Chinese accused of "dumping"

Discussion in 'TM Lounge' started by MUSICandCHARACTER, Jul 7, 2004.

  1. MUSICandCHARACTER

    MUSICandCHARACTER Forte User

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    Jan 31, 2004
    Newburgh, Indiana
    U.S. and China Quarrel Over Beds

    ATLANTA — The bedroom furniture industry is losing sleep over a bitter trade dispute between the United States and China.

    Some American manufacturers are accusing their Chinese counterparts of “dumping†— gaining market share in another country by flooding it with goods at artificially low prices. The U.S. furniture makers say the super cheap Chinese beds and bureaus are hurting local businesses.

    A preliminary federal investigation determined that many Chinese companies are indeed exporting wooden bedroom furniture to the United States below fair market value.

    Last month, the U.S. Department of Commerce (search) responded by imposing import duties on the Chinese manufacturers. For now, most Chinese plants face duty rates of less than 11 percent, but the final numbers are still pending. Industry analysts predict that they could be substantial enough to reverse a 5-year trend of lower prices on bedroom furniture.

    The threat of higher prices has many high-volume retailers siding with the Chinese. The Commerce Department investigation is likely to take three or four more months, with a final decision on duties and how much more consumers may pay expected just in time for Christmas.


    What does this have to do with anything? Well, dumping is a way to kill a market and take it over. When you have driven the profitable companies out, then you raise your prices. Hard to do unless you have lots of money or are a communist system.

    What gets me is that the Commerce Department has determined it is unfair. Who is upset -- you got it, the American retailers that were selling Chinese furniture at a very low price and a good profit. They could care less that American and Western countries' jobs were being ruined unfairly.

    Now I am the last person for "protectionism" for an industry that may be fat and doesn't want to compete. But unfair practices by a communist government is not open global markets IMO.

    It seems they are trying the same thing with musical instruments. CostCo is now refusing to sell Chinese instruments because the returns were killing them. Buy Chinese furniture now and save a few bucks and buy it again a few years later. Buy nice furniture now and your kids will be using it when you die.

    Jim
     
  2. mheffernen5

    mheffernen5 Pianissimo User

    That's probably a good thing that they are not making any more attempts to sell those cheap musical objects that make youth so discouraged. Stanley has great kids furniture.
     
  3. camelbrass

    camelbrass Mezzo Forte User

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    Nov 5, 2003
    Dubai, UAE
    Hi Jim,

    I've been watching these Chinese junk (get it?) arguments and I must admit that, generally, I agree that junky musical instruments specifically aimed at students is a liberty too far and I can also sympathise with American furniture makers. However, the alternative is that you as the consumer will pay more. If you're prepared to do that fine, jobs will come back to America and you'll be making your own furniture again.

    My biggest problem with the whole argument is what do you do with companies like Nike and others? They have used and abused the whole third world low cost scenario, including China, for years in order to strengthen US corporate coffers. The real benefit to the economy in the US has been the growth in service industries over the last 10 years, admittedly at the cost of manufacturing jobs. You can't enjoy the benefits of one and ignore the consequences of the other. Globalisation is not a one way street..or shouldn't be.

    Just a different view.

    Regards,


    Trevor
     
  4. dcstep

    dcstep Mezzo Piano User

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    Nov 27, 2003
    Denver
    I am against dumping, as I was when the Japanese were "dumping" their cars in the US market in the 1970's. When a government subsidizes an industry so that they can dump and gain market share, that's particularly offensive to me.

    I'm for the lowest possible price at a profit to the makers, including all their stakeholders (employees, contractors, owners, etc.)

    BTW, the competitor doesn't need to be foreign to dump, or at least practice a form of it. When Costco tried to enter the DFW market, Sam's would open a new, competing store as close as possible, often next door. Next, they'd lower prices (sometimes below cost – have you heard of a “loss leader?â€), and then put on the full-court-press in every aspect of their business so that Costco could not gain a toe hold. Dominant manufacturers, when faced with new competition, have lowered the prices to below cost to defend against the new threat. These practices keep the anti-trust department busy.

    Anyway, these kinds of threats, like dumping, are common in all markets. The goal is "free trade", but with no "artificial" economics (like government support). BTW, some of these Chinese makers are owned by US, Japanese, European and Korean companies and the subsidy to support dumping might actually be coming from a US source.

    Dave
     
  5. camelbrass

    camelbrass Mezzo Forte User

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    Nov 5, 2003
    Dubai, UAE
    Dave,

    All really good points.

    Regards,

    Trevor
     
  6. Tootsall

    Tootsall Fortissimo User

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    Oct 25, 2003
    Yee HAW!
    I think you'll find that the technical description of "dumping" is "selling at less than true cost" into a foreign market. So although the prices might be low, the onus is upon the country receiving the cheap goods to prove that the cost of production is actually higher. When you figure in the potential for "government subsidies", tax breaks, cost of living, true cost of raw materials, etc. it can be very difficult to "prove"...

    That is not to say that it is useless to make "dumping" claims. Most governments will cry "Dumping" and impose "temporary" anti-dumping tariffs on another country until such time that the WTO (World Trade Organisation) has made a defnitive ruling; and that can take YEARS! Then there is the appeal process which can add more time... all of which can have the effect of killing off the trade that gave rise to the dumping claim in the first place... whether it is finally proven to be dumping or not!

    When you figure that China is highly unlikely to "open their books" to international trade investigators AND that it is essentially considered a "Third World Country" (which is also good for collecting "brownie points" from the inspectors and ruling panels), a claim of "dumping" would only delay the inevitable. And the inevitable is that China does have HUGE potential for low-cost production and WILL make use of that potential to claw it's way up the ladder of international commerce.
     
  7. MUSICandCHARACTER

    MUSICandCHARACTER Forte User

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    Jan 31, 2004
    Newburgh, Indiana
    Dave,

    I have been thinking about this post since I read it earlier today (well yesterday, I am up late). The difference with Sam's Club is that Wal-Mart has share holders and it must show a profit. If they try too hard and too long to drive CostCo out, it will hurt their bottom line. They can try. But operating at a loss will hurt same store sales and make share holders leery. CostCo has been doing just fine -- their stock has been solid. Wal-Mart is wringing everything they can out of everything. CostCo is no longer going to sell Chinese instruments if the rumors are true. Wal-Mart won't care. CostCo pays their employees about twice as much as Wal-Mart and has much better customer service.

    I can see Wal-Mart not liking them moving into any place. And sure it keeps the lawyers busy. But it is not the same as a communist government dumping to gain market share. They don't have share holders to answer to (or regulators).

    Trevor asked if I would pay more for furniture. Yes. I would anyway. I have been sucked in buying cheap furniture before. You buy it again in a few years, if it lasts that long. Buy well made furniture and it lasts nearly forever. My wife and I agreed that we would save and buy good furniture rather than have it now and pay so much more in the long run.

    Works the same with band instruments. A good beginners horn can be played through high school (like a Yamaha 2335, Conn 22B, Holton 602, Bach 300, Getzen, Besson, etc.). A strong intermediate horn can be played for a long time -- and it may not be necessary to upgrade unless you become a serious player after HS.

    You both made good points. Just my thoughts.

    Jim
     
  8. dcstep

    dcstep Mezzo Piano User

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    Nov 27, 2003
    Denver
    Jim, remember that Wal-Mart doesn't need to make a profit at an individual store level (neither does Costco), so they can choose to fight hard in certain markets to gain or keep market share. Later, after they've eliminated the competition, they can shut down any "excess" stores and move back to a profit making situation. With $240-billion in annual sales, they've got tremendous flexibility on how they spend their budgets. Losing $50 million a year in the DFW market for a year or two is like a flea annoying an elephant.

    I actually think that Wal-Mart is an exceptional organization and I buy much of my supplies at Wal-Mart and Sams. Also, I believe that the politicians that are keeping them out of community banking are doing a grave disservice to the many rural communities that are underserved and overcharged for banking services by the community bankers of the USA. Just like high priced mom and pop hardware stores prior to Wal-Mart, community banks are overcharging by about 33% over what Wal-Mart could charge for a higher level of profitable service. Oh well, I'll get off that horse.

    Ciao,

    Dave
     

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