and with in the GOP had to cut Government services.
Now, the above changed in the 1930s. The Democrats had complete control of the House. Senate and the Presidency. The tradition of cutting the tariff with a Democratic Congress continued, but this time without the massive increase in revenue that had been the norm in previous Democratic congresses. This appears mostly due to the Great Depression and the resulting excess dollars in world circulation. People tend to forget the 1920s was a "Boom" time for the US, but the rest of the world never really recovered from the post WWI depression. Various reason for this has been suggested (through not the adoption of Prohibition, which the US adopted in 1919 and the rest of the world did not, but given the GOP tradition of raising tariff so high that revenues declines, which included money for enforcement of prohibition, there is a connection with why Prohibition failed).
The key reason the RTAA was passes was that for the first time in history, the United Kingdom had responded to an American increase in tariff by increasing they own tariff on goods from the US. In many ways this shocked the US, for Britain had NEVER done this before (going back to the US Civil War, every time a recession hit the GOP would get elected and raise the tariff, Britain would complain by do nothing, now for the first time Britain did something, put a tariff on goods imported from the US).
On top of this Latin America had become more and more a US area of economic control, and thus the US wanted to trade with Latin America. Thus RTAA was aimed more at Latin America then Europe but passed due to Britain's act of passing a tariff on US goods (which did NOT affect trade with Canada, did affect trade with British Colonies in the Caribbean). This trade movement, plus the Democratic Party tradition of lower tariff (and the resulting increase in revenue from the tariff which many people wanted in 1934 given the collapse of the banks between 1930 and 1933) let Congress give the President the power to reduce tariff by mutual treaty.
Please note FDR did use RTAA as to Latin America, but was reluctant to do so outside Latin America till WWII. By the end of WWII it was clear a new international economic was needed and thus Breton Woods. The GOP ended up supporting the new Economic System, more due to a fear of Communism then any real change of Dogma. The Dogma of the GOP of 1946 had not really changed, but by 1946 there was no one who had industry standing AND able to export. For example the Soviet Union still had industrial capacity but very limited export ability, Germany, Italy and France had large export facilities but no industry standing. As to Latin America the imports were foods and raw materials, thus nothing to protect from. Thus the 1946 GOP Congress saw no advantages to raising tariffs and worse, former President Herbert Hoover was working with Truman to feed Europe and was facing the same problem he faced in 1919, you had to get Europe on its feet BEFORE the Communists took over on the promises of work and food.
Thus the support for a low tariff among the GOP was still strong till at least the 1950s, and given the complete control of the House by the Democratic Party from 1948 till 1994 this lack of support for low tariff in the GOP, could be and was ignored. By the 1990s it had become GOP dogma that imports was the best way to destroy what remained of the Unions and thus tariffs had no support among the GOP (a secondary line of attack, was by importing, the US need not weaken its environmental laws, while getting the benefits of not have such laws involved in the manufacturing of goods).
As to your last paragraph "change global trading rules to include labor and environmental standards" has technically been pushed by the US, Europe and Japan over the last 20-30 years, but each time been allowed to be ignored. I suspect it will happen again, as it did under Clinton with NAFTA. Every so often you need to take a walk, and the US has been unwilling to do so for fear that other countries would act in their own best interests and against the US best interest. The US may be better off walking away and taking its ball with it, i.e. impose tariffs to reflect the lack of environmental and labor laws with other nations.
Response to happyslug (Reply #22)
Thu Feb 21, 2013, 02:14 PM
pampango (24,362 posts)
26. Republicans did not raise tariffs to starve government. Industry lobbyists wanted profit protection
for their corporations from foreign competition. You are right, though, that lowering tariffs has led to increase tariff revenues. Tariff revenues were at an all time high in 2010 at $25 billion. Of course that is only about 1% of total government revenue, thanks largely to the 16th Amendment and the income tax.
The Hidden Progressive History of Income Tax
The opposition to high tariffs was much, much more widespread than simply from those who wanted an increase in government revenue. After the passage of the 16th Amendment in 1913 tariffs were a smaller and smaller part of government revenues (from 44% in 1913 to 1% today). The high tariffs that republicans enacted in the 1920's were protection for their corporate backers, rather than attempt to starve government since tariffs as a source of revenue were increasing irrelevant by then. And this was less than 10 years after the progressive victory over high tariffs represented by the 16th Amendment.
These days high tariffs seem like a progressive idea to some, but a hundred years ago - when we actually had high tariffs - liberals did not view them that way. Perhaps, as with love, absence makes the heart grow fonder with respect to tariffs.
"People tend to forget the 1920s was a "Boom" time for the US..." They were a boom time but not for everyone. It is true that the GDP increased and Wall Street rose swiftly - at least until 1929, of course - but it is also true that income inequality reached record levels during the 1920's (since surpassed during the Bush years) and unions suffered such that percentage of the work force in unions reached historic lows (since surpassed as well). (Apparently the GOP could kill unions with high tariffs or with low tariffs.) So the 1920's were a 'Boom' time for some but not for many.
These Pacific and Atlantic trade negotiations are a good thing. There are major international trade problems and, as with global problems in general, it is a good idea to negotiate a global solution to them. We are right to be skeptical about the outcome, but liberals should not be afraid to negotiate on this issue or any other.
The reason for some optimism about them is that one of their main goals is to eliminate much of China's trading advantage by crafting standards on labor, the environment, etc. that China will not be able to comply with unless it transforms it society completely. If these standards could be included in WTO rules that would be great, but those negotiations have gone nowhere.
If our goal is not to put labor and environmental regulations into trade agreements, the Pacific negotiations make little sense. We already have 'free trade' agreements with most of the countries involved. Why would we include Canada, Mexico, Australia, Singapore, Chile and others in a trade negotiation, when we already have an agreement with them, unless we were including standards that will make it more difficult for China to compete with countries that have better labor and environmental laws?
And of course our Atlantic trade negotiation is with countries that already have better labor and environmental laws than the US has, so you probably would not apply tariffs on their products anyway ("...impose tariffs to reflect the lack of environmental and labor laws with other nations.")
Indeed, we could 'walk away and take our ball with us'. That is precisely what the republican base here (and far-right parties in Europe like the National Front in France) want to do. They favor the US withdrawing from the UN, the WTO, the IMF, World Bank, Law of the Sea Treaty and about any other international agreement or organization that keeps the US from doing whatever it wants to do whenever it wants to do it. In that way republicans have not changed much over the decades. They kept the US out of the League of Nations after WWI, the International Trade Organization after WWII and the Kyoto Protocol within the last 15 years.
At least since Woodrow Wilson the Democrats have been the party that engages with the world; negotiates disagreements with other countries; and tries to solve global problems by involving as many countries as possible. Republicans have more often been the party of 'cowboy diplomacy' whereby the US can do whatever it wants to do and to hell with the rest of the world. Other countries had better join us or get out of the way.
I do not want the US to "take its ball and go home" on any global issue. I believe in multilateral negotiations on global problems, which lead to international agreements that are effective and enforceable so that countries cannot, after a treaty is agreed to, say "Never mind. We have the 'sovereign right' to pollute, invade, torture or do anything else we want to do. We are a sovereign nation and hereby walk away from any treaty that we previously agreed to."
Response to happyslug (Reply #18)
Thu Feb 21, 2013, 01:04 PM
Gormy Cuss (30,884 posts)
24. IMHO he's tell the French there's no point in trying.
His screed follows a comment that the government would like to open talks with Titan. It's a giant "Hell No!" to the government.