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June 14, 2009

Economist's View - 3 new articles

Chinese Manufacturers Accused of Predatory Pricing in India

I don't know the details of this beyond what's given in the article below, but it sounds like anti-dumping claims and calls for "tougher safety and quality checks" are being used in an attempt to protect domestic industries in India from competition from Chinese manufacturers:

China accused of 'predatory pricing' tactics, by Amy Kazmin: India's small and medium enterprises have warned that they are suffering because of cheap imports from China. They are urging New Delhi to accelerate anti-dumping investigations and impose tougher safety and quality checks on Chinese products. The appeal for greater government protection came amid rising tensions between New Delhi and Beijing over trade, after a high-profile dispute over an Indian ban on Chinese made toys.

India's Federation of Chambers of Commerce and Industry said ... a survey of 110 small and medium-sized manufacturers found that about two-thirds had suffered a serious erosion of their Indian market share over the past year, because of cheaper Chinese products.

In its statement, FICCI said the Chinese imports were between 10 and 70 per cent cheaper than comparable Indian products, a price differential that it said was "huge and difficult to explain". Amit Mitra, the FICCI's secretary-general, said Indian industries were being hurt by "typical Chinese predatory pricing" intended to drive rivals out of business so that Chinese companies could capture the market – and then raise prices to more normal levels. ...

Indian manufacturers face serious competitive disadvantages in comparison with China, including poor infrastructure and rigid labour laws... However, Mr Mitra said ..."Even if we do all these reforms, will we be able to fight Chinese price mechanisms of an artificial nature...? It will be very difficult,"... The industry body called for New Delhi to step up the pace of its anti-dumping investigations and impose more stringent safety and quality checks to shield Indian companies from cheap Chinese goods. ...

In January, New Delhi announced a six-month ban on the import of Chinese toys, citing concerns about their safety, after Indian toymakers complained that such playthings had grabbed the lion's share of the country's $2.5bn toy market. However, the ban was lifted after just two months, after Beijing threatened to take the issue to the WTO.

But according to Dani Rodrick, we shouldn't worry about an outbreak of protectionism:

The worst that could happen is a return to the 1930s, when countries put up high trade barriers and retreated into isolationism, to the detriment of all. Fortunately, this is a remote scenario today.

In fact, he's worried about just the opposite:

The financial crisis laid bare the soft underbelly of globalization. It would be a mistake to respond by trying to take globalization to the next level.

I'll settle for maintaining th eglobalization status quo for the moment, or minimizing the erosion, but once we get through this, I hope world integration picks up where it left off.

Medicare for All

Clive Crook says "there are worse things than Medicare for all – and the present system might be one of them":

Medicare for all may be the best cure for the US, by Clive Crook, Commentary, FT: For the past few months, Barack Obama and his allies in Congress have been striding towards far-reaching reform of the US healthcare system... But the Democrats ... are divided.

They agree on several elements. At least to begin with, private employer-provided insurance will remain the norm. ... New mandates, subsidies and a regulated insurance exchange would widen coverage... But controversy surrounds three points: what the reform will cost, how it will be paid for and, especially, what role a new public insurance plan might play. ...

Most contentious is the proposed public insurance option – a government-run plan to compete alongside private insurers to press down on costs and "keep them honest", as Mr Obama puts it.

Mr Obama is strongly backing the public plan idea and most Democrats in Congress agree with him. A significant minority of more conservative Democrats ... worry that a public plan would crowd out private insurers and that the US would end up with a national government-run health plan: in effect, Medicare ... for ... everybody. Many left-leaning Democrats quietly agree with that prediction, which is why they like it.

In my view, there are worse things than Medicare for all – and the present system might be one of them. Medicare for all would give the US truly universal coverage and better control of costs. It would preserve choice of doctor and hospital, and private insurance for supplementary services could co-exist for those who wanted it. The demise of employer-provided plans would make labour more mobile...

One obvious objection is that Medicare for all would politicise US healthcare... Controlling costs by denying expensive treatments and squeezing suppliers' incomes is something Medicare for all could try to do, but this is a formula for perpetual political conflict...

A less obvious objection is that a healthy private insurance market is worth preserving. ... If competition is a good thing, competition among insurance providers is a good thing too. Yes, abolishing it reduces one kind of lump-sum administrative overhead, which is all some Democrats seem to care about. But it also abolishes pressures for innovation and other kinds of cost reduction. ... At the very least, one should pause before shutting competition down.

Shutting it down is not the purpose of the public plan, say its Democratic supporters: the public plan is just one more choice. This is disingenuous. ...

As I say, the present system is so bad that Medicare for all might be an improvement. I think the US would do even better to build its reform around competition among intelligently regulated private insurers. But if Medicare for all is what this president and Congress really want, they should come clean, and be out there making the case.

links for 2009-06-14

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