Globalisation uber alles

Every day a school day! Thanks, other Bob's :)

Nevertheless, I still believe that steel-making is strategic and countries ought to see beyond the short term commercial side even if it doesn't seem to make immediate economic sense. And manufacturing in general.
Why is steel making strategic? And which bit is strategic; mining the raw materials, smelting the iron or manufacturing products?

The reality is that the global steel industry is commoditised. There’s over capacity and there are countries which have significant comparative advantage over others because they have the raw materials, cheaper labour and a much larger internal demand.

So your domestic strategic steel industry can’t compete on price. And, if it can’t compete on price, why would anyone buy from it? Steel is, after all, largely commoditised.

So you would have to subsidise your domestic strategic industry to make it competitive. Which means taxing other, profitable parts of the economy more to subsidise your strategic industry. Which, in turn, means damaging the competitive advantage of those parts of the economy.

For what? When you can buy steel from any number of countries that will always be able to make it cheaper.
 
China has been actively moving away now, for some time, from low end manufacturing and is happy to let a significant proportion of that business get moved overseas to other lower cost centres. As part of 'China 2025' the shift is towards higher-value products and services, particularly technology and precision engineering. There are areas of tech where China is already world leader and the government will do all that they can to catch up in other areas.

So for all of the bleeding hearts who are promising not to buy their kids 'made in China' plastic tat this Christmas, they don't really care.
That is a very sound strategy and one which South Korea and previously Japan followed.

However, it may fail for one simple reason; trust. When talking about high-value products and services you need to be able to assure your customers that you're not diddling them or undermining their entire business. People simply cannot say that about Chinese businesses, no matter how unjustified some of the paranoia might be. It came to a head with Huawei, for all any of us know, this could be one of the finest companies in the world, utterly trustworthy and safe, but we still all have a nagging doubt about it.

We could happily purchase Hyundai or Samsung products as we wouldn't suspect that they have installed some nefarious piece of software that is stealing all our trade secrets. We will even, up to a point, trust pharmaceuticals from India because we can be reasonably assured that no one in the Indian government is adding secret ingredients to the mix. Absurd paranoia or not, we simply do not have the same faith and trust in China and Chinese products, that is why we'll continue to buy their tat at Christmas but don't want them near our vital infrastructure.

In fairness a country that will poison its own baby food is not yet a country that the rest of the world can rely upon and I can't see that changing even by 2025.
 
That is a very sound strategy and one which South Korea and previously Japan followed.

However, it may fail for one simple reason; trust. When talking about high-value products and services you need to be able to assure your customers that you're not diddling them or undermining their entire business. People simply cannot say that about Chinese businesses, no matter how unjustified some of the paranoia might be. It came to a head with Huawei, for all any of us know, this could be one of the finest companies in the world, utterly trustworthy and safe, but we still all have a nagging doubt about it.

We could happily purchase Hyundai or Samsung products as we wouldn't suspect that they have installed some nefarious piece of software that is stealing all our trade secrets. We will even, up to a point, trust pharmaceuticals from India because we can be reasonably assured that no one in the Indian government is adding secret ingredients to the mix. Absurd paranoia or not, we simply do not have the same faith and trust in China and Chinese products, that is why we'll continue to buy their tat at Christmas but don't want them near our vital infrastructure.

In fairness a country that will poison its own baby food is not yet a country that the rest of the world can rely upon and I can't see that changing even by 2025.
South Korea had invested heavily in China but found they were being ripped off, especially with the transfer of technology. Lotte Group was one of the first to go switiching all its production to Vietnam. In 2017 with the nuclear stand-off with North Korea, the PRC threatened South Korea with sanctions if they accepted the US SAAD Air Defence system. The Koreans had had enough and most big Korean companies moved to Vietnam.

As you might know, Korean cosmetics are big with females all over asia. They were finding fakes all over asia branded as Korean cosmetics, with 'Made in the Republic of Korea' on the label, but in reality 'made in China'.
 
That is a very sound strategy and one which South Korea and previously Japan followed.

However, it may fail for one simple reason; trust. When talking about high-value products and services you need to be able to assure your customers that you're not diddling them or undermining their entire business. People simply cannot say that about Chinese businesses, no matter how unjustified some of the paranoia might be. It came to a head with Huawei, for all any of us know, this could be one of the finest companies in the world, utterly trustworthy and safe, but we still all have a nagging doubt about it.

We could happily purchase Hyundai or Samsung products as we wouldn't suspect that they have installed some nefarious piece of software that is stealing all our trade secrets. We will even, up to a point, trust pharmaceuticals from India because we can be reasonably assured that no one in the Indian government is adding secret ingredients to the mix. Absurd paranoia or not, we simply do not have the same faith and trust in China and Chinese products, that is why we'll continue to buy their tat at Christmas but don't want them near our vital infrastructure.

In fairness a country that will poison its own baby food is not yet a country that the rest of the world can rely upon and I can't see that changing even by 2025.
China also are targeting growth of their internal markets so are, by no means, relying on exports alone to grow and develop their industries. As far as the tech goes I don't trust any nation to not be stealing data and secrets*, one only has to look at the, well publicised, back doors in Cisco technology to know that the Yanks have been up to it since forever.

* I know that two wrongs don't make a right
 

Bob65

Old-Salt
So you would have to subsidise your domestic strategic industry to make it competitive. Which means taxing other, profitable parts of the economy more to subsidise your strategic industry. Which, in turn, means damaging the competitive advantage of those parts of the economy.
Because the price you pay today is not the true price. The true price includes the externalities, which aren't a hard number upfront, but can be reasoned about. Why was there a mad scramble for PPE and ventilators recently? Because those countries who had given up their manufacturing capabilities had to wait until those countries who hadn't had seen to their own needs first. Or we could talk about the true price of relying on certain energy-exporting countries. Or we could even wonder what's the point of a standing army in peacetime, taxing profitable parts of the economy to subsidise that?
 
China also are targeting growth of their internal markets so are, by no means, relying on exports alone to grow and develop their industries. As far as the tech goes I don't trust any nation to not be stealing data and secrets*, one only has to look at the, well publicised, back doors in Cisco technology to know that the Yanks have been up to it since forever.

* I know that two wrongs don't make a right
You make an excellent point, one could add it was france, israel and america which sold the chinese technology. That isn't chinas fault, we are whinging an awful lot about our own mistakes.

Going forward was the point of the thread. One assumes any company or government who takes a course of action, they're better consider the political fallout, as the population at large have pretty much convinced themselves that its chinas fault (i expect trump to win on the basis of that determination, as his opponents were part of the past who colloborated in opening china up).
 
Because the price you pay today is not the true price. The true price includes the externalities, which aren't a hard number upfront, but can be reasoned about. Why was there a mad scramble for PPE and ventilators recently? Because those countries who had given up their manufacturing capabilities had to wait until those countries who hadn't had seen to their own needs first. Or we could talk about the true price of relying on certain energy-exporting countries. Or we could even wonder what's the point of a standing army in peacetime, taxing profitable parts of the economy to subsidise that?
No, the price you pay is the market price set by supply and demand equilibrium. It’s commoditised. Global over capacity has driven the steel price down. Unlike other commodities such as oil or copper, steel isn’t traded on an exchange; there’s no nodal point where cartels can manipulate the price (oil) or where derivatives traders create market liquidity and price action outside of the demand for the base commodity (copper). There are near zero externalities in the steel market; in fact, the global steel mild market is a reasonable approximation to a perfect market.

Which is fundamentally different from a high added value piece of technology like a ventilator. You can’t compare the two.
 
Why is steel making strategic? And which bit is strategic; mining the raw materials, smelting the iron or manufacturing products?

The reality is that the global steel industry is commoditised. There’s over capacity and there are countries which have significant comparative advantage over others because they have the raw materials, cheaper labour and a much larger internal demand.

So your domestic strategic steel industry can’t compete on price. And, if it can’t compete on price, why would anyone buy from it? Steel is, after all, largely commoditised.

So you would have to subsidise your domestic strategic industry to make it competitive. Which means taxing other, profitable parts of the economy more to subsidise your strategic industry. Which, in turn, means damaging the competitive advantage of those parts of the economy.

For what? When you can buy steel from any number of countries that will always be able to make it cheaper.
Largely true but just one or two issues. The first is that we have the means to create our own. We have the plant.
Secondly supply is dependent on demand and price is dependent on supply and in the event of trade wars, That could become prohibitive.
Thirdly if a country ceases to produce, it rarely starts again.
Lastly there is the production know how that ceases to have a use.

imho the alternative is to find alternative materials and production methods that can drive the economies.
 
Largely true but just one or two issues. The first is that we have the means to create our own. We have the plant.
Secondly supply is dependent on demand and price is dependent on supply and in the event of trade wars, That could become prohibitive.
Thirdly if a country ceases to produce, it rarely starts again.
Lastly there is the production know how that ceases to have a use.

imho the alternative is to find alternative materials and production methods that can drive the economies.
The UK does not really have the means of production for its steel demand though does it? It might have iron ore resources, but it can exploit them. It can hardly open cast mine Snowdonia can it? Nor does it have really the plant; it’s got some old technology legacy steel capacity and nowhere to build a modern plant with the capacity to meet its steel demand. Let alone move the ore around.

Nor, moving to the price issue, steel is near enough a perfect market. If we have a trade war with China, India, Brazil, Turkey etc etc will step in. The price / supply equilibrium will re-establish. And Britain’s minuscule steel making capacity will be irrelevant in that.

On your third point, who cares? If there’s somewhere faster, better and cheaper to source steel, why would you regenerate steel capacity in the UK? No-one is going to buy from it if it can’t compete on price.

Similarly, with the last point, so what? We used to know how to make bows and arrows.
 
The UK does not really have the means of production for its steel demand though does it? It might have iron ore resources, but it can exploit them. It can hardly open cast mine Snowdonia can it? Nor does it have really the plant; it’s got some old technology legacy steel capacity and nowhere to build a modern plant with the capacity to meet its steel demand. Let alone move the ore around.

Nor, moving to the price issue, steel is near enough a perfect market. If we have a trade war with China, India, Brazil, Turkey etc etc will step in. The price / supply equilibrium will re-establish. And Britain’s minuscule steel making capacity will be irrelevant in that.

On your third point, who cares? If there’s somewhere faster, better and cheaper to source steel, why would you regenerate steel capacity in the UK? No-one is going to buy from it if it can’t compete on price.

Similarly, with the last point, so what? We used to know how to make bows and arrows.
So what you’re saying is that If the greens force the issue by insisting on Carbon fIbre cars With ceramic engines etc etc that last for ages, mass production that keep the masses employed can go hang. You see as I see it we either go back to a locally sourced cottage industry market or we have to accept that the greens have lost the global climate change argument, purely because there is no alternative. I speak in speculative manner because I only buy what I need so either argument is lost on me
 
So what you’re saying is that If the greens force the issue by insisting on Carbon fIbre cars With ceramic engines etc etc that last for ages, mass production that keep the masses employed can go hang. You see as I see it we either go back to a locally sourced cottage industry market or we have to accept that the greens have lost the global climate change argument, purely because there is no alternative. I speak in speculative manner because I only buy what I need so either argument is lost on me
Why do the masses have to be employed in manufacture? What’s wrong with a service economy? Trade is not a zero sum game.
 
Why do the masses have to be employed in manufacture? What’s wrong with a service economy? Trade is not a zero sum game.
So services will build the South Korean built ships, that use Chinese steel , to transport the containers that bring the goods that we consume. It’s an interesting concept.
 

ROMFT

Clanker
I'm with LeoRoverman on this, when the plastic packaging weights more than the salad/vegetables that it contains then i can only think "where or what the f@@k are we all doing".
I can fill my spare time with fitness, music, playing with the partner's kid, etc.
But I'm looked on as some sort of freak, by the white, western Dutch & the various immigrants both, because i'm not interested in the latest car/phone/electronic gimmick/ FB & youtube/ latest fashion.
Thank God that I joined the forces & learned to function in a team whilst retaining individuality & balls.
Western Free societies need to really ask themselves what they are doing & why are they doing it.
We had a chance to do this with the Financial crisis but didn't, unfortunately i don't think that we are going to take this chance to do it either. That's probably why the Chinese (government) will win in the end, they won't even consider asking themselves these questions.
Jesus, i really need to stop thinking too much about things, it only leaves me feeling depressed.
 
China also are targeting growth of their internal markets so are, by no means, relying on exports alone to grow and develop their industries. As far as the tech goes I don't trust any nation to not be stealing data and secrets*, one only has to look at the, well publicised, back doors in Cisco technology to know that the Yanks have been up to it since forever.

* I know that two wrongs don't make a right
However the Chinese consumer tends to be rather thrifty unlike herds of bovine Yanks & Westerners. With an average family saving rate of 70% (for medical bills and everything else that can go wrong in China) people don't lever themselves as the 'developed' World does. Also the local consumer certainly the older ones, tend to be suspicious of Chinese made products and do rely on quality standards set by International Companies and brands.

There won't be a PRC consumer bonanza keeping a lot of their production occupied, high end or not.
 
I'm with LeoRoverman on this, when the plastic packaging weights more than the salad/vegetables that it contains then i can only think "where or what the f@@k are we all doing".
I can fill my spare time with fitness, music, playing with the partner's kid, etc.
But I'm looked on as some sort of freak, by the white, western Dutch & the various immigrants both, because i'm not interested in the latest car/phone/electronic gimmick/ FB & youtube/ latest fashion.
Thank God that I joined the forces & learned to function in a team whilst retaining individuality & balls.
Western Free societies need to really ask themselves what they are doing & why are they doing it.
We had a chance to do this with the Financial crisis but didn't, unfortunately i don't think that we are going to take this chance to do it either. That's probably why the Chinese (government) will win in the end, they won't even consider asking themselves these questions.
Jesus, i really need to stop thinking too much about things, it only leaves me feeling depressed.
This is really all about the concept of value and how it is exchanged. The reality is that almost all human economic activity ultimately contributes to quality of life, not life itself. In the developed world (and much of the developing world) the essentials of food, water, shelter, basic healthcare and security are taken as a given.

Most of us are not employed in delivering those essential needs. We all deliver well-being, whether we’re doing something directly health related, manufacturing goods used for leisure activities, running a restaurant or making music (and just about any other job you can conceive of). Society is consumerist.

So why can’t we build an economy based around the top, high added value part of the value chain? Why do we need to put people down pits when Australia can provide all the coal we need? Why do we need to pollute our tiny island to manufacture steel, when other countries can do it?

We should be looking to exploit the top end of the value chain, not regressing 70 years to when people died on London because it was so polluted.
 
This is really all about the concept of value and how it is exchanged. The reality is that almost all human economic activity ultimately contributes to quality of life, not life itself. In the developed world (and much of the developing world) the essentials of food, water, shelter, basic healthcare and security are taken as a given.

Most of us are not employed in delivering those essential needs. We all deliver well-being, whether we’re doing something directly health related, manufacturing goods used for leisure activities, running a restaurant or making music (and just about any other job you can conceive of). Society is consumerist.

So why can’t we build an economy based around the top, high added value part of the value chain? Why do we need to put people down pits when Australia can provide all the coal we need? Why do we need to pollute our tiny island to manufacture steel, when other countries can do it?

We should be looking to exploit the top end of the value chain, not regressing 70 years to when people died on London because it was so polluted.
I’m actually not disagreeing with you merely reflecting on the position of two different camps And how that will work out. If for example as the Services industry you include tourism, it really is serendipitous on a global scale for non industrial jobs. But to flip it another way why do we expect others to take the hits in mining and steel production. China is not being altruistic, far from it. A big population means expendebility.

we ceased mining not because we couldn’t, it was because it was uneconomic in pure commercial terms. Miners were bitter not just because mines closed, but because there was little else to replace it.
 

Bob65

Old-Salt
So why can’t we build an economy based around the top, high added value part of the value chain?
Because it doesn't work like that. You can't just skim the cream off the top because everyone else wants that cream too. Why do you think Huawei is building our 5G? There is no British, or even Western company that can do it anymore. They all moved their "low value added" work to China, did they imagine that the Chinese would happily do that work forever and never try to move up the value chain themselves? (In fact that's almost certainly what they did believe).
 

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