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China Now Has Third Highest Labor Costs in Emerging Asia

Posted on by Chris Devonshire-Ellis

Jan. 19 – An average worker in China costs more than the average worker in any other emerging Asian economy, save Malaysia and Thailand, when considered in terms of combined salary and welfare payments, China Briefing has found. Conducting a review of minimum labor costs, determined by the legal minimum amount stipulated in 15 different countries, and added together with the pertinent mandatory welfare payments due, it is apparent that since the introduction of the revised labor law in 2008, China’s workers are now amongst some of the best paid in Asia. The survey, conducted in-house, took samples of minimum wage levels from each of China’s provinces and 40 cities, and based its figures on the mean average. China’s minimum wage varies both on a provincial and an urban basis. This was then compared with similar data from other Asian countries. The results look like this:

 



However, it is expected that China’s next five year plan will see mechanisms put in place to double the country’s minimum wage by 2015. That will raise the Chinese figure to $3,000 plus welfare of 50 percent, assuming the latter payments remain the same. This provides a total minimum salary overhead of $4,500. In reality, most salaries will be far higher. That will make China’s average labor cost second only to Malaysia and significantly more expensive than any other Asian country. This represents mixed fortunes for foreign investors in China. It signals that an exodus of export driven manufacturing may occur, principally to competing, lower-cost Asian nations for China’s residual export driven manufacturing. According to figures released by China customs, the country’s export manufacturing trade reached US$1.58 trillion in 2010. It is to be expected that a significant percentage of this will relocate elsewhere purely to maintain economic viability for export manufacturers. While that is a huge amount China stands to lose, if it can genuinely develop a sustainable domestic consumer market, then the impact of losing this amount may be lessened by the impact of a greater collection of domestic taxes, both in VAT and profits taxes. However, that is a balancing act the government needs to get right if they are not to be left with a huge fiscal income gap. The good news is that such salary increases should manifest themselves into a massive rise in Chinese consumerism as significant wealth and disposable income is created. This follows on from plans revealed last year by several large scale manufacturers such as Bayer and Adidas, both of whom signaled their intentions to increase sales in China’s domestic markets by establishing additional manufacturing units in several inland cities. Growth for them, it appears, would be coming from new wealth being created inland and elsewhere within China’s own emerging markets. The scale of movement of the China demographics as concerns its working population is undervalued. Businesses involved in China must now start to take these figures into consideration for their businesses, or face either losing a burgeoning domestic market, or failing to adapt to lower pricing from competitors who have relocated elsewhere in Asia. Low prices for cheap commodities such as computers, toys, and other mass produced items will remain the driver for markets in the United States and European Union, meaning export driven manufacturers must begin to look at emerging Asia to ascertain which country is suitable for housing facilities for such demand.

 

 
Maersk to Pay US $31.9 Million to Settle Suit
The Journal of Commerce Online - News Story

Liner accused of overcharging military for transport of containers to Iraq, Afghanistan

Maersk Line Ltd. will pay the U.S. government $31.9 million to settle allegations that the U.S.-flag subsidiary of the world’s largest ocean carrier overcharged the Department of Defense for the transport of thousands of containers to Iraq and Afghanistan.

The Justice Department said the carrier overcharged the military by billing above the contractual rate for the transport of refrigerated containers; added late fees by not accounting for cargo transit times and a contractual grace period; and improperly charged the government for container delivery delays. The A.P. Moller-Maersk subsidiary also was accused of billing the U.S. government for container GPS-tracking devices that were not or only partially provided, and for not crediting themilitary for storage fee rebates received by the carrier at a Kuwaiti port.

“Our men and women in uniform overseas deserve the highest level of support provided by fair and honest contractors,” said Tony West, assistant attorney for the Justice Department’s civil division. “As the Justice Department’s continuing efforts to fight procurement fraud demonstrate, those who put profits over the welfare of members of our military will pay a hefty price.”

The settlement, announced Tuesday, was the culmination of a 2004 whistleblower lawsuit filed against APL by an industry insider, who will receive $3.6 million from the settlement. Maersk was added to the lawsuit in 2007, according to the Virginian Pilot.

Maersk said war-time conditions caused the inaccuracies in documentation, according to a Reutersreport. "Maersk and U.S. military leaders have worked together over the past few years to improve their dialogue and communication so that any contractual disagreements are handled as early as possible in the contracting process," Reuters quoted the carrier as saying.

 
Surveys shows China manufacturing slowing further

The Associated Press

December 29, 2011, 10:22PM

 

 
Notice of Potential Internet Security Threats

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December 7, 2011

 

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The U. S. Bureau of the Census Computer Incident Response Team (BOC CIRT) has received alerts regarding malicious e-mail messages purporting to be from well known companies in the international trade community.  These messages target computer users involved with export compliance and international shipping.  The Census Bureau will track these alerts as BOC CIRT security incidents until remediation steps are taken.

Recent security incidents involve e-mails claiming to be from reputable companies asking users to open an attached file to fill out, sign, and return back to a mimicked company posing as the reputable company.  These attached documents often contain a piece of malware known as a “keylogger” that records all of the keystrokes entered on the computer (including usernames and passwords) and sends them to a central database.  This malware is considered a virus and could cause harm to your computer, if exposed.    

Safe internet behavior is to open attachments that you expect to receive, and only from companies or people you know.  You should also maintain up-to-date virus scanning and malware scanning tools on each computer that is used to connect to the Internet to access AESDirect, or for web browsing, e-mail, or any other Web-based tasks.

For further information or questions, contact the U.S. Census Bureau's AES Branch
Telephone: (800) 549-0595, select option 1 for AES
Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 
West Coast Container Traffic Down 6 Percent

Bill Mongelluzzo, Associate Editor | Dec 1, 2011 6:21PM GMT The Journal of Commerce Online - News Story

October traffic pulled down by 6 percent decline in import

Container volumes handled at West Coast ports in October declined 6 percent compared to October 2010, largely because of a 9 percent drop in imports, according to the Pacific Maritime Association.

Containerized exports increased 1 percent year-over-year. Loaded containers in the first 10 months of the year were up 2 percent year-over-year, according to compiled statistics from PMA's Web site.

Since West Coast ports handle about half of all U.S. containers, and about two-thirds of the U.S. trade with Asia, the numbers reflect the overall U.S. liner trade trend of declining imports and increasing exports.

U.S. imports were down 2 percent during the first 10 months of the year compared to the same period in 2010. Imports were actually higher in the first four months of 2011 compared to the same period last year, but the tide turned in May and monthly figures since then were lower than in the corresponding months of 2010.

Exports, however, have been strong all year, and growth in the outbound trades is accelerating. Containerized exports through West Coast ports are up 8 percent year-to-date compared to the first 10 months of 2010.

October was the second busiest month of the year for exports, down slightly from March, which is traditionally the peak of the export season. Exports should remain strong now through the winter months, peaking next March.

Imports this year peaked in August and the monthly numbers have been declining since then. Imports will probably remain light the next couple of months, but there should be a small peak in January before factories in Asia shut down for two weeks for the 2012 Chinese New Year celebrations.

 
Countdown to Occupy Protest Shutdown Attempt

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Bill Mongelluzzo | Nov 30, 2011 6:07PM GMT

Importers and exporters are getting nervous as momentum builds for a Dec. 12 shutdown of West Coast ports by the Occupy movement. West Coast ports handle more than 50 percent of the U.S. containerized trade, including 70 percent of U.S. imports from Asia.

Shippers who lived through the 2002 employer lockout of longshoremen still have nightmares about the 10-day shutdown that cost the U.S. economy an estimated $1 billion a day.

Port executives are taking the threat of mass demonstrations seriously. Ports such as Los Angeles and Long Beach that have their own police departments are mapping out strategies to keep trucks moving and cargo flowing on Dec. 12. There is no port police department in Oakland, but port managers are working on a safety plan with city and county law enforcement agencies, said Isaac Kos-Read, director of external affairs.

“We’re going to keep our maritime operations up and running at full speed to keep the 99 percent working,” he said.

While isolated disruptions at individual marine terminals are certainly possible on Dec. 12, it is hard to imagine how a movement with very little knowledge of waterfront operations, and limited contacts with transportation unions, can shut down all West Coast ports from Seattle to San Diego.This is especially true because the movement lacks the support of the International Longshore and Warehouse Union. ILWU officers notified union members that any picket lines erected by the Occupy movement are not sanctioned by the union.

The ILWU is becoming increasingly annoyed by Occupy press releases that cite ILWU issues as reasons for a coast-wide port shutdown. The Occupy organizers never consulted with the union. 
Furthermore, the ILWU is dealing with globalization in a more effective way, such as its announcement this summer of a pact with the Panama Canal Pilots union. Finally, cargo volumes this year have been weaker than forecasted, and most union members don’t want to give up a day’s work over issues that are not clearly defined.

Some Occupy press releases have chastised the ILWU leadership for failing to actively support the movement. Current and former ILWU members have had a hand in the releases, and therefore the statements contain surprisingly detailed information about the history of union actions in support of workers around the world. ILWU officers said all members of a democratic union are free to express their own opinions, but Bob McEllrath, international president, wasquick to point out that only ILWU members or their elected representatives can authorize job actions on behalf of the union.

The Teamsters union, which established a high profile at West Coast ports the past few years as it attempted to organize harbor truck drivers, is likewise not involved in planning the ports shutdown. 
The Teamsters, though, are more openly supportive of the Occupy movement because they see it as an opportunity to draw national attention to the plight of the drivers. Change to Win, an umbrella labor organization supported heavily by the Teamsters, said that union is encouraging Occupy organizers to support the drivers and to “to pledge their ongoing solidarity with these workers who are fighting louder and harder than ever before to win their collective bargaining rights.”

Nevertheless, even this show of support from individual ILWU members and the Teamsters union will have a limited impact on a movement that seeks to shut down ports that last year collectively handled almost 15 million loaded TEUs. The big enchilada for the Occupy movement, of course, is Los Angeles-Long Beach, which handles 70 percent of West Coast container cargo. However, shutting down this sprawling complex of 13 container terminals that handle 30,000 truck moves a day without the active support of the ILWU would require an army of demonstrators blocking numerous roads and freeways in the harbor area. That would be difficult and dangerous. Individual terminals could be affected, but it is hard to foresee how the entire port complex could be shut down.

Oakland is the only U.S. port so far to be shut down by the Occupy movement. The Nov. 2 action closed the Northern California port for the night shift, and the demonstrators who stayed on the next morning agreed to go home after a union officer treated them to breakfast burritos. Kos-Read noted that the Nov. 2 event was part of a larger general strike, but Oakland executives do not anticipate as huge a turnout on Dec. 12.

The Occupy movement has yet to clearly define the goals it hopes to accomplish in shutting down the ports. Nor has the movement come to grips with the impact of its actions on the many longshoremen, truck drivers, rail yard employees and other blue-collar workers in the harbor, all of whom are members in good standing of the 99 percent. “Big Bob” McEllrath of the ILWU does not look or act like the 1 percent associated with Wall Street, and his words resonate with union members. “Any decisions made by groups outside of the union’s democratic process do not hold water, regardless of the intent,” he said.

 
American Airlines Files for Bankruptcy Protection

The Journal of Commerce Online - News Story

 

AMR replaces CEO, will seek new labor agreements to cut costs

The parent of American Airlines, the nation’s third-largest airline, filed for Chapter 11 bankruptcy protection on Tuesday and began an overhaul of its management, labor relations and operations.

AMR said it would continue normal flight operations at American and American Eagle as it seeks to reduce costs. At the same time, CEO Gerard Arpey stepped down and AMR said he will be replaced by the company’s president, Thomas Horton.

AA Cargo is the third-largest cargo carrier among passenger airlines in the United States and produced $532 million in revenue in the first nine months of 2011.

The Dallas-based airline lost $884 million in the first three quarters of this year and has posted losses in 14 of the last 16 quarters. American has seen its finances deteriorate under soaring fuel costs and organized labor agreements AMR says force some $600 million in extra costs on the carrier beyond the costs of other U.S. airlines.

American was the only major U.S. airline outside domestic-only Southwest Airlines to avoid bankruptcy protection in the wake of the September 11 terror attacks. Those competitors have redrawn labor pacts under Chapter 11, and larger mergers in recent years have led to consolidated operations and lower operating costs.

 

 
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