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Another trade issue has surfaced in the US, solar panel manfacturers asking for tariffs applied to Chinese imports.

The strange thing is, while US companies complain that Chinese companies are able to sell cheap because of government subsidies, the US companies are also receiving subsidies.

“The methodology of this is not political,” said Frank L. Lavin, a longtime Republican who has held a series of appointments in Republican administrations, including overseeing the antidumping and antisubsidy investigations office when he was the undersecretary of commerce for international trade during President George W. Bush’s second term.

But like many Republicans, Mr. Lavin was critical of the Obama administration for having provided a half-billion dollars in federal credit guarantees to Solyndra, now bankrupt, a California company with an alternative solar energy technaology.

The US government should realize–some day–that imports that are cheap, whether subsidized or not, provide a net gain in welfare to Americans. That is the foundation of free trade theory.


A new desalination plant outside of Tianjin is attracting attention because of the new government support for the project.

There is but one wrinkle in the $4 billion plant: The desalted water costs twice as much to produce as it sells for. Nevertheless, the owner of the complex, a government-run conglomerate called S.D.I.C., is moving to quadruple the plant’s desalinating capacity, making it China’s largest.

“Someone has to lose money,” Guo Qigang, the plant’s general manager, said in a recent interview. “We’re a state-owned corporation, and it’s our social responsibility.”

In some places, this would be economic lunacy. In China, it is economic strategy.

While domestic demand for fresh water is expected to grow, this new industry may also provide fresh water for export. The government’s support is being compared to its support of the solar-panel and wind turbine industries.

“There are large-scale desalination projects centralized all up and down the east coast of China,” ERI’s chief executive officer, Thomas S. Rooney Jr., said in an interview. “Our company has the most advanced technology in the entire desalination industry. And one of the beautiful things about China is that they like to adopt the most advanced technologies.”

“You can either fight them or join them, and our philosophy is that China likely is going to be the next big desalination market,” he added.

I am not sure this is a valid responsibility of government, to subsidize new technologies that do not promise profit. Maybe they do see it as potentially profitable in the future, or perhaps as a needed resource for Chinese society.

Here is an interesting observation–of how Chinese banking works with authoritarian oversight from the government. It may be a model for future reforms in the west, given the problems with banks in the US and Europe these days.

Today, Jiang Jianqing has a somewhat bigger job: running the world’s biggest bank, Industrial and Commercial Bank of China.

But he does the work for an annual salary that might make a hardened socialist nod with approval. He earned $150,000 in 2010, a mere 1.5 percent of Bank of America Corp CEO Brian Moynihan’s estimated $10 million pay last year, and half again smaller than the $20 million Jamie Dimon was paid for running JP Morgan.

One observation is that his salary is much less than in western banks, but there is also the observation that his responsibilities are judged by party members rather shareholders.

As Jiang’s example shows, China’s top bank bosses are a different breed to their Western counterparts. Beneath their coiffured hair and tailored suits, the likes of CCB Chairman Guo Shuqing and ICBC’s Jiang are first and foremost Communist Party members appointed to their jobs by the government.

China’s biggest financial institutions fall under the supervision of the Communist Party, so the bank heads also sit on the party’s Central Committee that is ultimately headed by the country’s President Hu Jintao.

Maybe there is something to be said for banks working for the good of government economic policy. Perhaps the days of a free market in the banking sector are outdated.

Protests in New York are focusing on some political problems that are thought to be responsible–among other things–for greater income disparities in the US.

In its declaration, the three-week-old protest group comes out four-square against foreclosures, executive bonuses, workplace discrimination, politicians beholden to lobbyists, monopoly agriculture, and the sale of personal privacy data. It decries everything from colonialism to “faulty bookkeeping.”

Referred to as Occupy Wall Street, these protests seem long overdue and–unlike some other political movements, like the Tea Party–these focus on issues that really matter both to the economy and a political system that many see as not being representative of anyone but the super-rich.

Two stories today serve as good examples of the negative externalities that may come with development based on trade–external based development.

One is about clothing manufacturers releasing dangerous chemicals into local water supplies. Addidas, Nike, and Li Ning are accused of releasing harmful chemicals into the Yangtze and Pearl rivers.

Another is about Conoco-Phillips and leaking oil in Bohai Bay. They have been ordered to shut-down the pumps.

The 840-square-kilometre (336-square-mile) slick emanating from the oil field in Bohai Bay — which ConocoPhillips operates with China’s state-run oil giant CNOOC — has caused huge anger amid allegations of a cover-up.

On Wednesday, the State Oceanic Administration (SOA) said operations would not be allowed to resume before the source of the spill was fully plugged and “risks eliminated”, as fears over the long-term impact on the environment grow.

“There has been oil seeping continuously into the sea for days from platforms B and C in the Penglai 19-3 oil field and there is still a slick in the surrounding marine areas,” the SOA said in a statement.

An especially interesting story for me because my wife and daughter visited a beach on Bohai Bay just a few days ago. No reports at home about oil slicks, but I guess it might happen.

The interesting observation to make here is how countries are encouraged to sacrifice domestic environment–and maybe public health–in the interest of development.

Greenpeace said eight samples of wastewater discharge from two factories in the Yangtze and Pearl River deltas, identified as suppliers for the brands, contained “a cocktail of hazardous chemicals”.

The Yangtze — China’s longest river — and the Pearl River Delta serve as a source of drinking water for about 67 million people, including those in Hong Kong, according to Greenpeace.

“Our tests of the wastewater found toxic chemicals that have no place in our natural environment,” Greenpeace campaigner Vivien Yau told a news conference in Hong Kong.

It is likely that these companies were facing restrictions that were not not very well enforced. Typically, China is enforcing rules now that some development has occurred.

Today, American business pages are full of reports about the shrinking jobs market in the US. Just when many economists were expecting positive news about employment, unemployment rates have grown back to 9.2%, and that is not including underemployment and the large numbers of people who have dropped out of the workforce.

While you might think the concern should be for the unemployed, the focus of most articles is the negative effect on growth, and the problems it presents for Obama’s re-election.

Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the government’s monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted.

Most analysts are not yet forecasting an outright slide back into recession, but at a time when President Obama and Congress are focused on spending cuts, Europe is in financial crisis and even China’s growth is slowing, there is little expectation of anything other than a prolonged slog for the United States economy.

Recent debates in the US Congress have focused on the huge public debt and how to address it, raise taxes, cut spending, or both. If you are concerned about employment, it does not look like a good time for worrying about debts, but recent political battles have focused on the debt limit and whether to increase it.

Budget strains were evident in the public sector as the federal government slashed 14,000 jobs, and state and local governments cut an additional 25,000. Nearly three-quarters of the job losses at the local level came in education.

Clearly, further cuts in government spending need to balanced by expansion in the private sector. That takes time, and the priorties may be different, but some are still optimistic.

For hopeful signs, some economists pointed to more recent data showing a pickup in retail sales at chain stores and a rise in an index of business hiring. In manufacturing, analysts expect an increase in auto production in the fall, partly because disruptions in supply will have diminished and partly because of built-up consumer demand.

Daniel J. Meckstroth, chief economist of the Manufacturers Alliance, a trade group, said consumers who had been delaying purchases of cars, washing machines, refrigerators and other big equipment that breaks down over time would eventually start buying again as they paid down debts.

“Spending was severely cut during the recession,” Mr. Meckstroth said. “Now, the longer you wait, the more pressure there is to make purchases. You can’t postpone some things indefinitely.”

Others believe this thinking is overly optimistic.

An interesting and disturbing article came out today from Nancy Folbre on Economix. It describes how grants are given to universities–with strings attached–to hire economics professors with views that are consistent with conservative foundations.

No problem with grants to help fund the services of good professors, but when the political views of professors become the condition of hire, academic integrity is lost.

Concerns about this trend are often framed in terms of academic freedom, putting the onus primarily on universities. After all, if they don’t like the strings attached to donations, they can turn them down.

An editorial in the St. Petersburg Times, which recently broke the story about the Koch Foundation’s support for two professorships at Florida State for which it has the power to screen appointments, musters some admirably old-fashioned outrage.

But, as that editorial points out, the issue reaches well beyond principles of academic freedom.

In the marketplace of ideas, people with a lot of money can buy whatever they want, and that’s fine. Unfortunately, they also have the power to influence other people’s ideas in ways that violate principles of justice, undermine democracy and distort the truth.

I am optimistic that the best US universities recognize the poor influence on their curriculums and refuse such grants. Still, there are plenty of colleges and universities hungry for money that I can see them accepting, and apparently that is happening.

What a shame.

Lots of news today about the US Senate hearing on ending tax breaks for US oil companies. This article focuses on one executive’s claim that ending the tax breaks is un-American. Another article says that subsidies for exploration and drilling dates all the way back to 1916.

There is also an explanation of the different ways they measure tax obligations. The companies include local and state taxes, while the Senators are counting only federal taxes.

Just how much do big oil companies pay in taxes?

Exxon Mobil says it pays plenty — more in U.S. taxes than it earned in the United States last year.

Not so, say critics of the oil industry; the Center for American Progress says the oil giant’s effective federal income tax rate is about half the 35 percent standard for U.S. companies. The liberal-leaning think tank, citing Exxon Mobil’s filings with the Securities and Exchange Commission, says the corporation didn’t pay any federal income tax in 2009.

It all depends on how you count.

Exxon Mobil counts everything — not just federal income taxes, but also local property taxes, state taxes, gasoline taxes and payroll taxes. The Center for American Progress (CAP) and other analysts count only the company’s federal corporate income taxes.

“We pay our fair share of taxes,” said Kenneth Cohen, Exxon Mobil’s vice president for public affairs, who in a conference call recently lumped more than $6 of sales, state and local taxes together with every $1 of federal income tax paid in 2010.

But Exxon Mobil’s tax rate is “lower than the average American’s,” Daniel Weiss, an energy expert at CAP, countered in an analysis that put the company’s U.S. federal income tax rate in 2010 at just 17.2 percent.

Of course average Americans also pay state and local taxes. Whatever, it is pretty clear that oil companies–with their high profits–could afford to help with the US deficit better than most.

Unless the US want to continue draining the middle class to support big business and the rich.

Interesting report here on the old US bases in the Philippines, Clark Air Force Base and Subic Bay, a navy base.

Two huge former US military bases have found a new lease on life in post-Cold War Philippines, with budget airlines and cargo ships taking the place of fighter jets and destroyers.

The conversion of Subic Naval Base and Clark Air Base into tax-haven special economic zones nearly two decades ago has drawn a few thousand investors that include shipbuilders, electronic firms, airlines and tour operators.

The transition, however, has not been smooth and the vast areas, each about the size of Singapore, still do not live up to their potential with parts resembling ghost towns, officials involved in running them acknowledge.

But they now employ around 150,000 people, nearly four times the 42,000 locals when US forces gave up what were then their biggest overseas military facilities in 1992, according to Subic’s state-administrator Armand Arreza.

Though not 100% successful because of ongoing economic troubles in the Philippines, they must be happy about kicking out the US. Not only are they creating more jobs, but the work supplements other parts of the Philippine economy, encouraging tourism and manufacturing.

Among the biggest recent investors at Clark are chip-makers Texas Instruments of the United States, which arrived in 2009, and South Korean giant Samsung, which set up operations last year.

The two have so far ploughed 860 million dollars and 135 million dollars respectively out of their initial billion-dollar investment pledges.

Japanese tyre manufacturer Yokohoma, which has been one of the most enduring foreign companies at Clark after arriving in 1996, also has expansion plans.

Meanwhile, regional airline AirAsia is due to make Clark its main Philippine hub in September, joining seven other budget carriers already there.

Over at Subic, Korean shipbuilder Hanjin Heavy Industries has built one of the 10 largest yards in the world which has delivered 20 ships over the past five years.

I first visited Philippines in 1978, working on a merchant ship that was moored in Manila for eight weeks. Never visited Clark, but I did spend one weekend at Subic Bay. The industries being supported by the US presence were bars and prostitution. These days there is still plenty of that around, but no doubt it is positive that there is better diversification.

Today I happened on a great article by Scott Patrick Humphrey. It discusses the connections between big business and the US government, undeniable after reading the article.

Mr. Humphrey has obviously done some research and supports his arguments well. Another myth he dispels is that public employment is responsible for draining public funds and creating public debt.

According to the Current Population Survey-IPUMS by the Economic Policy Institute, the average compensation, including salary and benefits, by education level in the United States breaks down like this: if you have a high school education, in the private sector you make $50,596, in the public sector, $53,880. That is a difference of $3,284 in favor of public workers; a number that seems modest at best. If you have a bachelor’s degree you will garner $91,256 in the private sector and $68,290 in the public sector; a difference of $22, 966 in favor of private sector workers. With a professional degree the private sector worker gets $192,977, while the public sector equivalent gets $121,192, a difference of $71,785. There goes that idea. Yet while we fiddle and fight amongst ourselves, the game is afoot and we’re in the hole from the get-go. When is it enough? But ya know what? “… on average, 54 percent of state and local public sector workers hold at least a four-year degree compared to 35 percent of full-time private sector workers” (Jeffrey H. Keefe, Debunking the Myth of the Overcompensated Public Employee).

Another issue is the disappearance of pensions and health care.

But here are many of the facts that the tea-baggers have never seen, because facts are found in books. Let’s start with pensions: in 1988, 63 percent of workers in large private sector firms participated in defined benefit pension plans; last year it was 30 percent; pensions are disappearing. (BLS, National Compensation Survey: Employee Benefits in the US for firms with more than 100 employees – retirement benefits)

Fewer firms are offering retiree health care benefits. Among firms that had 200 or more employees in 1988, 66 percent offered retirement health care; last year it was 28 percent. Apparently even if you work your whole life with a company, there is no guarantee you will be able to have care during the stage of life when you will need it most. (Kaiser Family Foundation; Employer Health Benefits 2010 Annual Survey)

This–of course–is another way to transfer income away from the middle class to the rich.