Monday, November 9, 2015
TWIF Flattener #6 - Offshoring
Use one of the current events sources linked at http://svhs-hwc-spring-2016.blogspot.com/2015/11/approved-sources-for-twif-current.html to find a recent news article that relates to, supports, or refutes Friedman's assertion that offshoring was a "flattener." Your comment should include the title of the news article, a link to the article, and a summary of the article including an explanation of how the article relates to this point. Don't forget to check your rubric for evaluation criteria!
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Title: China’s Factory Activity Shrinks for a Fifth Month
ReplyDeleteAuthor: Reuters
Source: The New York Times
Link: http://www.nytimes.com/reuters/2015/12/31/business/31reuters-china-economy-pmi-factory.html?ref=international
Summary:
The article discusses how China’s factory productions have decreased for the fifth month in a row. The article states China now has excess manufacturing capacity. In addition, China’s export orders have decreased for fifteen straight months. Contrastingly, China’s services sector continues to grow.
The article exposes the change over the past ten years from when the book was first published in 2005 to today. Thomas Friedman explores the idea that in order to succeed in the “new” world, businesses should offshore their production to China. This belief appeared correct in 2005. However, today China has reached a point where this is no longer as definitive due to China’s over capacity.
Title: China warns WTO its cheap exports will soon be harder to resist
ReplyDeleteLink: http://www.reuters.com/article/us-china-trade-idUSKCN0T02LB20151111
Summary: This article talks about the Chinese and how they have recently joined the World Trade Organization and are already complaining to other countries that their prices for goods are “unfairly cheap”. The articles goes on the explain how the Chinese seems to be “attracting complaints” from envoys and representatives globally. Also, the articles includes instances where “anti-dumping actions” have been placed on Chinese products such as solar power objects and food ingredients. Parts of this article are supporting Thomas Friedman in The World is Flat. For instance, Friedman writes that “[America] ‘will suffer a loss’” if China continues to play such a dominant role in the World Trade Organization. This article reinforces Friedman’s claim when it says that the products that are “frequently levied” are China’s which is not benefitting America whatsoever, and actually making it suffer.
Article Title: Coming home
ReplyDeleteLink: http://www.economist.com/news/special-report/21569570-growing-number-american-companies-are-moving-their-manufacturing-back-united
This article explains some of the many reasons that some of the largest businesses are beginning to move their manufacturing sites back into the United States. Thomas Friedman explains that most companies outsourced their manufacturing because of how much cheaper it was to make and import items. He is correct about this, but I do not believe that he foresaw a wage increase in China, which is now causing a few companies to "reshore". In addition to wage increases, the companies that reshored also did so because they felt that paying slightly more for manufacturing in America would be worth waiting far less time to receive products overseas. An incentive that is unrelated to costs is the increased publicity from the media. The companies often see reshoring as; "a way of looking after the firm’s reputation as well as bringing direct business benefits," because many people prefer when companies manufacture and provide jobs in America.
Title: Here, there and everywhere
ReplyDeleteSource: The Economist
Link: http://www.economist.com/news/special-report/21569572-after-decades-sending-work-across-world-companies-are-rethinking-their-offshoring
Summary: This article informs the reader that the United States will begin to manufacture computers again its own soil. Several reasons for this change are stated, with the most important being that the wages in countries such as China and India (countries that the United States often offshore in) are increasing, while the wages in the United States have remained stagnant. As Friedman explains in "The World is Flat", the sole reason that countries offshore their manufacturing to foreign nations is to take advantage of the cheaper wages and production costs. Based on this article, Friedman's assertions are correct. Since the wages in China rose (which meant an increase in labor and manufacturing costs for the United States), the production of certain goods were transferred from China to America due to the fact that the advantageous manufacturing conditions in China were dissipating.
Link: http://www.pri.org/stories/2011-10-20/reversing-offshore-drain-china-may-lose-jobs-us
ReplyDeleteTitle: Reversing the Offshore Drain: China May Lose Jobs to U.S.
Summary: Numerous American companies, such as Solar World, are choosing to open factories inside the country, instead of offshoring them to China; the popular modern day manufacturing strategy. There are several reasons for the recent exodus of American factories from China. First, Chinese factories are not always held to the same standards as products are in the U.S.. This poses significant risk for companies that choose to manufacture there because they could easily encounter costly lawsuits or recalls. Furthermore, the primary reason that so many companies have chosen to offshore their manufacturing centers to China is the cheap labor that such practices offer; however, this benefit is quickly disappearing as "Chinese wages are going up 17 to 20 percent a year." Additionally, offshoring becomes even less economic when you factor in the massive shipping costs that would not be as substantial if products were made in the U.S.. While there are drawbacks to manufacturing in the country, such as a slight increase in the cost of goods, more and more companies are joining the move back to the states as it becomes the most economic strategy.
This news article refutes many of the major points that Friedman makes about offshoring in "The World is Flat." While the novel argues that the competition between offshore factories in China helps to keep labor costs low, the article explains that wages are still increasing, and will eventually catch up to those in America, making offshoring economically detrimental. Also, Friedman states that the products are made the same way in China as they would be in the U.S., but the news release contradicts this idea by pointing out the varying standards of Chinese and American factories.
Very interesting!
DeleteTitle: China’s Fading Factories Weigh on an Already Slowing Economy
ReplyDeleteLink: http://www.nytimes.com/2016/01/20/business/international/china-economy-slowdown.html?action=click&contentCollection=DealBook&module=RelatedCoverage®ion=Marginalia&pgtype=article
Summary: This article states that China is directly effecting the economy. Its factories are closing and people are out out of jobs. Roughly 1/3 of the furniture factories have gone out of business putting a strain on China’s economy. This is considered offshoring because many of these countries are run by foreign businessmen who set up factories in China due to cheap labor. Now that many of these factories are failing it is putting a strain on those businesses who are “Offshoring”. Offshoring is setting up a factory or company in a foreign country to try to lower the production cost, and the cost to pay the workers in order to have a more successful income. This is “flattening” the World by using one of Friedman’s examples of a “Flattener”.
Author: Tereas Tritch
ReplyDeleteTitle: How Romney’s Tax Plan Would Encourage Offshoring
Source: http://takingnote.blogs.nytimes.com/2012/11/01/how-romneys-tax-plan-would-encourage-offshoring/
Summary: Mitt Romney's tax proposal states that people who move their companies to another country will avoid being taxed. This is persuading more and more companies to offshore their company to another country. However, current policy states that companies that are offshore must still pay United States taxes, so they are in favor of Romney's tax policy. On the other hand, Obama wanted to keep the current tax policy in tact, where companies still had to pay United States' taxes. This relates to Friedman's arguments in many ways. Friedman explains in this flattener that offshoring is taking a company and moving it to another country for cheaper money, and in the article Chrysler wanted to move production to China. He also says that offshoring will allow many countries to collaborate with each other on certain tasks, which would happen between China and America if Chrysler went through with their plan to move to China.
Title: Corporate Inversion - Moving the Head Office for Tax Purposes
ReplyDeleteLink:http://www.theguardian.com/business/2014/jul/14/corporate-inversion-movinghead-office-tax-purposes
Summary:
This article discusses the pros and cons of offshoring a company’s corporate headquarters for tax benefits. Since the United States has the highest corporate tax rate, businesses move their headquarters, to other countries with lower tax rates. Paying the lower tax rate allows the companies to make higher profits. The companies can still keep their manufacturing facilities and management operations in the original location. All of the money made outside the US can be spent outside the US without spending US taxes. This allows a company to be more profitable by reducing expenses through lower tax rates. However, the negative effect is that money has to stay outside the US, because once you bring it into the US, it gets taxed. The article uses a company called Shire as a good example, to pay less in taxes. Shire first met with resistance to the UK, but laws had changed to allow offshoring.
Title: "The Global Oil Glut is Squeezing the US Shale Industry"
ReplyDeleteLink: http://www.bbc.com/news/business-35355286
Summary: This article overviews the world oil glut. Oil prices have been dropping drastically, and fracking has been the cause of this. Fracking uses fractures in shale rocks to produce more oil than previously available in old well sites. As a result of this the price of a barrel of oil now costs less than $30. Also because of this, many oil companies are going bankrupt and more will come. In the US, oil drilling production is staying high which is causing an oil glut in other foreign companies. In order to keep prices low in the US however, companies need to figure out ways to cut costs so that they can increase the number of projects available. This shows that oil production is a flattener because instead of relying on foreign oil and allowing prices to remain high, the US is creating jobs here and cutting our reliance on foreign oil production. According to Friedman when he wrote his book, industry is going overseas, but today it is coming back to the US.
Title: VW Admits Cheating in the U.S., but Not in Europe
ReplyDeleteLink: http://www.nytimes.com/2016/01/22/business/international/vw-admits-cheating-in-the-us-but-not-in-europe.html?ref=international
Summary: I found an offshoring article that highlights Volkswagen in the U.S. It describes how they operated in the U.S., though sometimes illegally, and how the impacts were unprecedented nonetheless. Volkswagen is a German carmaker, and the article talked about a scandal of how it made its cars in the U.S., opposed to its business operations in Europe as a whole. Offshoring is the process of moving the production capabilities of a company elsewhere, in this, to the U.S. for a larger market. Such relies on a global market for these decisions, a flattened market. Friedman talks about offshoring as a way to save many, but Volkswagen moved closer to the U.S. as a way to target a specific market.
Title:The story so far
ReplyDeleteLink:http://www.economist.com/news/special-report/21569574-offshoring-has-brought-huge-economic-benefits-heavy-political-price-story-so
Summary: The article states that rich corporations like to move their rich factories away from their rich country. Bringing their companies to places like China, where people will work hard for little to no money, creates a great economic boost. They needed to do this to keep their company alive, because other companies had lower prices. Whenever a company had an opportunity to move their factory to a place like China, they would take it.Moving their companies though gave less job opportunities in America, and an immoral reputation. Friedman expresses in his story that companies should offshore to save money, just like companies today are doing.