Musk: Tesla will have a factory in China
leftlanenews.com
leftlanenews.com
"The automaker recently announced that import tariffs and transportation costs will push the price of its Model S in China to $121,000, or roughly 50 percent more than the plug-in sedan costs in the U.S."
We'll never hear it mentioned in American news, but we had import tariffs up until the 80s when we adopted supply-side economics as our ideology. We wonder why our manufacturing has all gone overseas, well there is actually a very simple explanation. Other countries still protect their manufacturing with tariffs while we don't. American workers can't compete with countries that have no minimum wage, no environmental protections, and few (if any) anti-corruption laws that are actually enforced. In fact if you go back far enough (and this might appeal to skeptics with a libertarian slant) tariffs were a primary form of taxation before income tax. I wish we could at least have an open debate about bringing some of them back, with projections and an honest analysis of what it would do for American industry. But with corporations seeking ever-lower costs by design, and politicians ramming through the TPP at top speed, I don't see it happening any time soon.
This is going to happen anyway, as China and others can increasingly afford their own cheap goods and don't need to export them to us, and the days of cheap debt are coming to an end very soon. It would just accelerate the erosion of what's left of America's economic fantasy. And none of this even touches on the dumping of US Govt. junk paper by a country like China, which would collapse the economy instantly into either an Argentina / Venezuela style inflation nightmare (as the Fed has to print ever larger sums to keep the government solvent), or a Greece slash & burn scenario.
The euro, pound, franc, and yen would obviously soar in value, so Brussels, London, Bern, and Tokyo would have to go out into the markets to rebalance their currencies. The only practical way to rebalance would be to buy . . . dollars.
So why don’t the Chinese go nuclear? They know that in a short period calm would return to the markets, America’s debt would end up held by its friends, and they would be stuck with a wide variety of assets their managers had shunned in the first place."
G.G. Chang, Forbes OP/ED 10/06/2013
PS4s are a luxury, but when we apply the same logic to necessities then that argument falls on its face fairly quickly.
Tariffs are also susceptible to political wrangling, where taxes are levied selectively.
> PS4s are a luxury, but when we apply the same logic to necessities then that argument falls on its face fairly quickly.
So let's only apply it to non-necessities. We already have higher taxes on some luxuries, what would happen if we implemented them as import tariffs rather than sales tax?
In fact, you can use the tariff to finance the income subsidies, and it will work at some tariff level as long as the right proportion of the market for that good is not receiving the subsidies.
Further, the industry growth prompted by the tariff is likely to disproportionately help those the income subsidy would be targeting. You'll notice the market for unskilled labor in the US is not exactly thriving.
The political economy argument is more compelling, but in practice "free trade" ends up being anything but. International trade agreements usually take the form of market access conditioned on the kinds of regulation friendliest to the most politically influential (~largest) actors. This is how you get, eg, "free trade" agreements that massively strengthen copyright regimes, to the benefit of "original" content producers and the detriment of content remixers and consumers.
Some suspect that Sony is importing at an even higher price than the retail US price. No one knows for sure, but clever US sellers were buying PS4 at full retail price, shipping to Brazil, paying all taxes, and still they were able to sell cheaper than the retail price of the Brazilian PS4.
If Sony produced PS4 in Brazil they would pay 6% taxes instead of the 40% protection tariff. Microsoft (actually Foxconn) is doing exactly that in Brazil and that's why the XBox One is actually cheaper than a PS4.
Sony simply did not want to incur the labor costs and risks associated with investing in the local tech industry. Nothing wrong with that (it's their decision), but they are not being truthful to the local consumer.
[1] (in portuguese) http://info.abril.com.br/games/noticias/2013/10/sony-divulga...
You can't expect them to set up a factory in every single geopolitical location that imposes these rules.
Supply-side economics is a misnomer. Classical economics would be a much more accurate term. It is true that American workers cannot compete with lower costs overseas (though I think the lower costs have more to do with the fact that the US has more alternative means of employment and therefore higher wages). However this is no issue. As a friend of mine always likes to say, trade is like technology: you can think of other countries like a machine where you put in one kind of good (exports) and get back another (imports). So why would you want to impose a special tax on this machine? Economic theory suggests that to do so would be inefficient.
The only valid reason for protectionism is strategic: e.g. having the ability to make things for yourself in case other countries cut off supply. The US is by far the world leader in military technology so I don't think this is an issue.
As far as I can see, Chinese government has been pretty successful using all kinds of economic tools to manage its growth over past 30 years. Import tariffs is one of the tools. I think it would be fair for US to have some tariffs against China to balance the trade. The real problem is such policy has not political appealing at this time. If raising tariffs help future US businesses to compete against China, since such businesses don't exist today, there is no immediate political or economical return, so it is unlikely to happen.
We don't have quite the population of the US, but the potential for solar here is strong too.
Not to mention that Woomera may align with Elon's SpaceX interests.
And then, if we're still dreaming, a Hyperloop from Sydney to Melbourne, currently one of the most flown travel legs in the world.
So, even if they did lose something, it shouldn't have been much. Which means "making Tesla there == there go your trade secrets" is not necessarily correct.
If Tesla's IPs and manufacturing capabilities end up in Chinese hands, all foreign car companies would be so screwed in China and possibility else where. The Chinese have shown a lot of boldness in their infrastructure projects. I can imagine them building charging stations throughout the country in just a few years. Once that happens, all gasoline cars would be at such a disadvantage. The relative efficiency of electricity generated from power plants vs. gasoline cars could have a significant effect on China's oil import (their major Achilles Heel) and pollution. China has no qualms about nuclear power. BTW, China also has the world's biggest automobile market.
The Chinese would love to have a Chinese Tesla. If I was the Chinese, I might even consider buying up Tesla.