Tag Archives: China

Caterpillar

Cat: How can we not do business with countries that abuse human rights?

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Doug Oberhelman, Chairman and CEO of Caterpillar, met with Chinese President Hu Jintao on Thursday in Chicago:

In an interview with the Journal Star just before a luncheon in Washington, D.C., featuring Chinese President Hu Jintao, […] Oberhelman didn’t argue that the concerns about human rights issues in China are valid. […] Hu, Oberhelman said, has helped companies like Caterpillar because he has been welcoming to foreign investment in China.

“We’re big in China, of course, and it is really hard to imagine how we could continue to be a leader in world markets without investing in China,” he said. If you want a legal insight Read more

“I am often asked why we invest as much as we do in China. My question is, how can we not?”

I’ve juxtaposed these quotes in the hopes that it will be jarring to my readers. If it’s not jarring to you, read them again and realize that “human rights issues” in China include things like torture, illegal detention (imagine being arrested simply for expressing unpopular views or for no stated reason whatsoever and denied contact with anyone for an indefinite period of time), and being put before a judicial system that is explicitly instructed by the very same Hu Jintao “to rank ‘the constitution and laws’ of China behind the ‘Party’s cause [and] the people’s interest.'” (See the Human Rights Watch report.)

Think of that and read it again. Torture, illegal detention, unfair courts — concern over that is “valid,” Mr. Oberhelman says. And then he asks “how can we not” invest in China? It’s helped Cat continue to be “a leader in world markets.”

The key here is that Caterpillar wants to put human rights issues and U.S.-China trade in separate compartments, and convince policy-makers that one should not have anything to do with the other. That’s the gist of the memorandum of understanding (MOU) that Cat signed:

The MOU outlines the importance of maintaining a positive trade environment between the Unites States and China, emphasizes how Caterpillar’s exports to China support jobs in the United States and stresses that mutually beneficial trade policies will support greater U.S. exports from Caterpillar in the years to come.

“We realize there are important and substantive issues that exist between the United States and China, from currency valuations to the protection of intellectual property, and that these need to be resolved with a sense of urgency,” said Rich Lavin, Caterpillar group president with responsibility for growth markets, including China. “But we also know the way we resolve disagreements is important. Caterpillar will continue to urge policymakers in both the United States and China to resolve differences in an atmosphere of mutual respect— not by threatening a trade war. We continue to believe that quiet diplomacy and multilateral forums offer a preferred path for resolving differences,” Lavin added.

In other words, address torture and illegal detentions if you must, but don’t let it get in the way of our company making lots of money by doing business with this oppressive regime. Nothing is more important than making money. We should be able to resolve disagreements over torture and illegal detention without threatening the profits we’re getting from the people who torture and illegally detain Chinese citizens. Do we have an understanding?

Is there no one who questions the morality of this? How does Caterpillar defend this kind of compartmentalization ethically? Why does no one hold Caterpillar to a higher standard than this?

Nation/World

Bleak Friday: China and Russia renounce U.S. dollar

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This doesn’t bode well:

At a joint press conference in St. Petersburg, Russian President Vladimir Putin and Chinese Premier Wen Jiabao announced their countries’ agreement Thursday to allow their currencies to trade against each other in spot inter-bank markets and online trading platforms like VT markets, thereby formally renouncing the U.S. dollar….

Despite the avowed assurance of not challenging the U.S. dollar, the trade pact between Russia and China will actually result in the undermining and marginalization of the U.S. dollar’s “petro-currency” status.

According to the International Energy Agency, China is the largest consumer of energy, and now the largest automobile market in the world, with an expected rapid increase in oil consumption. Concomitantly, Russia is the second biggest oil exporter and the biggest natural gas exporter in the world.

Add to this global energy picture the two countries’ phasing out of dollar usage for trading energy commodities, and there would indeed be a significant downgrade of the status of the U.S. dollar.

The Chinese Xinhua news agency reports that Russian trade with China was $45.1 billion this year. It won’t be in dollars anymore. Also, this:

Russia’s Prime Minister said Friday he was confident in the euro despite Europe’s swelling debt crisis and criticized the dollar’s dominance as a world reserve currency….

“We have to get away from the overwhelming dollar monopoly. It makes the world economy vulnerable,” he told a gathering of business leaders in Berlin through a translator….

Asked about the possibility of Russia one day adopting the euro as a currency, Putin did not rule out such an option. “The rapprochement of Russia and Europe is inevitable,” he said.

In his call to reduce the dollar’s dominance in the world economy, Putin noted an agreement signed this week with China to use their respective currencies, the ruble and yuan, for bilateral trade in the future.

Deutsche Bank AG’s chief executive Josef Ackermann echoed those comments, saying “I think it is completely accurate that we have to reduce the currency system’s dependence from one dominant currency such as the dollar.”

Caterpillar, Nation/World

Cat’s growing presence in China — Is it a good thing? Part 2

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In a previous post, we looked at potential pitfalls in efforts to access China’s markets. Specifically, it appears that access comes with a high cost: supplying Chinese competitors with proprietary technology. Another example of this was recently exposed in the Wall Street Journal:

When the Japanese and European companies that pioneered high-speed rail agreed to build trains for China, they thought they’d be getting access to a booming new market, billions of dollars worth of contracts and the cachet of creating the most ambitious rapid rail system in history.

What they didn’t count on was having to compete with Chinese firms who adapted their technology and turned it against them just a few years later.

Today, Chinese rail companies that were once junior partners with the likes of Kawasaki Heavy Industries Ltd., Siemens AG, Alstom SA and Bombardier Inc. are vying against them in the burgeoning global market for super-fast train systems. From the U.S. to Saudi Arabia to Brazil and in China itself, Chinese companies are selling trains that in most cases are faster than those offered by their foreign rivals.

Caterpillar recently announced it’s building another large engine factory in China, expanding its presence there. How long will it be before we start seeing Chinese companies competing head-to-head with Caterpillar — using Cat’s own technology against them?

Caterpillar

CAT’s growing presence in China — is it a good thing?

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Caterpillar announced Sunday that Cat China and AVIC Liyuan Hydraulics Co. “have signed a joint-venture agreement to establish a company to design and manufacture medium- and heavy-duty hydraulic pumps and motors for the construction equipment industry.” The press release was picked up and reprinted in the Journal Star Monday on the web — it will probably appear in Tuesday’s paper.

This joint venture comes on the heels of Cat’s September 29 announcement that they were building their twelfth factory in China, this one to make mini hydraulic excavators. That announcement was met with some criticism, not so much at Caterpillar per se, but against U.S. trade relations with China. From the American Thinker blog:

Why can’t Caterpillar make a profit exporting mini-excavators to China? The answer is simple: China has a 30% tariff on all excavators. In fact it has a similar high tariff on just about every vehicle…. When President Obama’s economic adviser Larry Summers was Secretary of the Treasury under President Clinton, he oversaw China’s entry to the WTO (World Trade Organization), and he let China declare all these vehicles as a “strategic sector” entitled to high protective tariffs….

The Chinese government has long used these tariffs as a lever in order to loot American companies of their technology. First it forces vehicle-making companies to locate their factories in China if they want to sell to the growing Chinese market. Then it forces them to “share” their proprietary technologies with Chinese competitors. Caterpillar already has 11 factories in China. It also has two Chinese competitors – Liugong and Sany – that are producing what one expert describes as “knockoffs” of Caterpillar models, and they are exporting them to the world.

From a similar post (same author) on a different blog, they add, “What we see is American trade pacifism at work. We keep our markets open to Chinese products. They close their markets to American products and then, in return for access, force our companies to build factories in China and give Chinese competitors their proprietary technology.” The upshot is, “If trade were free and balanced, Caterpillar might profitably produce excavators in the United States and sell them in China, but with the Chinese government setting the terms of trade in a way that keeps out made-in-America products, Caterpillar has little choice but to locate its factory in China.”

Well, they have “little choice” if they want to do business in China, that is. It’s easy to see why they would want to do business in China — so obvious I need not recite the reasons here. But is it worth the cost in the long run if they ultimately have to share their research and development with their competition? What happens when they start having to compete with cheaper knock-offs of their products — not just in China, but worldwide? I can’t help but wonder if they’re sacrificing long-term viability for short-term gain.

Chamber of Commerce

Chamber wants to take Peoria business leaders to Red China

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The Peoria Area Chamber of Commerce is offering a trip to China for a low package price of about two grand, not including transportation from Peoria to Los Angeles. But why? For what purpose? The Journal Star reports:

A visit to China will not only open the eyes of business leaders, but their minds, said Rob Parks, president of the Peoria Area Chamber of Commerce.

The article doesn’t say specifically what Ms. Parks believes business leaders have their minds closed to. The rest of the article just quotes her saying that the country is very old, very populous, and very friendly. Participants will get to tour the usual sights (e.g., the Great Wall), but will also hear from “Chinese business leaders.”

I wonder if there will be anyone from Amnesty International to speak to our business leaders about China’s widespread human rights violations. It bothers me that the Chamber is cheerleading for doing business in/with a nation where “torture and other ill-treatment continue[s] in prisons, police stations, Re-education through Labour camps, and other unofficial detention facilities” and where hundreds of thousands of people are incarcerated by police without trial, to name just a few human rights abuses.

On the other hand, human rights abuses effectively keep labor costs down. And heaven knows we’ve got to compete with Wal-Mart and other superstores who already exploit cheap Chinese labor. So I guess it’s best not to think about things that might prick the conscience. It’s not good for business.