Thursday, June 10, 2010

Press Briefing

Jan 11, 2010

Palm-Size NMR - The portable but powerful magnet could be used to find archaeological artifacts or to detect contamination in products

An Energy Strategy for Grown-Ups - Wind power is not a realistic substitute for oil

Global Financial Industry Leaders Support Constructive Dialogue to Secure Financial Sector Stability and Economic Growth
The IIF study compares a projected economic growth scenario without the introduction of new bank regulatory reforms with one that sees reforms coming into effect with the capital and liquidity calibration as currently projected. Mr. Sands said, “The analysis suggests that rapid implementation of the Basel Committee proposals would have a significant negative impact on economic growth and job creation. Specifically, in the core G-3 (the United States, the Euro area & Japan), the analysis indicates that GDP by 2015 would be 3% lower than it would otherwise be, which implies under reasonable assumptions, that some 9.7 million fewer jobs would be created over this five year period than would otherwise be the case.

The Gulf Spill and the Limits of Science - TV has fueled unrealistic expectations of a quick fix

How the West Can Help Iran's Green Movement - Please do not barter away our democracy for nuclear weapons negotiations with the current unworthy leaders in Tehran

The Rise of Chinese Labor. WSJ Editorial
Wage hikes are part of a virtuous cycle of development.

The recent strikes at Honda factories in southern China represent another data point in an emerging trend: Cheap labor won't be the source of the Chinese economy's competitive advantage much longer.

The auto maker has caved and given workers a 24% pay increase to restart one assembly line. Foxconn, the electronics producer that has experienced a string of worker suicides, has also announced big raises. This is all part of the virtuous cycle of development: Productivity increases, which drive wages higher, forcing businesses to adjust, leading to more productivity growth.

The supply of Chinese migrant workers from the countryside, once thought to be endless, is running dry, and that is giving workers leverage to demand bigger pay packets. The brief drop-off in orders brought on by the global financial crisis provided a respite, as did a recent drought in southwest China that spurred extra migration to the coastal factory zones. But shoe manufacturers are the canary in the coal mine. An American industry association recently polled its members and found that 88% saw a labor shortage in China, and almost as many had experienced late deliveries as a result.

While higher wage costs could mean more expensive sneakers for consumers and squeezed profit margins for the big brands, it has some silver linings. For instance, tamping down protectionism.

New York Senator Charles Schumer is again threatening to impose punitive tariffs on Chinese goods unless there is progress toward revaluing the yuan. The Senator says that currency manipulation holds down the cost of Chinese labor, at the expense of "millions" of American jobs. If wages rise in southern China regardless of the fixed exchange rate to the dollar, it undercuts the protectionist claims.

Jobs are hardly going to flood back to the U.S. merely because final assembly costs in China rise by 20%—just as they didn't after the yuan appreciated by 21.2% from 2005-08. More likely, some labor-intensive operations will shift to the likes of Vietnam or Bangladesh.

However, rising wages would hasten the long-awaited "rebalancing" of the Chinese economy toward greater consumption. The high savings rate has been a function of profits being reinvested by both private and state-owned companies, not the savings decisions of households, whose income has lagged behind the stunning GDP figures. Government spending and bank lending have been geared toward investment, which remains the main driver of growth. Greater spending power for individual Chinese would make for more sustainable growth and also encourage imports, lessening the trade surpluses that cause tension with the U.S.

Some investors may question to what extent Beijing is encouraging workers to be more assertive in demanding higher wages from foreign companies to favor local producers, as competition for the domestic market heats up. However, the trends that are making labor more costly will ultimately force all employers to adjust, including less efficient state-owned enterprises.

No doubt the government would prefer that foreign firms go first, which is reflected in the fact that state-owned media have been allowed some freedom to report on the Honda strikes. But as China leaves behind the era of cheap labor, the quality of management will become ever more critical to success in the marketplace. That should favor foreign companies honed by global competition, and drive China's next round of state-owned-enterprise reform.

Reckless Endangerment - The Senate votes for the EPA, but only barely

The White House Blog - Saving Taxpayer Dollars by Streamlining and Modernizing Government

How the White House is Making Oil Recovery Harder

Open Skies Treaty Remains Vital Instrument for Cooperation, Transparency. By Rose E. Gottemoeller, Assistant Secretary of State for the Bureau of Verification, Compliance, and Implementation. Also served as the head of the U.S. delegation and Chair of the 2010 Review Conference for the Treaty on Open Skies.

Farewell, Medicare Advantage - Democrats strike up the funeral parade for private insurance options

The iPhone, Net Neutrality and the FCC - Regulatory uncertainty is spoiling the rollout of Steve Jobs's latest inspirations. There's a better way to spur broadband competition.

Success with 'cisgenics' in forestry offers new tools for biotechnology

Iran and the 'Freedom Recession' - Facebook had no answer to the pro-regime vigilantes who ruled the streets. And the U.S. president, who might have helped, stood aside.

The Ongoing Administration-Wide Response to the Deepwater BP Oil Spill: June 8, 2010

How Not to Spur Credit-Ratings Competition - Europe would rather attack the messengers than address overspending and stagnation