Made in China

Some leaders have absolutely no clue as to what constitutes a new world economic order, thinking it merely involves re-alliances. Where these are products of whim, on one end, and vitriolic tempers, on another, then reckless utterances blabbered can have hidden consequences. 

When we purchase coffee beans from middlemen in the Ivory Coast, we pay for any unfair trade practices that may have been inputted — ranging from underpricing to subhuman work conditions. When we import rip-offs from Seoul, we take advantage of criminality’s upsides on patents, brands and trademarks.

Depending on the source economy, we could be aiding and abetting child labor, unfair wages, pollutive manufacturers, foreign corruption, even slavery, in some instances. All these may benefit us in terms of price but there also are those hidden costs we might be paying for when we reduce the question of economic order to simply a question of who are friendly to us and who are not.

A case in point is our increasingly bizarre dalliance with a super power that does not respect our territorial sovereignty.

As eclectic as our standing relationships have been, the Philippines still imports from China so much that the balance of trade between us remains skewed.

We import things we need and things we don’t need. One borrowing client with a network of food businesses regularly draws from letters of credit negotiated with the state-run Bank of China. He imports dim-sum and nuggets made from animals he has yet to identify, as well as other processed finger food basically comprised of flour, fillers and food coloring.

All these can be put together in a Filipino kitchen from less expensive yet purely Filipino ingredients – all by Filipino hands. And yet he finds it cheaper in terms of operating to import from China.

Only our labor costs are competitive. Nothing else is. Electricity costs remain the highest. Increasing opportunity losses from gridlocks, illegal checkpoints and poor storage facilities increase transportation and handling costs. Taxes, both legitimate and those paid to unscrupulous local executives, bloat costs and make importations relatively cheaper options.

For a country with a one-child policy, ironically China is the most prolific manufacturer of toys. The paradox is inescapable. The toy section in a department store in downtown Shanghai is about as big as a three-square meter booth. In uptown Manhattan, Toys R Us is several stories high. And yet China is the planet’s leading toy maker.

China’s propensity to devalue its renminbi adds to its cost advantages. While that benefits our dim-sum importer, little known are hidden costs increasingly creeping up on Chinese manufacturing – costs that we may unwittingly be importing.

As we import from China, we import things like toxic lead mixed into the plastic used to make toys for toddlers that end up in their vulnerable endocrine system. Once, we imported melamine mixed with the milk we fed our children.

To these detrimental costs, the immeasurable charges are inflicted at the Chinese end benefit importers who could not care less.

Recently, under the current administration and its advocacy to rid our streets of the drug menace inherited from past administrations, we are just now learning how vast our importations are of quite a different commodity. Not only have illegal drugs been smuggled on to our shores but so have the chemists who transform these into tradable commodities.

Another involves a different kind of importation that results from our dependence on an economy we have no control over. It’s inevitability looms as reckless rhetoric is replaced with reality and our crush on China turns into hot and heaving infatuation.

Recently China’s factory-gate inflation hit a historic high of 5.5 percent. As its sovereign debt also increased, thus alarming international creditors, the risk-related Chinese debt rates are likely to exacerbate factory-gate inflation. Despite a devalued renminbi, the impact on our imported Chinese-manufactured goods cannot be easily discounted by a peso-to- dollar-to-renminbi mix, where the peso to the dollar is likewise weakening. Factory-gate inflation is inflation at the very origins and price additives cascading down a value chain can only increase if not accelerate.

As Chinese importations are a substantial part of our non-oil importations, these goods turn into virtual marginal price setters of most of our commodities thus, affecting items from cheap plastic toys to imported dim-sum, to white appliances, flat-screen television sets, laptops and cellphones.

On the opposite end of the Pacific, Donald Trump seeks to make the American economy more competitive. With concerns about China’s indebtedness increasing and the bloating of factory-gate inflation, it would be interesting to see if the resulting global repercussions favor a domestic Filipino economy prone to latent wild and whimsical blabber on global trade realignments.