Sunday’s Washington Post had an article by one Anne Dumas that’s been blogged here and there, provocatively titled What’s American and Envied by France?. It starts with a rather shocking assertion that has, unsurprisingly, been quoted in a lot of the bloggage:
[N]ot a single enterprise founded here in the past 40 years has managed to break into the ranks of the 25 biggest French companies. By comparison, 19 of today’s 25 largest U.S. companies didn’t exist four decades ago. That’s why France is looking to the United States for lessons.
You know I’m sure most of you think my constant references to Argentina in the context of Italy’s economic problems is troubling, possibly even irritating. You may well be right. I have to say that I followed Argentina steadily from 1998, waiting to see the inevitable happen. The principal problem was, lets be clear, the 1:1 dollar peg. This was the epoch of the internet/ICT boom, and a rapidly rising dollar. It’s not clear to me at all that had Argentina pegged to the dollar in 2002 it would have had the same problems so quickly. One of the problems with being attached to a rapidly rising currency is that your imports get cheaper, and your exports dearer.
Now for an apochryphal story. Late in the crisis, before the geyser finally blew, back in early December 2001, a friend of mine visited Argentina. Seeing some nice shoes in a shop window he entered the shop (you will remember Argentina was famous for its leather products: all those cows). On asking where the leather came from, he was informed ‘it’s from Brazil, Argentinian leather is too expensive’. One month later it was all over bar the shouting. Well….. Continue reading →
China is getting into car manufacture in a big way, but before going further with this, let me sidetrack you to another article in today’s FT. Here you will find two interesting details. Firstly, according to Arthur Kroeber, of China Economic Quarterly, ?Since 2003, China has gone from being a net importer of capital goods to being a net exporter”. I’m still loking for some confirmation of this, but if true, it is very significant. The other detail: overcapacity means there is a continuing price war in China, and factory gate prices are falling. This point needs to be borne in mind by all those who imagine a rise in the value of the Renminbi would produce a comparative increase in ‘mark to market’ prices for consumers. I’m with Morgan Stanley’s Andy Xie here, overcapacity is likely to be such that the ‘pass through’ rate would be minimal, most of the on-costs being absorbed by an ever more deflationary environment in China.
Interestingly enough, Jean Claude Trichet gave three arguments, at the end of his press conference yesterday, in order to justify the urgent necessity for the Lisbon Agenda: ageing, technological changes, and growing global competition (or labour arbitrage in Stephen Roach’s language). I couldn’t agree more.
Now for the cars. Yale Global has reproduced an interesantissimo supplement from the FT:
Automakers may see China as a growing market, but soon they may face unexpected competition from a number of manufacturers who are seeking to export to the West, as well. Several Chinese companies have already begun a trial run in the Middle East to prepare for the US market, the goal of more than two decades of attempts to build a competitive car industry. The Chinese companies will encounter numerous obstacles and opponents ? including the multinational companies that currently dominate the global markets ? but if successful, they could reshape the auto industry. Because the economies of countries like the US and Germany depend heavily on the auto industry, the implications of such a move are substantial. How will the West respond?
First a bit of ‘breaking news’ for German readers: the main factor which has lead to the massive round of cost cutting and staff reductions in Germany has not been the activity of a small group of hedge funds, the main culprit, let’s get it out of the cupboard, has been the high euro.
Whilst the contents of G7 meetings are never formally disclosed, it has been a more or less open secret that for some time now that the focus of recent meetings has been on how to overcome perceived imbalances in the global economy, and in particular how to force through ‘structural reforms’ in countries like Germany and Japan where such reforms are enormously politically unpopular. So the structural reforms have been pushed via the indirect route: making them virually inevitable due to cost pressures in export dependent economies. Continue reading →
The Financial Times is reporting that all senior executives of the Yukos oil company have left Russia. The FT suggests they fear for their safety amid a flurry of arrest and search warrants issued by Russian prosecutors for oil company managers.
?There is not a single member of the management board left in Russia at the moment,? a person familiar with the situation said on Wednesday. Yukos, which has been crippled by tax claims of over $20bn (?15bn) and faces the forced sale of its main production asset, is now managed by remote control, according to the person.
Source: Financial Times
Well, well, this was hardly unexpected. In fact the reality may well be that this time there is plenty of smoke but no fire, since Siemens has announced it has no concrete plans to move 10,000 jobs abroad. Indeed much of the noise at present may emanate from a threat to move as a negotiating posture in order to try and force changes. But behind this the underlying reality is that the problem is coming. Not only is Germany having a ‘job-loss’ recovery there is good reason to doubt whether it is having a recovery at all. And of course the main course may well be yet to be served since many of the jobs threatening to relocate seem to be in the industrial sector, whilst just round the corner the high-end services issue is surely coming. Still there is one difference with the US: the headlines are not being made by an opposition candidate talking about Benedict Arnold CEO’s, but by a Chamber of Commerce head who seems to be saying he’s Benedict Arnold and proud of it. Continue reading →
South Korean manufacturing giant Hyundai has picked Slovakia as the site for a new $870m (?466m) car plant, one of the biggest deals in the car sector this year. The factory, which will open in 2006, is intended to produce up to 200,000 vehicles a year under Hyundai’s Kia brand. The north Slovak city of Zilina beat a Polish location in what had been a long-running contest to get the plant. Both countries offered incentives for the investment, but Slovakia boasts slightly lower costs for manufacturers. In fact Slovakia has arguably the lowest business cost base of any of this year’s new EU members, and enjoys a strategic location on the border with Austria. All of which means that it is rapidly converting itself into an auto manufacturing hub since this is the second big car project that Poland has recently lost to Slovakia: last year, France’s PSA Peugeot Citroen said labour costs had persuaded it to pick Slovakia for a new plant roughly the same size as Kia’s.
This of course is neither outsourcing, nor is it job-migration. But it certainly is a news item which doesn’t go down too well here in Spain, which feels it is rapidly losing its pride of place as the European car components centre. Continue reading →
“A sad day for trade relations between the US and Europe”. This is how John Disharoon, vice president of the trade committee at the American chamber of commerce to the EU described the decision by the European Union to begin imposing trade sanctions on US goods as of today. Of course, the arguments about why this measure is totally justified (or conversly totally un-justified) will be legion. However, at the end of the day, I can’t help agreeing with the above-mentioned comment. With all the problems we face out there in front of us, with all the dangers of a renascent protectionism which we can clearly see inside the US itself, this, it seems to me, is the last thing we need right now. It wreaks of the worst kind of logic of bureaucratic decision making. Continue reading →
Actually just after my Chinese visitor dropped by I received a Bulgarian one, my former ‘research assistant’, young Bulgarian anthropologist Yassen Bosev. And what did Yassen want? To tell me to Forget India, Let’s Go To Bulgaria. Only trouble was, I had some bad news for him: India’s minister of Disininvestment and Technology, Arun Shourie, already got there first. Why does everyone think Indian president Kalaam was in Bulgaria on his first overseas visit late last year? Continue reading →