Washington Insider-- Tuesday

Looking to Robots

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Australia, China Trade Tensions Continue To Rise

China over the week imposed new bans on imports of products from Australia, including lobster and timber, with reports indicating that items like copper and sugar could also be targeted. The action resulted in clearance of Australian rock lobster shipments to be delayed in Shanghai on increased inspections.

On Friday, the General Administration of Customs of China (GACC) issued a warning notice to exporters saying that it had found a pest—the bark beetle Ips grandicollis—in imported log timber from Queensland and they banned all log shipments coming in from the Australian state. A China foreign ministry spokesman confirmed today that Chinese authorities have repeatedly found “biohazards” in imports of Australian timber.

Meanwhile, China rejected an appeal by Australia on tariffs that it imposed on Australian barley. Australia had sought a review of the tariffs which totaled more than 80.5% that were put in place earlier this year.

While the frictions between Australia and China are rising, it is not yet clear that the situation has prompted any shift of business yet to the U.S. as there have been no sales of U.S. barley to China despite the tariff situation on barley from Australia.

US Removes Parboiled Rice From GSP

Duty-free treatment for parboiled rice from several countries under the Generalized System of Preferences (GSP) will be removed via an executive order issued October 30 by the White House.

The announcement Friday indicated the administration would modify rice tariff lines under the GSP, with Sen. John Boozman, R-Ark., saying the move is a “step in the right direction is a win for American rice producers. Our rice farmers can compete with anyone on the world stage. This update will help level the playing field to ensure our American farmers are not being undercut by international growers. I appreciate the Administration for listening and responding to this petition from our farmers.”

The USA Rice Daily indicated the tariff line adjustment was for parboiled rice and would primarily affect Argentina, Brazil, Pakistan, Paraguay and Thailand. Parboiled rice from those countries will face an 11.2% US tariff, the group said.

The USA Rice Federation sought action in March to remove all six tariff lines for rice covered under the GSP.


Washington Insider: Looking to Robots

Bloomberg is reporting this week that although the recent U.S. political focus has been on ways to bring manufacturing back, some business people believe that “both candidates are going about it the wrong way — talking about tariffs or taxes, when they should be smoothing the road for robots.”

The report highlights Kent Bicycles, a firm that employs about 150 people at a plant in Manning, South Carolina, that opened six years ago. The company still does most of its manufacturing in China and Taiwan and even its recent partial reshoring was a risky venture that went against the tide. Owner Mark Kamler says he would like to take it further and quadruple his U.S. output to 1 million bikes a year. But he says he's not getting the kind of government help he needs.

The administration has tried to boost manufacturing by imposing tariffs, Bloomberg says. In the election campaign, both parties are promising to bring factories home — with a mixture of incentives for companies that do — and penalties on those who don't.

Kamler is critical of policies that rely on tariffs, and notes that industrialists in rival countries get substantial help from politicians when they seek to upgrade plants to make better use of robot technology. “The very first thing the U.S. government should do is to help U.S. companies automate.”

Manufacturing, which employed about one-quarter of the U.S. workforce in the 1950s compared with less than 9% now, can once more become a bedrock of middle-class jobs, Bloomberg noted. That's part of what President Trump meant by “make America great again.” It's been a theme of Biden's campaign too, with a promise to “create millions of new manufacturing and innovation jobs.”

When the issue is framed that way, automation tends to appear--along with globalization — as an enemy of employment. However, Bloomberg says that “walking through Kent's factory, it's easy to see why. The plant houses a mix of manual and automated processes, and moving from one to the other feels like time-travel.”

Kent's expansion plans would see more of the assembly process carried out that way.

Still Kamler says that he'll have to hire more workers to tend to the robots he plans to buy. “There'll be job openings, and they'll likely be better compensated. The paint line requires a higher skill set and pays as much as $1.50 an hour more than the assembly line, he said.

The Manufacturing Institute says its research shows that about three-quarters of manufacturers are planning to boost investments in smart-factory technology over the coming year. They also think the biggest impact of automation on the workforce will be to create opportunities for people who know how to operate the new machinery.

Carolyn Lee, the institute's executive director, estimates that there are already about 400,000 openings like that, and says manufacturers will need to fill 4.6 million of them by 2028.

“One of the prime benefits of automation is that it replaces tasks that are repetitive or physically taxing, freeing people to focus on tasks that require human skills and creativity and creating even more jobs along the way,” she says.

Kamler notes that labor unions see this as a “rose-tinted view” and are more worried about the jobs that will disappear — about 40 million in the U.S. by 2030, according to a McKinsey study. While people fear automation will cut jobs, Kamler says, he expects to need to hire more OS workers to tend to the robots he plans to buy.

Shielding employees from that risk is becoming part of the bargaining process. In 2018, a landmark agreement negotiated by Las Vegas culinary workers with local hotels required employers to give notice six months before introducing machines that could displace workers--and to train their staff in how to use them.

The episode shows how automation has spread beyond factories and deep into service industries — where most job losses during the pandemic shutdown have been concentrated, Bloomberg says. That could be ominous for the laid-off workers.

However, Kent Bicycles has come through the slump without any job cuts — thanks to the surge of interest in cycling among locked-down Americans. It came as a relief to Kamler, after a period when the company got hit by tariffs on almost every part it imports. Kent had to push prices up as much as 20%, and temporarily lay off about 40 staff — one reason Kamler, a Republican, was irritated when his factory briefly appeared in a local campaign video.

“We went months of shipping lots of bicycles and losing money” because of the administration's tariffs, he says. Now, though, “business is off-the-charts crazy good.” But even with all this new demand, Kamler says robots are the key to ramping up output–because expanding manual production lines on that scale will push costs too high, and make his bikes uncompetitive. He reckons customers are willing to pay maybe 10% extra for made-in-America products, but that's the limit.

“If we're going to make bicycles in a big way, we need a lot more automation,” he says. 'We just can't do it the way we used to do it years ago.”

So, we will see. There is wide support in both parties now for worker protections and perhaps only modest interest in retooling jobs to be more competitive — the way Kent wants to do. Clearly, the coming debate over trade policy will need to consider a broad range of implications and will be deeply controversial—and should be watched closely by producers as it emerges, Washington Insider believes.

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