The Washington Post looks at what happens when the U.S. actually fights low-priced Chinese imports with tariffs: The factories move to Vietnam. It’s an interesting angle for a story, but as with the paper’s story last week on manufacturing jobs returning to the U.S., I wanted more.
Six years ago, the Commerce Department imposed tariffs of 7 percent and up on Chinese bedroom furniture after finding that the Chinese were dumping those products here at artificially low prices. By last year, Chinese imports in the market had plunged to $691 million— less than half the inflation-adusted level of 2004.
Alas, imports from Vietnam have more than made up the difference, and American furniture-making jobs have been cut in half in those six years, the Post reports.
But as with many such trade stories, there’s a big hole here: How much cheaper is it to make furniture overseas than in the U.S.? The only data the Post reports is wages:
Furniture workers in Dongguan, a throbbing industrial city near Hong Kong, earn about $170 a month, compared with less than $80 in Vietnam. Their American counterparts make about $12 an hour.
The Post should use apples-to-apples here, rather than giving us monthly Asian wages versus hourly American wages. Assuming a forty-hour week, twelve bucks an hour works out to $2,000 a month for furniture-plant workers in the U.S. Conversely, Chinese workers, assuming a 50-hour week, make 82 cents an hour, while Vietnamese ones make a whopping thirty-eight cents an hour.
And labor costs are only a part of the end cost of a product. In furniture, for instance, labor accounts for roughly is about 15 percent of the cost of building it (not including big costs like marketing and shipping). How much more does it cost to build a couch in the U.S. than it does to build it overseas? How much more does it cost after you include things like shipping?
Nor are we told why we have tariffs on Chinese imports but not Vietnamese ones. Why the difference? We also don’t get any information on why the tariffs target China’s bedroom furniture exports but not other kinds.
The most interesting part of this story is this, but even it needed to be fleshed out more:
The only Americans getting more work as a result of the tariffs are Washington lawyers, who have been hired by both U.S. and Chinese companies. Their work includes haggling each year over private “settlement” payments that Chinese manufacturers denounce as a “protection racket.”
Fearful of having their tariff rates jacked up, many Chinese furniture makers pay cash to their American competitors, who have the right to ask the Commerce Department to review the duties of individual companies. Those who cough up get dropped from the review list.
That sounds like bribery to me. Why isn’t it? Doesn’t that deserve more explanation than this?
How much gets paid in “settlements” each year depends on negotiations with Washington lawyer Joseph Dorn, who represents American furniture makers who first petitioned for the anti-dumping tariffs. Dorn said, “It is wrong for Chinese companies to criticize” the practice, as they “came up with the idea” and “voluntarily agreed” to pay.
I really like the idea behind today’s story and the one I wrote about last week. But they both come up a little bit short.