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PostPosted: November 29 18, 10:12 am 
Sucking on the Rally Nipple
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Joined: April 16 06, 6:03 pm
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pioneer98 wrote:
That article is nuts.

Real Wood’s main supplier was a company in Liaoning Province in northern China. Some of its other Chinese suppliers refused to share the cost of the tariff, but the Liaoning company agreed to split the 10 percent tax on one product line, as well as the pending 25 percent step-up. Cobb, though, wasn’t confident the deal was sustainable. There was one factor that might help Real Wood, however. Its main supplier had already shifted some of its production to Cambodia, where labor was even cheaper — and the anti-dumping duty didn’t apply. This early migration put the manufacturer in a good position to rush even more of its operations to Cambodia, Cobb told me. Doing the work in Cambodia, which had carved out an economic zone where many other Chinese companies had moved, meant that China-specific tariffs wouldn’t be levied, even as all the profits would continue to accrue to Chinese companies.

“Everyone speaks Chinese there,” he said. His supplier “sent their skilled managers to Cambodia. There are real job losses going on in China. Our main supplier is going to get as much as he can to Cambodia as soon as possible.”

The notion that jobs being lost in China would somehow magically result in jobs being created in America was risible to Cobb. Making flooring was hard and relatively low-paying. Cobb said he couldn’t find enough local workers for the company’s local affiliated mill as it was, and the cost structure for the products it sold made the economics impossible. Turning lumber into veneers required the quarter-inch-thick planks to be separately tempered, a very labor-intensive process. One of the new veneers Cobb had recently perfected, in collaboration with the Liaoning company, required every plank to be hand finished to make it look as if the wood had been reclaimed from old buildings. Cobb thought it was preposterous to believe that this could be done in the United States for a competitive price. Even if it could, he went on, building a factory in the United States would be not just expensive but extremely risky, given that the tariffs on China could be removed at any time by the president or some future administration. Cobb noted that some of his competitors manufactured engineered hardwood flooring in America through the use of prison labor — an arrangement that illustrated the economic reality of the global market, where inexpensive labor makes high-end flooring affordable.

Nowhere in here does it say what this guy takes in profit. If you took a big chunk of this guy's profit out of the equation, I wonder how competitive the local mill would be.

This reminds me of something a Spanish winemaker told me earlier this year. He said the US puts tariffs on European wines so he cannot ship his wines directly to the US and have them be competitive in the US market. So instead, they ship them to Chile, and from Chile ship them to the US to get around the tariffs.

Tariffs seem like a good idea in a very simple world trading order, but the world commerce is not simple, so all these tariffs do is add costs to everyone involved, producers and consumers. Stupid stuff.

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