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Post by anansi on Sept 21, 2018 6:40:20 GMT -5
The U.S. is in a trade war with Rwanda over used clothes KIGALI, Rwanda — The annals of history are rife with examples of things man has gone to war over: money, religion, and love, to name but a few. Thanks to a new trade war between the U.S. and Rwanda, historians can add another, unlikely catalyst to the list: used clothing. It began in 2016, when Rwandan President Paul Kagame decided to raise the tariff on secondhand clothing imports from the U.S. and Europe, from 20 cents to $2.50 a kilogram, part of a "Made in Rwanda" initiative to encourage domestic industry. President Trump called the practice unfair, but Rwanda declined to reverse course — so he started taxing Rwandan imports to the U.S. earlier this year. Kagame promises that the long-term gains from "Made in Rwanda" will outweigh any short-term trade war losses. But so far, for many of the more than 20,000 Rwandans who work in the used clothing industry, it's hurting business. "In one year, I have lost, like, half of my business," Karim Mushumba, a secondhand store owner, told VICE News. Since used clothes are scarcer and more expensive now, Karim has to pass the cost on to his customers. "To tell my customers they should pay double, it needs more explaining... The customers, they don’t come, they don’t come." So who is benefiting from "Made in Rwanda?" At the moment, it looks like Trump's greatest economic rival: China. The country is already Rwanda's fifth-largest trading partner, and thanks to the U.S. tariffs, it plans to invest even more. That includes opening clothing factories in Rwanda, like C&H — a Chinese clothing manufacturer that employs more than 1,000 Rwandan workers in a factory on the outskirts of the capital. Malou Jontilano, the factory’s manager, says now that there’s a tax break, they're planning on opening another project that will employ about 3,000 workers. “The government is really giving us 100 percent support,” Jontilano said, “So they are willing even to pay all the necessary taxes incurred. You know without the government, C&H is not there.” news.vice.com/en_us/article/438vjg/the-us-is-in-a-trade-war-with-rwanda-over-used-clothesAlthough Kagame is a bit of a dictator, I really like his approach to things, he isn't afraid of the greater Intl powers and he seems to know how to benefit from China's investment and largesse.
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Post by kel on Sept 21, 2018 13:14:09 GMT -5
Kagame promises that the long-term gains from "Made in Rwanda" But what are the long term gains to Rwanda if u have merely changed your supplier from the U.S. to China Yes, the Chinese have hired Rwandan workers, but those same workers now have to pay double for the costs of their clothing. Furthermore, the Chinese get to be in business without having to pay tax. So, the Rwandan treasury doesn't benefit nor do the people.....
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Post by Deleted on Sept 22, 2018 1:29:52 GMT -5
Kagame promises that the long-term gains from "Made in Rwanda" But what are the long term gains to Rwanda if u have merely changed your supplier from the U.S. to China Yes, the Chinese have hired Rwandan workers, but those same workers now have to pay double for the costs of their clothing. Furthermore, the Chinese get to be in business without having to pay tax. So, the Rwandan treasury doesn't benefit nor do the people..... Not enough information is provided in the article to determine if Rwanda benefits from this policy. The Rwandan treasury is collecting $2.50 per kilogram for used clothing whereas it used to collect $0.20, that's a 1,150% increase in revenue from this source. The volume of imports would have to drop catastrophically in order for the Rwandan treasury to lose revenue. If they collected $200 on 1,000 kilograms of used clothes, they are now getting $2,500, a net gain of $2,300. The import of used clothes would have to drop to below 80 kilograms from 1,000 kilograms before they would start collecting less in tariff. They did not "merely changed your supplier from the U.S. to China". You are making an absurd claim based on zero facts. When you manufacture in country, you rely on local suppliers. If you hire 2,000 workers and you have a hundred suppliers who, on average, hire 400 workers, you are creating income for your 2,000 employees as well as the 40,000 employees of your suppliers. Whoever wrote that article has zero respect for the intelligence of his/her readers.
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Post by kel on Sept 22, 2018 16:52:35 GMT -5
The Rwandan treasury is collecting $2.50 per kilogram for used clothing whereas it used to collect $0.20, that's a 1,150% increase in revenue from this source. The volume of imports would have to drop catastrophically in order for the Rwandan treasury to lose revenue. This is naive. Obviously sales will fall and fall drastically........this is what happens under tariffs. Not only that, it will affect the lowest income tier of Rwandan people ....... the people who most need the lowest cost provider. Spending more for clothes now means less spending for other things such as education, health care, saving and investing, business formation, and consumption in other areas of the domestic economy. Who said that the Chinese will rely on local suppliers ?? The way these sweetheart deals usually work is that the manufacturer gets a completely free hand ........ no import/export taxes on raw material and no taxes on sales, incomes, etc. Does Rwanda grow cotton I dont think so. Yes you are creating income for 2000 employees, but said employees will now have to pay more for clothing. The suppliers most likely will be from abroad as Rwanda supplies neither cotton, polyester, nor machinery. Even if Rwanda did supply cotton, I doubt it would be the lowest cost provider on that since many larger countries with greater expertise produce it. Clearly Kagame has never read up on David Ricardo and "Comparative Advantage"
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Post by Deleted on Sept 22, 2018 21:10:24 GMT -5
"Clearly Kagame has never read up on David Ricardo and "Comparative Advantage"" So, a nation should be run based on dogma written several centuries ago that applied to nations very different from what exist today? Where's the advantage when "“Every year, we spend over $15 million to import second hand clothes. Wearing such clothes is not worth our value,” said Claver Gatete, Rwanda's Minister of Finance and Economic Planning, according to a report by Rwandan news agency KT Press... At the 13th National Dialogue, Gatete said that Rwanda needs investors in the textile industry to provide quality clothes and more importantly create more jobs." www.fibre2fashion.com/news/textile-news/rwandan-textile-industry-looks-for-investors-176616-newsdetails.htmI don't think you are in a position to tell Rwandans what's in their best interest. I'm baffled by the absurd anti Chinese attitude on this forum. The Chinese don't claim to be Santa Claus and the Africans aren't idiots in need of our supervision. The article I got the quote from shows that both sides know what they want. Read it and tell me how Rwanda is taken advantage of.
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Post by kel on Sept 23, 2018 14:10:07 GMT -5
"“Every year, we spend over $15 million to import second hand clothes. Wearing such clothes is not worth our value"
This statement is alarming... and leads me to believe that the speaker doesnt understand economics at all.
First of all $15million is NOTHING. Second, how can he say that the clothes offer no value when clearly people are buying $15million dollars worth annually.
Clearly they are getting value....huge value. Cheap clothing allows them to deploy their money to other areas such as savings, investment, education, health....
Fine, u want to develop a textile industry, but there is NO way non-taxpaying Chinese textile manufacturing will be the lowest cost provider of cheap clothing to Rwandans. So, then what exactly is the benefit to Rwandans of this policy ?
U have just made clothing more expensive for the poorest. U get no tax revenue from the Chinese....and a handful of jobs ?. These same job holders will nownhave to pay DOUBLE for clothing - $30million. It is a backdoor tax on the poorest....and will put small and entry level entrepreneurs out of buainess.
This looks like political corruption too me. China want in on Rwanda and is willing to pay (under the table).
Comparative Advantage is not 'dogma' it is real... and one of the reasons USA Japan and now China have such dynamic economies.
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Post by Deleted on Sept 23, 2018 17:17:43 GMT -5
"Comparative Advantage is not 'dogma' it is real... and one of the reasons USA Japan and now China have such dynamic economies." Dude you are funny. The USA never gave a damn about comparative advantage, it protected its industries with high tariffs from Britain and others that had 'comparative advantages' over US industry. Please state the 'comparative advantages' of China and Japan. You might find this pdf on S. Korea's development of interest. kellogg.nd.edu/sites/default/files/old_files/documents/166_0.pdf
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Post by kel on Sept 23, 2018 20:03:41 GMT -5
China comp advantage: super cheap low quality labor numbering in the hundreds of millions. Therefore: focus on becoming the labor force for manufacturers......
Japan: low innovation but super high quality and conscientious workforce, therefore focus on copying higher tech produced by others.(namely the US)
USA: since China dropped the communism in the 70's US could no longer maintain a large manufacturing labor force....lowest cost producer for low level manufacturing would always be China. Therefore, facilitate the shift away from and embrace your advantage: 1.Super high tech innovation 2.Medical/Biotech/Pharma 3.Military tech 4.Cultural product export: Hollywood, Sports, AfroAm cultural product: music,etc. 5.Tradition of freedom and rule of law thereby becomimg the preferred place for people to invest and park their money. -Wall Street, Real Estate.
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Post by Deleted on Sept 24, 2018 15:47:31 GMT -5
"China comp advantage: super cheap low quality labor numbering in the hundreds of millions. Therefore: focus on becoming the labor force for manufacturers...… " Absent the hundreds of millions part, that's a good description of Rwanda. Makes sense for them to emulate China and S. Korea. "Japan: low innovation but super high quality and conscientious workforce, therefore focus on copying higher tech produced by others.(namely the US)" Let me guess, you are a Trump fan? Where can I catch a Bullet Train anywhere in the USA? What nonsense. Checkout the innovations Japan is responsible for even before the creation of the USA. en.wikipedia.org/wiki/List_of_Japanese_inventions_and_discoveries"USA: since China dropped the communism in the 70's US could no longer maintain a large manufacturing labor force....lowest cost producer for low level manufacturing would always be China." You're behind the times. The USA started the present trade war because China is breaking out of this low cost producer gig, they are sending that business to places like Rwanda.
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Post by anansi on Sept 25, 2018 6:09:47 GMT -5
Kel said[ China comp advantage: super cheap low quality labor numbering in the hundreds of millions. Therefore: focus on becoming the labor force for manufacturers..] Yes that's true for now, but labor cost is also rising in China causing them to farm out manufacturing elsewhere, in the same manner the U.S did 30 yrs back Africa is just that place today, as is taking place in Ethiopia and other nations. Why China is sending jobs to Africa www.pri.org/stories/2017-08-07/why-china-next-africaAnd did I mentioned China's population will be aging soon.
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Post by Deleted on Sept 25, 2018 7:13:48 GMT -5
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Post by kel on Sept 25, 2018 14:20:33 GMT -5
"as in many other Ethiopian industrial parks -- amazing tax breaks: companies enjoy a 10-year tax holiday, expatriate staff pay no income tax for five years and exports are duty free.
The benefits are so unbelievable it is hard to see how Ethiopia will win."
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Post by Deleted on Sept 25, 2018 16:16:17 GMT -5
"as in many other Ethiopian industrial parks -- amazing tax breaks: companies enjoy a 10-year tax holiday, expatriate staff pay no income tax for five years and exports are duty free. The benefits are so unbelievable it is hard to see how Ethiopia will win." Did you forget the following parts of the article? " Ethiopia is undoubtedly one of the continent’s poorest countries, but that’s changing. In the decade leading up to 2016, Ethiopia’s economy swelled 10% a year making it the fastest growing in Africa. And with 100 million people, 70% of whom are under age 30, it also has the continent’s second-largest population. That’s both a massive demographic dividend and a real risk: with unemployment at 16.8%, jobs are urgently required...When Emaway Gashaw was 18 years old, she got on a bus and waved goodbye to her large family of coffee farmers. The journey from Jimma, in western Ethiopia, to Addis Ababa took 10 hours. She wound up in Jemo, a suburb of the capital that a decade ago was countryside but today is dotted by concrete condos housing rural migrants looking for work, including her elder cousin. “When I got here, I didn’t have any opportunities so I took this job,” she says. Emaway is a leather skiver at the Huajian International Light Industry City, a 1.5 million-square-meter industrial park that, will eventually provide housing, hospitals and schooling onsite, employ 100,000 workers, and within 10 years create $4 billion in revenue, according to the company. The Jemo area of Addis Ababa is becoming increasingly urban. From 8 a.m. until 5 p.m., Emaway forms part of a sprawling assembly line inside a brightly lit, air-conditioned shed that looks like a giant aircraft hangar. But her wages allow for little. “I get paid 1,200 birr ($44) a month with overtime,” she says. “After rent and food, there is nothing left. My cousin has to support me.” Emaway is one of the lowest-paid workers at the factory. Getachew Tilanun, 20, is from a family of maize farmers in Welega, where Ethiopia borders South Sudan in the west. After working at the factory for two years, he has been promoted twice and now earns 2,500 birr (about $90) a month, and receives three meals a day and the chance to live onsite for subsidized rent. Unlike 90% of International Labour Organization member states, Ethiopia has no minimum wage. The international poverty line is about $57 a month. Emaway Gashaw, 18 years old, has worked at Huajian for nine months. “For my wage, I have a lot of responsibility,” he says, explaining that he oversees 100 workers, including 11 line supervisors. “If they make mistakes, my wages get docked.” Getachew has taught himself to speak Chinese to give himself “unique” employment skills. “I tried to find out everything I could about China on the internet,” he says. “When I saw Asian people, I just tried to speak to them.” His work is tough, but the alternative is worse. “Even my father doesn’t like being a farmer,” Getachew says. “It’s the job of the very uneducated.” Just 1% of the 4,000 workers at the Jemo factory are Chinese, says Bonn Liang, a manager who was headhunted from Dongguan one year ago. "But in the future, we will all go back to China,” he adds." Who will run the factories after the Chinese go back to China? If you are concerned about the lousy pay the workers get, pressure the Western companies who buy the products made at these factories from the Chinese.
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Post by kel on Sept 26, 2018 13:47:44 GMT -5
Yes, but this was originally about Rwanda.
Giving China everything while taxing goods meant for their poorest.......
Yes some will get jobs, but that wont offset the increase in costs for the rest.
And all for what ?? 15million - 30 million???
Will the workers even be able to afford the product they make ??
Not sure the Ethiopia comparison is appropriate.....it is way larger than Rwanda.
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Post by Deleted on Sept 26, 2018 23:25:26 GMT -5
"Yes, but this was originally about Rwanda." Not really, it's about Africans deciding how they can develop their nations. Ethiopia, Rwanda and others have decided to emulate the Chinese and South Korean models. You don't approve of their choice. "Giving China everything while taxing goods meant for their poorest....... Yes some will get jobs, but that wont offset the increase in costs for the rest. And all for what ?? 15million - 30 million???" They are giving anybody who wants to set up shop in their country these incentives to do so, not just China. You don't know if the jobs created will or will not offset the increase in costs for the rest. You don't even know if there will be increases in costs for anybody, you are letting your imagination runaway with you. As I've said above, the article that started this conversation doesn't provide enough information to conclude one way or the other about this matter. "Not sure the Ethiopia comparison is appropriate.....it is way larger than Rwanda." A valid point. Checkout what the Ethiopians are up to. www.youtube.com/watch?v=gkYs-oJVYQYwww.youtube.com/watch?time_continue=5&v=koEGPj_N_nY
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