• EU considers trade action after Bangladesh factory collapse

    Khurshed Rinku / Khurshed Rinku / Reuters

    A view of rescue workers attempting to find survivors from the rubble of the collapsed Rana Plaza building on April 30.

    By Susan Taylor, Neha Alawadhi, Serajul Quadir and Rema Paul, Reuters

    The European Union voiced strong concern over labor conditions in Bangladesh after a building collapse there killed hundreds of factory workers, and said it was considering action to encourage improvements, including the use of its trade preference system.

    Anger has been growing since the illegally built structure collapsed last week, killing at least 390 people. Hundreds remain unaccounted for but rescue officials said on Tuesday they had given up hope of finding any more survivors.

    It was the third deadly incident in six months to raise questions about worker safety and labor conditions in the poor South Asian country, which relies on garments for 80 percent of its exports.

    Representatives of major international garment buyers - some facing sharp criticism in home markets for doing too little to safeguard the mostly female workers making their clothes - met industry representatives in Dhaka on Monday and agreed to form a joint panel to put together a new safety plan.

    Clothes made in five factories inside the Rana Plaza building on the outskirts of the capital, Dhaka, were produced for retailers in Europe and Canada.

    Late on Tuesday, the EU issued a brief statement expressing concern and suggested it would look at Bangladesh's preferential trade access to the EU market in considering taking action to encourage better safety standards and labor conditions.


    "The EU is presently considering appropriate action, including through the Generalised System of Preferences (GSP) - through which Bangladesh currently receives duty-free and quota-free access to the EU market under the ‘Everything But Arms' scheme - in order to incentivize responsible management of supply chains involving developing countries," said the statement, issued by EU foreign policy chief Catherine Ashton and Trade Commissioner Karel de Gucht.

    About 3.6 million people work in Bangladesh's garment industry, making it the world's second-largest apparel exporter. The bulk of exports - 60 percent - go to Europe.

    Ashton and de Gucht said they were deeply saddened by the "terrible loss of life", particularly because it followed a fire in the Tazreen Fashion factory in a Dhaka suburb in November that killed 112 people.

    The sheer scale of this disaster and the alleged criminality around the building's construction is finally becoming clear to the world," Ashton and de Gucht said.

    Also on Tuesday, following a private emergency meeting of Canadian retailers, the Retail Council of Canada said it would develop a new set of guidelines.

    That emergency meeting brought together retailers including Loblaw, Sears Canada Inc and Wal-Mart Canada, to discuss how they would deal with the tragedy.

    Representatives of some 45 companies, including Gap Inc, H&M, J.C. Penney, Nike Inc, Wal-Mart, Britain's Primark, Marks & Spencer and Tesco, and Li & Fung, also met officials from the Bangladesh Garment Manufacturers and Exporters Association in Dhaka on Monday to discuss safety.

    The Retail Council of Canada, which represents operators of more than 43,000 stores in Canada, said it would work with international organizations, the Bangladeshi government and others to find ways to address safety in the Bangladesh garment industry.

    Primark and Loblaw have promised to compensate the families of garment workers killed while making their clothes.

    AGONISING WAIT

     With no hope left of finding survivors, heavy machinery is being used to clear concrete and debris from the site in the commercial suburb of Savar, about 20 miles from Dhaka.

    It was still an agonizingly slow process for families waiting for news on loved ones who worked in the Rana Plaza, which collapsed with about 3,000 people inside. About 2,500 people have been rescued so far, many of them injured.

    With angry protests continuing daily since Bangladesh's worst industrial accident, the building's owner was brought before a court in Dhaka on Monday, where lawyers and protesters chanted "hang him, hang him."

    About 20 people were injured on Tuesday as police fired teargas, rubber bullets and water cannon to disperse protesters in Savar calling for the death penalty for the owners of the building and factories.

    Officials in Bangladesh have said the eight-story complex had been built on swampy ground without the correct permits, and more than 3,000 workers entered the building last Wednesday despite warnings it was structurally unsafe.

    Eight people have been arrested - four factory bosses, two engineers, building owner Mohammed Sohel Rana and his father, Abdul Khalek. Police are looking for a fifth factory boss, Spanish citizen David Mayor, although it was unclear whether he was in Bangladesh at the time of the accident.

    The garment industry employs mostly women, some of whom earn as little as $38 a month.

    Copyright 2013 Thomson Reuters. Click for restrictions.

  • Activists to call for sanctions over Thailand's elephant ivory trade

    Sukree Sukplang / Reuters file

    Thai custom officials display seized ivory tusks during a news conference at the customs office of Suvarnabhumi Airport in Bangkok in this Feb. 25, 2011, file photo.

    BANGKOK -- Ivory is easy to find on the stalls of Chatuchak Market and River City mall in Bangkok. On display at just one shop are hundreds of pounds of carved elephant tusk, unthinkable in most capitals but freely and legitimately for sale in Thailand.

    As many as 30,000 elephants were slaughtered globally last year, environmental groups say, and populations are rapidly dwindling, with poachers undeterred by a ban on the international ivory trade in existence since 1989.

    Thailand allows its nationals to trade in ivory from elephants that have died of natural causes inside its borders.

    But animal activists say the system is abused and ivory from Africa and elsewhere is "laundered" through the country.

    The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) holds a conference in Bangkok from March 3 to 14 and -- to the embarrassment of the hosts -- environmental groups such as World Wide Fund for Nature and TRAFFIC plan to table a motion calling for sanctions against Thailand.

    "One of the reasons Thailand is being hit so hard in the CITES conference is, if you look at the numbers of domestic elephants and the numbers of Thailand's ivory carvers, it doesn't add up," said William Schaedla, director of Southeast Asia for TRAFFIC, an NGO for monitoring wildlife trade.

    TRAFFIC estimates the country's elephant population and the natural death rate would provide only 18.5 pounds of ivory per registered carver a year. But poor enforcement and regulation mean Thai merchants can lay their hands on much larger quantities.

    'A bottomless pit'
    After the 1989 ban, countries were supposed to inventory their pre-existing stockpiles so CITES could keep tabs on them. Thailand never did, animal rights groups say.

    "There's an undisclosed amount of ivory in the country, so essentially a bottomless pit to launder through," said Schaedla.

    Thai ivory is supposed to be certified, but according to Schaedla this involves an easily forged slip of paper that the government doesn't bother to track, meaning African ivory can easily enter the market.

    These failures mean Thailand now faces sanctions that, at their strongest, would ban its participation in international trade in the most endangered CITES-listed species, including reptile skins and rare orchids in which it has thriving markets.

    Only Thai nationals should be able to buy ivory inside the country but buyers from Europe, the Americas and China are more common. Crackdowns are rare, and mostly occur during the run-up to CITES conferences, NGOs said.

    Efforts have been made to clean up the laws governing elephants, but lobbying from ivory carvers and elephant owners derailed the process.

    "The resolution of this issue is about political will, and Thailand has repeatedly kicked the can down the road," said Tom Milliken, TRAFFIC's director for South and East Africa.

    Some believe sanctions aren't enough, and that the only way to save Africa's elephants is to ban all ivory markets, including those in Thailand and China, the world's largest.

    "Our position is any legal market provides a parallel illegal market," said Mary Rice of the Environmental Investigation Agency, a London-based NGO.

    Ivory 'should be illegal'
    The EIA estimates that over 90 percent of the ivory on sale in China is illegally sourced.

    "We must target the demand side and ensure markets in China and Thailand for ivory are banned. Ivory should be illegal without exception," Shelley Waterland of the Born Free Foundation told a news conference in Bangkok on Thursday.

    Thai Prime Minister Yingluck Shinawatra said on Wednesday Thailand would "consider" a ban on the domestic ivory trade, but some officials apparently see no need.

    "The Thai government has a system to control the ivory trade from domestic animals already," said Theeraphat Prayurasith, deputy director of Thailand's Department of National Park, Wildlife and Plant Protection.

    "We do not use African ivory in this country, and the quantities are not too large to be from domestic ivory. It is the right of Thai people to use domestic elephants," he said.

    Activists will argue at the CITES conference that this system is not working, and the Thai ivory trade is a big factor behind dwindling African elephant populations.

    "No one is going to hammer them and hit them with sanctions if they do something. But there's an appearance of subterfuge and stalling," said Schaedla.

    Reuters

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  • Iran bans pistachio exports as sanctions bite

    Atta Kenare / AFP/Getty Images file

    A pistachio wholesaler shows his goods at his shop in Tehran in November 2006.

    Iran has ordered a six-month ban on pistachio exports to try to control the price of the nut, which has doubled in the past month.

    Pistachios are among Iran's top non-oil exports and widely consumed at home, bringing in an average of $1.5 billion a year and providing work for hundreds of thousands of people.

    Iran was long the world's largest pistachio exporter, with over 200,000 tons a year, but was surpassed last year by the United States.

    First Vice President Mohammad Reza Rahimi told Iranian state TV on Friday that the ban is temporary and meant to help bring down the price of pistachios that doubled from about 250,000 Iranian rials per kilogram ($3.18 per pound).

    Western sanctions over Iran's controversial nuclear program have slowed the country's economy and disrupted foreign trade.

    The Associated Press

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  • Tobacco industry uses trade pacts to try to snuff out anti-smoking laws

    A pack of Marlboro Menthol cigarettes intended for sale in Australia. As of Dec. 1, all cigarettes sold in the country must be sold in plain packaging with graphic warnings covering 75 percent of the front and 90 percent of the back of the pack under a groundbreaking law.

    By Myron Levin, FairWarning

    As countries around the world ramp up their campaigns against smoking with tough restrictions on tobacco advertising, the industry is fighting back by invoking international trade agreements to thwart the most stringent rules.

    A key battlefront is Australia, which is trying to repel a legal assault on its groundbreaking law requiring cigarettes to be sold in plain packs without distinctive brand logos or colors. Contesting the law, which takes effect Dec. 1, are the top multinational cigarette makers and three countries — Ukraine, Honduras and Dominican Republic — whose legal fees are being paid by the industry.

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    The dispute underlines broader concerns about trade provisions that enable foreign companies to challenge national health, labor and environmental standards. Once a country ratifies a trade agreement, its terms supersede domestic laws. If a country’s regulations are found to impose unreasonable restrictions on trade, it must amend the rules or compensate the nation or foreign corporation that brought the complaint.

    In the case of Australia’s plain packaging law, the tobacco industry and its allies are challenging the measure as a violation of intellectual property rights under trade agreements the nation signed years ago.

    Public health advocates fear the legal attack will deter other countries from passing strong measures to combat the public health burdens of smoking. The “cost of defending this case, and the risk of being held liable, would intimidate all but the most wealthy, sophisticated countries into inaction,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids in Washington D.C.

    The advocates also say countries should be free to decide how best to protect public health, without being second-guessed by unelected trade panels. Moreover, they argue, tobacco products, which kill when used as intended, should not be afforded the same trade protections as other goods and services.

    Worldwide, nearly 6 million people a year die of smoking-related causes, according to the World Health Organization, which says the toll could top 8 million by 2030. With fewer people lighting up in wealthy nations, nearly 80 percent of the world’s 1 billion smokers live in low- and middle-income countries.

    Marlboro, the world's top-selling brand, is shown packaged under labeling laws of, clockwise from upper left, the U.S., Egypt, Djibouti, Hungary.

    Countries have been emboldened to pass more stringent measures by the Framework Convention on Tobacco Control. In effect since 2005, the treaty has committed about 175 nations to pursue such measures as higher cigarette taxes, public smoking bans, prohibitions on tobacco advertising, and graphic warning labels with grisly images such as diseased lungs and rotting teeth (The U.S. has signed the treaty, but the Senate has not ratified it. The U.S. Food and Drug Administration has ordered graphic warnings for cigarette packs, but an industry court challenge on 1st Amendment grounds has stalled the rule.)

    Cigarette makers say they acknowledge the hazards and the need for regulations. “We actually support the vast majority of them,” said Peter Nixon, vice president of communications for Philip Morris International, which has its headquarters in New York, its operations center in Switzerland, and is the biggest multinational cigarette maker with 16 percent of global sales.

    Bans on cigarette ads spread
    But the industry has watched with growing concern as more than 35 countries have adopted total or near-total bans on cigarette advertising. Its big profits depend on consumer recognition of its brands. Yet in many countries, the once-ubiquitous logos and imagery are receding, leaving the cigarette pack as a last refuge against invisibility.

    Now the pack, too, is under attack. Along with plain packaging laws such as Australia’s, countries are weighing retail display bans that keep cigarette packs out of view of consumers, and laws requiring graphic health warnings so large that there is barely any room for trademarks. Tobacco companies contend that countries enforcing such rules are effectively confiscating their intellectual property and must pay damages.

    The industry also claims that measures like plain packaging are counterproductive. “We see no evidence — none at all — that this will be effective in reducing smoking,” Nixon of Philip Morris International said in an interview. In fact, he said, generic packaging likely will increase sales of cheap, untaxed counterfeit smokes, thus increasing consumption.

    Todd Rosenberg / Philip Morris

    Louis Camilleri, chairman and CEO of Philip Morris International.

    Louis C. Camilleri, chairman and CEO of Philip Morris International, drew a line in the sand in remarks to Wall Street analysts in November, 2010. The company would use “all necessary resources and…where necessary litigation, to actively challenge unreasonable regulatory proposals,’’ Camilleri said, specifically mentioning plain packaging and display bans.

    Up to now, tobacco-related trade disputes have mostly involved quotas or tariffs meant to protect domestic producers from foreign competition.  

    The key issue now, though, isn’t traditional trade barriers, but whether health regulations unduly restrict the movement of goods. In challenging anti-smoking rules, the industry has drawn on global treaties, such as the 1994 pact known as TRIPS (the Agreement on Trade Related Aspects of International Property Rights), that include broad protections for intellectual property and foreign investment.

    In the hands of aggressive corporations, such long-standing provisions have become ‘’the ticking time bomb for this century as governments tackle problems like tobacco, the environment, obesity, access to essential medicines,” said Myers of the Campaign for Tobacco Free Kids.

    Two recent legal decisions showed that such cases are no slam dunk for the industry.  In September, a court in Oslo, Norway, rejected a lawsuit by Philip Morris Norway AS that challenged the country’s retail display ban. The company had claimed that in enforcing the ban, Norway had violated the European Economic Agreement by failing to adopt the least trade-restrictive measures to achieve its public health goals.

    The court, siding with Norway’s government, found that other measures would not be as effective in insuring that “as few as possible youngsters begin to smoke.’’

    Australia also triumphed in the first round of its legal defense of plain packaging. Rejecting a lawsuit by the four top global companies -- Japan Tobacco Inc. and Imperial Tobacco, along with British American and Philip Morris International — Australia’s High Court upheld the law as legal and constitutional. 

    The law requires that all cigarettes be sold in drab olive-brown packs, with pictorial warnings covering 75 percent of the front and 90 percent of the back.

    The goal is to reduce “the attractiveness and appeal of tobacco products to consumers, particularly young people,” a spokeswoman for Australia’s Department of Health and Ageing said in an email to FairWarning.

    But two major challenges remain.

    Australia law challenged under trade pacts
    In one, Philip Morris Asia has accused Australia of violating a 1993 bilateral trade pact between Hong Kong and Australia. Such agreements, known as investor-state treaties, allow a foreign investor by itself to bring an arbitration claim for damages against a country.

    The case is before an arbitration panel of the U.N. Commission on International Trade Law.

    In the other, Ukraine, Honduras and the Dominican Republic earlier this year brought their challenges before the World Trade Organization.

    The complaint in March by Ukraine was a striking paradox. Its trade ministry filed the challenge within hours of Ukraine’s president signing a ban on tobacco advertising, and its parliament voting to ban public smoking — revolutionary moves in chain-smoking Eastern Europe. Trade officials took the action despite Ukraine having no tobacco exports to Australia, and therefore no apparent financial interest in its anti-smoking policies.

    But prodded by the tobacco industry, the trade ministry branded the plain packaging law as a violation of intellectual property rights that Australia was bound to protect.

    Honduras and the Dominican Republic soon joined the attack on Australia, filing similar complaints with the WTO.

    Cigarette makers are paying for heavyweight lawyers to represent the three countries. 

    As company representatives have told FairWarning, Philip Morris International is paying the firm of Sidley Austin to represent the Dominican Republic, while British American is picking up legal expenses for Ukraine and Honduras. 

    “We are happy to support countries who, like us, feel plain packaging could adversely affect trade,” said British American spokesman Jem Maidment. 

    It’s not unusual in trade disputes for corporations to give legal assistance to governments with mutual interests. In this case, however, the three countries appear to have little, if any, direct stake in Australia’s tobacco control policies.

    While tobacco exports from Ukraine to Australia are nonexistent, exports from Honduras and Dominican Republic in the past three years have averaged $60,000 (U.S.) and $806,000, respectively, according to figures from Australia’s Department of Foreign Affairs and Trade.

    Responding in April to an inquiry from Ukrainian journalists, the country’s Ministry of Economic Development and Trade said it had “a policy of supporting Ukrainian producers and protecting their interests in the internal and external markets.” In this case, the ministry said, it had “received concerns” about Australia’s law from the Ukrainian Association of Tobacco Producers, made up of the top tobacco multinationals, and from the Union of Wholesalers and Producers of Alcohol and Tobacco Association. 

    Konstantin Krasovksy, a tobacco control official in Ukraine’s Ministry of Health, told FairWarning the countries had allowed themselves to be used. “Honduras, Dominican Republic and Ukraine agreed to be a prostitute,” he said.

    Honduran officials, in an April press release, said Australia’s law ‘’contravenes’’ its trade obligations. It noted that the tobacco industry “employs several hundred thousand people directly and indirectly throughout the supply chain in Honduras.”

    The Dominican Republic, a major cigar exporter, also said plain packaging “will have a significant impact on our economy.”  In a written statement to FairWarning, Katrina Naut, director general for foreign trade with the country’s Ministry of Industry and Commerce, said that if other countries join Australia in adopting plain packaging, it will lead to falling prices for name-brand tobacco products and “an increase — rather than a decrease — in consumption and illicit trade.” 

    Uruquay vs. Philip Morris
    Among supporters of Australia, none is more vociferous than the government of Uruguay. It recently told the WTO’s Dispute Settlement Body that the global trading system “should not force its Members to allow that a product that kills its citizens in unacceptable and alarming proportions continues to be sold wrapped as candy to attract new victims.”

    Uruguay’s stance reflects its own high-stakes battle with Philip Morris.

    The tobacco giant has challenged Uruguay’s requirement of graphic warnings on 80 percent of cigarette packs. Philip Morris is also fighting a rule that limits cigarette marketers to a single style per brand, making it illegal to sell Marlboro Gold and Green along with Marlboro Red.

    The challenge by Swiss units of Philip Morris cites a 1991 bilateral treaty between Switzerland and Uruguay. Since filing the complaint in 2010, the tobacco company has also closed its only cigarette factory in Uruguay.

    The regulations “are extreme, have not been proven to be effective, have seriously harmed the company’s investments in Uruguay,” according to a statement by Philip Morris International.

    Uruguay, with a population of less than 3.5 million and an annual gross domestic product of about $50 billion, seems a poor match for the tobacco giant, which had sales of $77 billion in 2011.

    Amid reports that government officials were seeking a face-saving settlement, Bloomberg Philanthropies announced in late 2010 that it would fund the legal defense of Uruguay’s anti-smoking laws. New York Mayor and businessman Michael R. Bloomberg, an ardent tobacco foe, affirmed the support of his namesake charity in a call to Uruguayan President Jose Mujica.

    Eduardo Bianco

    Advocates fear other countries may have a harder time standing their ground. “Bloomberg has been very generous, but his resources are not unlimited and he can’t pay to defend every tobacco regulation in every country,” said Chris Bostic, deputy director for policy for the group Action on Smoking and Health.

    The Uruguay case could be pivotal, said Dr. Eduardo Bianco, president of the Tobacco Epidemic Research Centre  in Uruguay. “If they (Philip Morris International) succeed with Uruguay they would send a clear message to the rest of the developing countries: ‘take care about us, you can be next.’"

    FairWarning (www.fairwarning.org) is an online, investigative news organization based in Los Angeles that focuses on safety and health issues.

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  • 'International Bag City' is a key to China's economic future

    Aly Song / Reuters

    People walk in front of posters advertising International Bag City in Pinghu, Zhejiang province September 28, 2012.

    By Kevin Yao and Nick Edwards, Reuters

    PINGHU, China - Chinese luggage magnate Karohy Shi wants to add another name to the list of chic cities synonymous with style. Move over Milan, look out London, forget Paris. Say hello International Bag City, Pinghu.

    But the $236 million trading center Shi is building in this coastal town about 100 kilometers from Shanghai is more than a place for foreign fashionistas to find the perfect purse.

    It aims to help local firms develop their own domestic brands and markets and start scaling the global value chain.

    "If we don't do this, maybe five years from now most of the factories around here will have only one thing in their future - going bankrupt," said Shi, chairman of International Bag City (IBC) and local luggage maker, Newcomer Group.

    Newcomer is one of many Pinghu bag factories that employ some 40,000-50,000 people, operate on razor-thin margins after a decade of rising labor and raw material costs and where Europe's slump is a fresh threat to survival in an industry where 70-80 percent of output is for foreign clients.

    It's a familiar story everywhere in China's vast manufacturing sector, which generated most of the roughly $2 trillion of revenues derived from exports last year.

    Shi's example is the sort of initiative China's leaders want to see sprouting across the economy and provides a case study of the benefits and challenges the country will face as the government shifts the focus of factories away from exports.

    Beijing wants home-grown firms to tap into China's fast-growing, foreign brand-focused, consumer class and transform the country's factories from low-end assembly lines for the likes of Apple Inc and Wal-Mart to high value-added product originators of their own.

    Chinese leaders need manufacturers to move up the value chain to avoid the so-called "middle income trap" where wealth creation stagnates as market share is lost to lower cost competitors overseas and the attainment of high-income country status stays hopelessly out of reach.

    The Communist Party fears the popular discontent that that could stoke, even though jobs are likely to be lost as China ditches its labor-intensive export model.

    "Right now, we take overseas orders and earn processing fees, but we cannot survive just on processing fees. This model is dead," said Cao Liang, head of Pinghu municipal government's news department and the vice chief of propaganda for the local Communist Party branch.

    Path to prosperity
    Shi's IBC plan will bring together retailers, wholesalers, traders, raw material suppliers, designers and service providers into one location - with the aim of cutting costs and export dependency and developing home markets and brands.

    Aggregation around a center of excellence is a well-trodden path to prosperity. Edward Lloyd did much the same in 1688, turning his coffee shop meeting venue for ship brokers, merchants and financiers into the Lloyd's of London insurance market that remains the world's leading provider of specialist insurance cover more than 300 years later.

    Shi and his partners see IBC -- a 400,000 square meter development of office towers, wholesale market and design studios -- as the way to roughly double the value of annual bag revenues in Pinghu to 10 billion yuan ($1.6 billion) by 2020, while cutting export exposure to 50 percent of the industry's output.

    Shi has proposed to the local Jiaxing government in Zhejiang province that it uses Pinghu's IBC - which will employ 10,000 people when it opens in September next year - as a template to build a fashion capital modeled on Milan and Paris. But his motivation is more about making a profit than leaving a mark on China's economic landscape.

    "Now Chinese people have more money," 46-year-old Shi, who has an MBA from the China Europe International Business School, said in English.

    "In the past, one bag was used for every purpose. But now, especially for young people, if they take the wrong bag to the wrong event, they are out, they will be laughed at," he said. "It's a big potential market."

    Faltering foreign demand and soaring costs add urgency to the need for change. Many exporters are running at reduced capacity and some are struggling to survive.

    The second slump in orders in four years has left China's export growth this year averaging around 7.8 percent versus 2011. It was just 2.7 percent in August from a year earlier and the Commerce Ministry has said things could get worse in the months ahead - jeopardizing the official 2012 target for a rise of 10 percent.

    That's not great news in a country where exports generated 31 percent of gross domestic product in 2011, supported an estimated 200 million jobs and where analysts expect the weakest year of economic growth since 1999 at 7.7 percent.

    Domestic retail sales growth meanwhile is averaging 14 percent this year, reinforcing Beijing's belief it must change China's economic mix towards domestic consumption.

    A Beijing-backed World Bank report envisages per capita income rising to $16,000 by 2030 from about $5,000 now, with two thirds of economic activity forecast to come from domestic consumption against less than 50 percent at present.

    Other reports suggest the shift could come sooner than policymakers expect. Analysts at McKinsey reckon China's mainstream consumer class will comprise 400 million people with household incomes between $16,000 and $34,000 by 2020. Boston Consulting Group says China will be the world's No.2 consumer market by 2015.

    Margin multiplication
    Fang Xiaodong is one Pinghu businessman thriving in the domestic market.

    "The profit margin of a single piece of clothing for domestic sale is much higher than for exports. It could be five or 10 times higher," says the chairman of Zhejiang Yisijia Garments Co., a maker of clothes for the world's biggest brands in the outdoor activities market.

    Fang is rapidly expanding his own range of gear for a growing number of Chinese consumers attracted to hiking, climbing, camping and skiing - the kind of outdoor activities that come with rising wealth and increased leisure time.

    Fang started selling under the Yisijia label for domestic sales in 2005. It is now 35 percent of annual sales of 200 million yuan and competing so successfully with foreign brands in China he plans a launch in Europe under the name Esguard.

    Fang expects his own-label domestic sales to grow 30 percent in 2012 as his overseas sales of foreign brands drop 10 percent.

    The switch to a domestic focus forces up logistical costs as firms switch from exporting containers of gear straight off production lines to shipping individual cartons through China's fragmented retail network, in which producers bear the risk of unsold output.

    "The cost of expanding domestic sales is high. Most companies that are switching to home markets are not successful," Li Yushi, vice head of the Commerce Ministry's think-tank in Beijing.

    Skills shift
    Others are investing to reduce labor costs. Linda Zhao, Newcomer's general manager, said the company spent 10 million yuan on automation in 2011.

    New machinery and new processes need new skills. Pinghu, with a small permanent population of 480,000 supplemented by a migrant population of 250,000, has responded by providing city-sponsored re-training for workers laid off from low-end jobs.

    If they up sticks in search of jobs elsewhere, Pinghu's enterprise zones and business parks will empty and a bustling city - where small businesses line streets intersecting housing developments built on ample waterside plots and a newly-finished fashion mall gleams at its edge - will shrivel.

    "Demand for skills is higher this year than last. The structural change is being felt," Hu Jianfei, director of Pinghu Human Resources Centre, the city's official labor market, said.

    "The situation forces companies to adjust and upgrade," said Hu, who helps 2,200 firms find workers each year.

    Get the balance right and China could secure its manufacturing base years into the future, even for those in the low margin textiles business, like David Tien, executive vice president of Quang Viet Enterprise Co Ltd.

    His firm makes sportswear for the world's biggest household names. Tien, from Taiwan, has no ambition to create his own brand or come up with his own designs. That makes him acutely sensitive to maximizing margins in a business where he says 3-5 percent is about as good as it gets.

    Tien is bucking the apocryphal trend of textile makers leaving China for lower cost locations such as Vietnam. Instead, he set up a factory in Pinghu a decade ago to try to squeeze more profit from a business he's run from Vietnam for 20 years.

    "I have 3,000 staff in China and 10,000 staff in Vietnam, but I get the same production volume and profit from both locations," Tien said.

    Higher skill levels, adaptability to new technology and the willingness to work plenty of overtime to complete rush orders give his Chinese factory the edge.

    The only downside is staff turnover, which leaves him recruiting and training roughly a third of his Chinese workforce every year. And it's getting harder to do so.

    "We know that China's getting richer," Tien said. "It's got lots of young consumers and they know how to spend, but they are not so keen on the hard work to earn it.

    "The real long-term problem for manufacturing business in China is that young people just don't want to work in factories anymore."

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  • Auto industry in middle of US-China trade conflict

    By Paul A. Eisenstein, NBC News contributor

    With both nations facing possible leadership changes, the U.S. and China appear heading for a serious battle over trade – and the auto industry is caught in the middle.

    President Barack Obama, clearly intending to look tough, has authorized the U.S. to file a new trade complaint with the World Trade Organization over China’s subsidized auto and auto parts exports.  But the Chinese landed the first punch today when they filed a complaint with the World Trade Organization over allegedly unfair duties the U.S. has enacted on 30 different types of goods including Chinese-made steel, paper and kitchen appliances.

    China and the U.S. began squabbling over trade – and backing up the dispute with tit-for-tat sanctions – earlier this year.  But the debate has been heating up for a number of years, especially over concerns about China’s lackadaisical attitude towards American intellectual property.

    In recent years, critics contend, it’s become routine for the Chinese to copy American-made goods.  Earlier this summer, in fact, Ford Motor Co. won a rare victory when it was able to block a Chinese competitor from producing a virtual clone of its big F-Series pickup.  Despite some high-profile campaigns, however, American business officials say China has done little to stop the problem, especially when it comes to entertainment programming, such as films and videos.

    Both countries continue to insist they want to take steps to improve – rather than limit – free trade.  But the timing may make it difficult for either side to back down from their increasingly confrontational approach.

    President Obama will announce the details of the new WTO complaint during a campaign swing through Ohio, later today.  The timing and location are anything but coincidental.  China has been rapidly building up its automotive export business to the U.S., something that has a direct impact in Ohio, a manufacturing swing state that could play a pivotal role in outcome of the November presidential election. About 12% of Ohio’s workforce is employed directly or indirectly in the automotive sector.

    And that’s not lost on Republican candidate Mitt Romney who has been accusing the White House of ignoring the trade threat from China. 

    US, China take trade battle up a notch

    The situation could grow worse if subsidized auto goods are allowed to continue freely entering the U.S. market, critics contend. The government complaint asserts the Chinese government provided about $1 billion in support for that country’s car parts manufacturers between 2009 and 2011, a move that allegedly benefited about 60 percent of the auto goods shipped to the U.S.

    According to the White House, the U.S. auto parts industry lost about half its jobs between 2001 and 2010, the same time period during which it claims employment in the export side of China’s auto parts making industry increased seven-fold. There’s not a direct, one-to-one comparison; China, for one thing, exports parts to markets other than the U.S. But there’s no question that lower-priced Chinese parts have been cutting into jobs at manufacturers as diverse as Delphi Corp. and American Axle.

    “Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest. It's not right; it's against the rules; and we will not let it stand,” the President declared during a stop in Cincinnati. “American workers build better products than anyone. 'Made in America' means something. And when the playing field is level, America will always win."

    The President’s comments were countered by candidate Romney who issued an e-mailed statement insisting, “It is too little, too late for American businesses and middle-class families.” The GOP nominee, who has taken significant fire for his own foreign affairs gaffes in recent months, asserted he will pursue a “comprehensive strategy (to) ensure a level playing field” with China.


    While a White House official insisted the timing of today’s WTO complaint was coincidental, the result of months of preparation, the President clearly used the news for his own political advantage.  He referred to Mitt Romney’s long ties to Bain Capital noting, “I understand my opponent has been running around Ohio claiming he's going to roll up his sleeves and take the fight to China. But here's the thing: his experience has been owning companies that were called 'pioneers' in the business of outsourcing jobs to countries like China.

    “Pioneers!” the President added, “Ohio, you can't stand up to China when all you've done is send them our jobs.”

    This is the 15th trade complaint the U.S. has filed with the WTO since China joined that global trade regulating body in December 2001.  But it’s also the second time since the beginning of the current presidential campaign that the Obama White House has taken action against China for alleged trade violations in the automotive sector.  The first complaint targeted the claimed dumping of Chinese-made tires.

    But that move prompted a rapid backlash, China firing back by placing over $3 billion in duties on U.S. automotive exports.  The Chinese auto import tariffs vary widely by manufacturers but are stiffest for products built by Detroit’s Big Three. The Cadillac CTS and Buick Enclave, for example, are subject to 22 percent duties, the Jeep Wrangler and Grand Cherokee models 15 percent.  The American-made Acura TL sedan, on the other hand, faces only a 4.1 percent mark-up.

    While the bitter presidential campaign may be spurring the White House to move with the latest trade complaint, China has similar motivation to fight back.  The country plans to install its own new president during the 10-year party meeting tentatively scheduled for October.  But things have not gone nearly as smoothly as planned.

    The all-powerful Communist Party was roiled by a corruption scandal involving rising star Bo Xili and his wife – the latter now convicted of murdering a British businessman.  Complicating matters, Xi Jinping, the man expected to become president, has been virtually invisible in recent weeks raising serious questions about his health and the planned succession process.

    Experts warn the Chinese will not be ready to back down on trade issues at this crucial point, especially not on a sector as crucial to their economy as the auto industry.  Complicating the situation, Chinese domestic auto sales have unexpectedly weakened in recent months making exports all the more important.

    So the shots fired today could trigger still more unless the Geneva-based WTO finds a way to achieve a face-saving compromise for both sides.

    More money and business news:

     

  • Panasonic, Canon shutter China factories amid violent anti-Japan protests

    Getty Images

    An anti-Japanese protester throws a gas canister during a demonstration over the disputed Diaoyu Islands in Shenzhen, China, on Sunday.

    By NBC News staff and wire reports

    Major electronics firms Panasonic and Canon have temporarily suspended production at factories in China after a territorial dispute over a group of uninhabited islets in the East China Sea triggered violent anti-Japanese protests.

    Sites linked to auto manufacturers Toyota and Honda have also been attacked in the unrest, which has forced frightened expatriates into hiding and sent relations between Asia's two biggest economies into crisis.

    Ratcheting up tensions further on Monday, Chinese state media warned Japan it could suffer another "lost decade" if trade ties soured. Japan counted China as its top trade partner last year, with total two-way trade of more than $340 billion.

    Tyrone Siu / Reuters

    A demonstrator kicks a glass window of the Japanese Seibu department store during a protest in Shenzhen, China, on Sunday.

    A report in the Japan Times on Monday, posted on Twitter, said 1,000 fishing boats were sailing towards the disputed islands - a move likely to further inflame tensions.

    "I'm not going out today and I've asked my Chinese boyfriend to be with me all day tomorrow," said Sayo Morimoto, a 29-year-old Japanese graduate student at a university in Shenzhen.

    Protests broke out across dozens of Chinese cities at the weekend, some violent, in response to the Japanese government's decision last week to buy some of the disputed islands from a private Japanese owner. The move incensed Beijing.

    Much at stake for US as tensions rise in troubled China Seas

    In Tokyo, electronics giant Panasonic Corp said Monday it has suspended production at two electronics components factories in China and closed another, telling workers to stay at home after the facilities were attacked by anti-Japan protesters.

    Atsushi Hinoki, a Tokyo-based Panasonic spokesman, said another plant in China has been closed after several workers "sabotaged" operations in the factory. The plant will also remain closed until Tuesday - a memorial day in China when it marks the anniversary of Japan's 1931 occupation of parts of mainland China.

    Afp / AFP - Getty Images

    Chinese demonstrators set fire to a Japanese national flag during a protest over the Diaoyu islands issue, known as the Senkaku islands in Japan, in Wuhan, China, on Sunday.

    Meanwhile, Canon Inc is set to suspend operations at three of its four plants in China on Monday and Tuesday. It will halt production lines at its laser printer factory in Guangdong, a digital camera factory in Guangdong, and a copier plant in Jiangsu, Japanese media reported.

    The protests focused mainly on Japanese diplomatic missions but also targeted shops, restaurants and car dealerships in at least five cities. Toyota and Honda reported arson attacks had badly damaged their stores in Qingdao.

    Japan protests after man seizes flag from ambassador's car in Beijing


    Many Japanese schools across China, including in Beijing and Shanghai, have cancelled classes this week.

     Japanese Prime Minister Yoshihiko Noda, who met visiting U.S. Defense Secretary Leon Panetta on Monday, urged Beijing to ensure Japan's people and property were protected.

    "It is in everybody's interest ... for Japan and China to maintain good relations and to find a way to avoid further escalation," he told reporters In Tokyo.

    Panetta said Sunday he is concerned the territorial disputes in the Asia-Pacific region could spark provocations and result in violence that could involve other nations, such as the United States.

    'Conflict'
    Speaking to reporters on his plane en route to a weeklong trip in the region, Panetta said he will urge countries here to find a way to peacefully resolve their problems. He arrived Sunday in Tokyo, the first stop of his trip.

    "I am concerned that when these countries engage in provocations of one kind or another over these various islands that it raises the possibility that a misjudgment on one side or the other could result in violence and could result in conflict and that conflict would then, you know, have the potential of expanding," Panetta said.

    The defense chief said his conversations with the Japanese and Chinese would echo what Secretary of State Hillary Rodham Clinton told them earlier this month — that they must find a process for settling the disputes. The U.S., he said, does not take a position with regard to the disputed lands.

    Protesters in China attack Japanese factories in a show of anger over a territorial dispute between the two countries. NBCNews.com's Dara Brown reports.

    More China coverage from our Behind the Wall blog

    The dispute over the islands -- called the Senkaku by Japan and the Diaoyu by China -- intensified last week when China sent six surveillance ships to the area, which contains potentially large gas reserves, in response to Japan's purchase.

    The overseas edition of the People's Daily, the main newspaper of the Chinese Communist Party, warned that Beijing could resort to economic retaliation if the dispute festers.

    "How could be it be that Japan wants another lost decade, and could even be prepared to go back by two decades," said a front-page editorial in the newspaper. China "has always been extremely cautious about playing the economic card," it said.

    A Chinese man holds up a piece of paper with the words "Diaoyu island belongs to China, Japanese get out" outside the Japanese embassy in Beijing, China, Sept 11.

    "But in struggles concerning territorial sovereignty, if Japan continues its provocations, then China will take up the battle," the paper said.

    China is Japan's biggest trade partner and Japan is China's third largest. Any harm to business and investment ties would be bad for both economies at a time when China faces a slowdown.

    Qingdao police announced on the Internet on Monday they had arrested a number of people suspected of "disrupting social order" during the protests, apparently referring to the attacks on Japanese-operated factories and shops there.

    China's 7.6 percent growth rate is the lowest in three years – but the country's economic problems appear more dire than the latest numbers indicate. Some believe the government will counter the downturn with a massive stimulus package, a strategy that has left China's local banks saddled with bad debt in the past. NBC's Ian Williams reports from Beijing.

    In Shanghai, home to China's biggest Japanese expatriate population of 56,000, one expat said his family as well as other Japanese customers had been chased out of a Japanese restaurant on Sunday by protesters near the Japanese consulate.

    Guangzhou police said on Monday, on an official microblog, that they had detained 11 people for smashing up a Japanese-brand car, shop windows and billboards on Sunday.

    The Associated Press and Reuters contributed to this report.

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  • Chinese media: 'Many Chinese people dislike Hillary'

    Mark Ralston / AFP - Getty Images, file

    Treasury Secretary Timothy Geithner, U.S. Secretary of State Hillary Clinton and Chinese Vice-Premier Wang Qishan attend the joint statment reading for the closing of the U.S.-China Strategic and Economic Dialogue in Beijing on May 4.

    By Ed Flanagan, NBC News

    BEIJING – It may be Hillary Clinton’s final trip to China in her current role as Secretary of State, but China’s state media has not held back in saying what they really feel about the former first lady and, by extension, the United States.

    In an editorial entitled, “Secretary Clinton: the person who deeply reinforces US-China mutual suspicion,” in Tuesday's edition of noted nationalist newspaper, Global Times, the paper took Clinton to task for her “meddling” in the South China Seas and Diaoyu/Senakku disputes.

    “Many Chinese people do not like Hillary Clinton,” the editorial stated. "She makes the Chinese public dislike and be wary of the United States, which does not necessarily serve U.S. foreign policy interests.”

    Other Chinese state media avoided blaming Clinton for the current heightened tensions in the Asia-Pacific region, but nevertheless took issue with America’s recent “pivot” in the region.

    Nearly two weeks after fleeing his country, Chinese dissident Chen Guangcheng on Thursday spoke out saying his family has been the target of retaliation from Chinese officials. The NOW w/ Alex Wagner discuss what's next for Guangcheng and his family.

    Clinton has pledged to take a strong message to Beijing on the need to calm regional tensions over maritime disputes that have raised broader fears of military friction between the two major Pacific powers.

    The last time Clinton visited Beijing, plans to highlight improving U.S.-China ties were derailed by a blind Chinese dissident whose dramatic flight to the U.S. embassy exposed the deeply uneasy relationship between Beijing and Washington.

    This time, the irritants are disputes over tiny islets and craggy outcrops in oil- and gas-rich areas of the South and East China Seas that have set China against U.S. regional allies.

    As Clinton preps for Asia-Pacific tour, is North Korea capable of reform?

    As Clinton prepares to travel back to Beijing on Tuesday, U.S. officials say the message is once again one of cooperation and partnership -- and an important chance to compare notes during a tricky year of political transition.

    But the unease remains, sharpened by disputes in the South and East China Seas that have rattled nerves across the region and led to testy exchanges with Washington just as the Obama administration "pivots" to the Asia-Pacific region following years of military engagement in Iraq and Afghanistan.

    Pacific micro-nations cash in on US-China aid rivalry

    Both governments, too, are preoccupied with politics at home, with the Obama administration fighting for re-election in November and China's ruling Communist Party preparing for a once-in-a-decade leadership change. 

    Mistrust
    The general sense of mistrust over American involvement in these issues which China adamantly claims are regional territorial disputes was apparent in many users, perhaps most succinctly put by one user who wrote, “The Diaoyu Islands belong to Asian people, we don’t need American help on this issue.”

    Much at stake for US as tensions rise in troubled China Seas

    That position has dominated state media coverage of Clinton's visit to the region this week, manifesting itself in a consensus that the United States was behind much of the recent emboldened confrontations between other Asian powers – most notably the Philippines and Japan -- and China.

    Blind social activist Chen Guangcheng is starting a new life of freedom in the U.S. NBC's Michelle Franzen reports.

    In yesterday’s edition of China Business News, an article noted that “The U.S. is the origin of all issues,” in the region and that Clinton’s visit to the region “delivers a message that Japan and the Philippines are just two sidekicks on the stage while the U.S. is the “boss” at the backstage.”

    Whether state media's depiction of the U.S. Secretary of State accurately reflected the opinions of China's population was unclear, however.

    Activist: I want to leave China 'on Clinton’s plane'

    On China’s popular twitter-like service, Weibo, reaction to the editorial was mixed.

    “The Global Times shouldn’t use their attitude towards Hilary to represent our collective opinion,” wrote one irate user. “I think she’s good, please don’t make fools of us.”

    “History will prove that she [Clinton] is the real peacemaker," another user wrote. 

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  • Canadian lobster fishermen lash out at cheaper U.S. imports

    In Canada, some lobster fishermen are blocking trucks carrying American-caught lobsters from reaching processing plants, saying the imports are hurting the market for their catch. CBC's Jennifer Choi reports.

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  • US-Colombia trade deal to enter into force in May

     

    By Reuters

    CARTAGENA, Colombia - The U.S.-Colombia free trade agreement will enter into force next month, far earlier than expected, as a result of what the Obama administration called "historic" progress for Colombian worker protections and human rights.

    The announcement came during the Summit of the Americas in Colombia, where President Barack Obama has been meeting regional political and business leaders including Colombian President Juan Manuel Santos to push for greater access for U.S. exports.

    U.S. Trade Representative Ron Kirk told reporters in the Caribbean city of Cartagena that the trade deal Obama signed in October would be implemented on May 15, months ahead of what most trade watchers had anticipated.

    "We believe this is a very historic step," Kirk said.

    Colombia's weak labor record, including murders and attacks on union activists that were not investigated, had held up the free trade pact with the United States for years.

    Politically powerful U.S. union groups like the AFL-CIO had opposed the deal - which was largely negotiated under former President George W. Bush - on the grounds that Colombia lacked the capacity to enforce worker protections.

    On Sunday, Obama administration officials said Colombia's creation of a new labor ministry, prosecution of crimes against union workers and steps to fight discrimination against Afro-Colombians and women had assuaged its concerns and made it possible to implement the trade deal.

    Labor Secretary Hilda Solis told reporters U.S. officials had been working closely with Colombia on labor rights issues over the last year and the United States believes there has been "remarkable progress."

    "However, we do know that there still remain challenges," she said.

    Colombia already has duty-free access to the United States for most goods under longtime U.S. trade preference programs. When implemented, the deal will eliminate most of the duties Colombia now imposes on American farming and manufactured goods.

    The U.S. Chamber of Commerce welcomed the news of the May 15 implementation which it said "opens the door to new business opportunities, economic growth, and job creation," noting U.S.-Colombian trade was already worth $14 billion last year.

    Republican Congressman Dave Camp, chairman of the powerful Ways and Means committee, called the agreement to put the deal in place quickly "cause for celebration."

    But AFL-CIO President Richard Trumka said the decision was "deeply disappointing and troubling," describing the endorsement of Colombia's labor gains "premature."

    "We regret that the administration has placed commercial interests above the interests of workers and their trade unions," he said.

  • Colombia president to Obama: Don't ignore your neighbors

    Handout / Reuters

    Colombia's President Juan Manuel Santos, left, his wife Maria Clemencia Rodriguez, and his Foreign Minister Maria Angela Holguin, right, receive President Barack Obama at a state dinner Friday before the start of the Summit of the Americas in Cartagena.

    By msnbc.com news services

    Updated at 12:15 a.m. Saturday ET: CARTAGENA, Colombia -- Washington should turn back to alliances with neighbors in Latin America rather than focus on faraway conflicts like Afghanistan, Colombia’s President Juan Manuel Santos said on Friday before welcoming President Barack Obama to the Americas Summit.

    U.S. influence has waned in recent years in a region it traditionally saw as its backyard, allowing China to gain ground and emerge as the No. 1 trade partner with various countries including regional powerhouse Brazil.

    "If the United States realizes its long-term strategic interests are not in Afghanistan or Pakistan, but in Latin America ... there will be great results," Santos said just before Obama flew into Cartagena, on Colombia's north coast.

    Obama was greeted about 5 p.m. local time with a military band and honor guard in white uniforms, according to White House reporters traveling with him.

    Obama later had dinner with Santos, Santos' wife and the Colombian minister of foreign affairs, Maria Angela Holguin, at Castillo San Felipe, a colonial-era hilltop fortress.

    "Hello, my friend," Obama called out as he approached Santos. "This is spectacular."

    Secret Service agents sent home from Colombia, involvement with prostitutes alleged

    Bombs go off
    Later, two small bombs exploded in Colombia's capital Bogota, about 650 miles away from Cartegana, and police said they may have been a protest by leftist guerrillas against the presence of Obama.

    Guillermo Legaria / AFP - Getty Images

    Members of the Technical Investigation Corps of the Colombian Attorney investigate an area where unknown assailants activated an explosive device Friday near the U.S. Embassy in Bogota, Colombia.

    "There are windows broken, but nobody hurt or killed,'' a senior police source told Reuters, saying the explosives were placed in a ditch in a residential area near the attorney general's office and the U.S. Embassy.

    Two small bombs were also reported in Cartagena, where no one was hurt and no major damage was reported, NBC News said. 

    Obama was welcomed at the last Summit of the Americas in 2009. But Latin American hopes, including for a U.S. rapprochement with communist-run Cuba, were largely dashed as Obama has focused on other global priorities.

    PhotoBlog: Protests ignite at Summit of the Americas in Colombia

    Santos' comments came in a speech to hundreds of businessmen from North and South America meeting ahead of the Organization of American States' (OAS) sixth summit attended by more than 30 heads of state in the historic Caribbean port of Cartagena.

    With deep ideological fissures dividing Latin America over the last decade, the Colombian leader urged his fellow heads of state -- who meet on Saturday and Sunday -- to follow his example of putting pragmatism first.

    "Let's respect our differences, but stay together. Who would have imagined Venezuela and Colombia working together?" asked Santos, whose first action after taking office in 2010 was to bury the hatchet with socialist President Hugo Chavez next door.

    Various presidents had arrived by Friday, some donning traditional loose-fitting "guayabera" shirts to cope with the heat in tropical Cartagena.

    Inter-American Development Bank head Luis Alberto Moreno said the region contributed 14 percent of global GDP, was enjoying annual growth of about 4 percent, and looked on course to double per capita income by 2030.

    "Latin America is one of the motors of world economic recovery," he said.

    Mexican President Felipe Calderon also addressed business leaders, making an impassioned plea to curb rising protectionism in the region in response to a flow of funds from rich nations that has strengthened currencies and hurt competitiveness.

    In an interview with a Colombian radio station, Obama did, however, took a conciliatory line on efforts to legalize drugs, echoing the region's oft-cited complaint that the United States is the biggest consumer and so must sort out the problem at its end.

    "In the United States we have a responsibility to reduce demand for drugs, and that's why I've put in billions of dollars in public health to try to encourage the treatment programs, the education programs, the prevention programs that can reduce drug demands of the United States as such a large market for the drug traffickers," he told the Radio W station.

    This article includes reporting by Reuters.

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