Globalisation in BusinessWeek

BusinessWeek has two bloody interesting pieces up on various aspects of globalisation, one American and one Chinese.

First, NAFTA!

… the regional fears Nafta inspired in 1992 have gone global in 2008. In addition to Mexico, most of the world’s dynamic emerging markets, including China, India, and Brazil, have become strong players in the global economic arena. Americans worry about competition from overseas companies and workers from other lands emigrating to the U.S., especially with the economy faltering amid falling home prices, tottering financial markets, and shaky consumer confidence.

The case for freer trade and open markets is overwhelming. Economic evidence and economic history alike support the view that freer trade over time invigorates economic growth by encouraging the spread of new commercial ideas, new technologies, and new ways of organizing everyday life. Consumers enjoy lower prices and greater choice. Competition from overseas rivals encourages corporate efficiency and innovation.

Which is say (in one’s best Mitch Hedberg voice) they’re for it. Diminishing the power of the article somewhat are things like, “give Joe Sixpack credit”. I’m sorry – what?

I imagine, however that, as we move farther into this lunatic’s game called the election, we’re to see a lot more of this. From pols, from pundits, from media generally, from academics. You name it. Expect heat, though – not light.

The Chinese-centred article is similarly bound up in the new world of globalisation.

… many of China’s manufacturers — including Shan Hsing — are undergoing the kind of restructuring that tore through America’s heartland a generation ago. The U.S. housing market, which generated demand for everything from Chinese-made bedroom sets to bathroom fixtures, has plummeted. A new Chinese labor law that took effect on Jan. 1 has significantly raised costs in an already tight labor market. Soaring commodity and energy prices, as well as Beijing’s cancellation of preferential policies for exporters, have hammered manufacturers. The appreciation of the Chinese currency has shrunk already razor-thin margins, pushed thousands of manufacturers to the edge of bankruptcy, and threatened China’s role as the preeminent exporter of low-priced goods.

So new labour laws in China are driving up costs, sending owners to India and God knows where else – this isn’t new. When was Naomi Klein’s No Logo first published? She detailed the Baby-Huey-like migration of multinationals from one Export Processing Zone to the next. Sonia Gandhi was on about this in India 2 years ago.

Chinese policymakers so far profess little concern. The closures are mainly hitting lower-value, labor-intensive exporters that pollute heavily and use energy inefficiently. Beijing now wants cleaner industries that produce higher-quality items for the local market, from cars and planes to biotech products and software.

That emphasis not only helps boost domestic consumption — a key national goal — but also reduces frictions internationally from the ever-swelling trade surplus. “We are not abandoning the [exporters],” said Guangdong Governor Huang Huahua on Mar. 8. “[But] selling domestically is good for the country, good for the collective, and good for the people.”

From an international-macro perspective, this is good news. Slower production/manufacturing means more unemployment in China, which means more pressure from the bottom to do something about government from the top. Who knows? Perhaps China will move even faster to democracy, devolution – all the things we like to think we have. One can only hope.

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