Monday, June 1, 2015
TWIF Flattener #6 - Offshoring
Use one of the current events sources linked at http://svhs-hwc-fall2015.blogspot.com/2015/06/approved-sources-for-twif-current.html to find a recent news article that relates to, supports, or refutes Friedman's assertion that offshoring was a "flattener." Your comment should include the title of the news article, a link to the article, and a summary of the article including an explanation of how the article relates to this point. Don't forget to check your rubric for evaluation criteria!
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Link: http://www.npr.org/2011/03/17/134619750/how-offshore-tax-havens-save-companies-billions
ReplyDeleteSummary:
In the United States, corporate income taxes are quite high at 35%, while in other countries corporate taxes are much lower, and sometimes not even existent. Large companies situated in America such as Microsoft and Google are offshoring, or taking their businesses abroad where they can manufacture products and keep more of their revenue. By offshoring to Ireland where corporate tax rates are as low as 12.5% Google has saved over $3 billion dollars over the past three years. The scale at which corporations are saving money is very high, and offshoring has proven to be a very effective method to not technically avoid U.S. taxes, but rather profit from being stationed abroad. By taking advantage of the lowered taxes in other countries, large companies are trying to keep a competitive edge over others without needing to sacrifice 35% of their income.
Relevance of article:
In TWIF, Friedman talks about offshoring as an alternative method to outsourcing that still allows companies to increase their profits. While outsourcing involves making products in foreign countries and importing them to America for cheaper costs, offshoring involves moving an entire industry abroad and bringing foreign earned profits back to America. This article demonstrates the ways in which large corporations such as Microsoft and Google are offshoring to countries such as Ireland that have 12.5% corporate tax rather than 35% in America. Friedman’s arguments state that offshoring can be greatly beneficial for a corporation because it allows them to avoid high tax rates while increasing their total income. Therefore, this article reinforces the ideas that Friedman supports on offshoring.
Title: U.S. Is Seen as Laggard as Russia Asserts Itself in Warming Arctic
ReplyDeleteLink: http://www.nytimes.com/2015/08/30/world/united-states-russia-arctic-exploration.html?hp&action=click&pgtype=Homepage&module=first-column-region®ion=top-news&WT.nav=top-news&_r=0
Summary: As many countries are working to save the Arctic for its many valuable offerings, the United States is finally making the effort to join the "race" The United States is lagging behind many other countries drilling for resources and mapping transit routes. Many people are calling it a new "Cold War" as he U.S. are specifically targeting Russia because they are in the lead at controlling the Arctic. This is conected to the flattener: Offshoring because the United States are joining the competition for controlling the Arctic, an offshore business, forcing the other countries to compete amongst themselves and the U.S. to control the Arctic.
Title: Toyota Restarts Tianjin Production After Devastating Blast
ReplyDeleteLink: http://www.bbc.com/news/business-34070627
Summary: Two weeks after a fatal explosion tore through the port city of Tianjin, the Japanese auto company says it will gradually restart production. The blast was from a chemical storage facility on-site, injuring 67 Toyota employees and killing 139 others. The factory produces the Toyota Corolla, employing around 12,000 workers. In 2014 alone manufactured 400,000 vehicles.
Summary: In what could not be a better example of off-shoring, though unfortunate, Friedman had specifically talked about Japanese companies taking advantage of Japanese speaking, educated, low-wage workers to employ in their factories in China. Likewise, in 2003, China replaced the U.S. as the biggest importer of Japanese products (TWIF 143). Setting aside their historically wartime differences, the two countries are locked now in an economic struggle. The Chinese being a flattener has saved Western multinationals billions, and opened the world to more products, more ideas, and new wealth.
Author: Reuters
ReplyDeleteTitle: Exclusive-India Seeks to Step Up Scrutiny of Offshore Wealth Managers: Sources
Link: http://www.nytimes.com/reuters/2015/08/06/business/06reuters-india-wealth-banks.html?_r=0
Summary:
This article describes how India would like private banks to register any offshore business they are doing with the Securities and Exchange Board of India (SEBI) in order to diminish the amount of illegal money transfers. This could be a problem for some private banks who may need to give out personal information of clients outside of India to prove that the banking is being done legally. The SEBI says if any private banks would like to continue the offshore banking they will have to agree to their terms.
The section of this article I would like to focus on is the aspect of offshore banking. In the flattener #6 Friedman discussed how factories were being relocated to China in order to face lower labor costs, lower taxes, and more efficient workers willing to work twelve hour days. This just shows that any sort of business or industry could be shipped overseas. In this case even banking can be relocated for likely lower interest rates and taxes. The ability to offshore businesses is flattening the world by creating more fair competition.
Title: China’s Tricky Economic Transition: From Steel Mills to E-commerce
ReplyDeleteLink: http://www.npr.org/sections/parallels/2015/08/28/435480156/china-s-tricky-economic-transition-from-steel-mills-to-shopping-malls
Summary:
China’s economic growth has been slowing recently, as the country is in the midst of veering away from investment, and needs to focus on their services and costs instead. The economy in China is simply in recession, where bankruptcy and loan payments become increasingly more problematic and widespread. However, the recession was a result of the Chinese climbing the economic statuses for an extended period of time, and now, there is not enough capacity in China to continue manufacturing as they used to. In contrast, the consumption of products from China is quite successful, but it is not increasing enough to support the continuation of the old production methods. Therefore, China must allow more freedom of innovation to maintain successful, lucrative results.
Friedman described offshoring to China as one of the world’s flatteners. He highlighted how once China joined the World Trade Organization (WTO), the country continued to steal manufacturing work from other offshoring locations. Friedman also stated that China’s endgame was to achieve world domination, but the article indicated that this will not occur at the rate with which China is transitioning, especially since their economy is currently in a downturn.
Title: The Nation: The 'New GM': Layoffs, Factory Closings, Offshoring
ReplyDeleteLink: http://www.npr.org/templates/story/story.php?storyId=104815923
In the sixth flattener, Friedman discusses the practice of offshoring. After China joined the WTO (World Trade Organization) and had to comply with international laws, American investors thought that offshoring would be financially beneficial to U.S. companies. The cheaper labor, lower taxes, and inexpensive energy in China was enticing for several American companies; therefore, many moved their factories to China. Some companies however, stayed in the United States, including General Motors.
This article talks about how General Motors became bankrupt in the United States and needed to offshore to China in order to recover. After the Clinton and Bush administrations supported the financial benefits of offshoring, the Obama administration tried to "save" domestic automaking and the many jobs lost because of offshoring. However, this approach backfired on GM as they were no longer competitive. After many years of closing factories, laying off workers and beginning to shift production overseas, GM found itself in over $170 billion in debt. Rather than changing their operation plan, the Obama administration handed GM a gigantic tax payer funded bailout. Now the only option for GM to survive as a company is to use that bailout money to close its factories in the United States and lay off 21,000 jobs in an effort to "save" manufacturing in America. This proves that is is much smarter to off-shore factories to China and increase the number of business and administration workers in the United States than to keep the factories domestic and shut down the entire operation. The transfer of wealth from the United Sates to other countries through off-shoring truly flattened the world economically.
Author: The Associated Press
ReplyDeleteTitle: Verizon Strike Possible as Contract Deadline Looms
Link: http://www.nytimes.com/aponline/2015/08/01/us/politics/ap-us-verizon-labor-talks.html
Summary: This article talks about how the Verizon company is dealing with possible offshoring of its business. However, a strike in with the employes may arise if the offshoring is not done and the Verizon company is trying to eliminate the decent community-based jobs that are causing this commotion. This relates to China entering and accepting the WTO business and building upon the business by getting low-waged employees who did decent work.
Title:No need to change China trade deal to address job fears, say Australian unions
ReplyDeleteLink: www.theguardian.com/australia-news/2015/aug/30/china-free-trade-deal-job-fears-australia-unions
Summary: The China free trade agreement having an influx of workers can be changed without altering the deal. This has had an effect of people wanting to stop the trading with China. If the trade were to be stopped it would be considered "economic sabotage." They will quickly gain benefits off of tariff cuts. The trade agreement is being discussed and is expected finished by October.