U.S. Imposes Big Tariffs On Korean Chipmakers 827
dipfan writes "This is serious - the U.S. government has decided to levy steep import tariffs on South Korean computer chips (and Vietnamese catfish). The result is a 44 percent tariff on DRAM semiconductors made by Hynix. The case was brought by Micron Technology on the grounds that the South Koreans were receiving unfair subsidies. Hynix says the tariff is 'outrageous', and the South Koreans plan to appeal to the World Trade Organisation."
Worst part is tariff goes directly to Micron (Score:5, Interesting)
Tariffs are wrong... (Score:5, Interesting)
Maybe that means that Micron needs put a plant in Korea or something. I don't know. But as a consumer I want the lower prices, it makes me want to go and buy more memory. I don't see my government acting in my favor here.
sri
Re:Extreme (Score:5, Interesting)
Just like we tax polluting fuels to encourage alternatives, this would have a very positive effect on "alternative" operating systems.
Lower dollar good for US companies... (Score:5, Interesting)
Unless you intend travelling overseas in the near future (and that puts you in a minority of Americans) you should be putting your (American-made) party hats on and celebrating this end to an imbalanced economy.
Perhaps this 44% will offset a tiny part (Score:4, Interesting)
Re:North Korea? (Score:5, Interesting)
You *will* be screwed by this ruling, regardless of where you live. Prices for various electronics will be going up.
Correct me if i'm wrong ... (Score:3, Interesting)
Hey, great... this worked so well the last time! (Score:5, Interesting)
In 1975, Japan's Ministry for International Trade and Industry had organized JApan's leading chip makers into two groups-- NEC-Toshiba and Fujitsu-Hitachi-Mitsubishi-- to challenge the United States for the 64K DRAM business. They won. By 1985, these two groups has 90 percent of the U.S. market for DRAMs. American companies like Intel, which had started out in the DRAM business, quit making the chips because they weren't profitable, cutting world DRAM production capacity as they retired. To make matters worse, the United States Department of Commerce accused the Asian DRAM makers of dumping-- selling their memory chips in America at less than it cost to produce them. The Japanese companies cut a deal with the United States government that restricted their DRAM distribution in America-- at a time when we had no other reliable DRAM sources. Big mistake. Memory supplies dropped just as memory demand rose [OS/2 had created a need for RAM] , and the classic supply-demand effect was an increase in DRAM prices, which more than doubled in a few months. Toshiba, which was nearly the only company making 1 megabit DRAM chips for a while, earned more than $1 billion in profits on its DRAM business in 1989, in large part because of the United States government.
Re:Yeah, this is Bush's version of "free trade" (Score:5, Interesting)
Oh, but this president doesn't get laid, so I guess that should make me proud. Because getting laid is much more shameful than inciting a war that lead to the death of thousands of innocent people (Oh, I think I figured it out, Saddam is using ultra-high tech
Re:Yeah, this is Bush's version of "free trade" (Score:5, Interesting)
I'll bite.
Steel tarrifs are there for a reason. I don't know the current situation in detail, but when NAFTA hit Canada started sucking up the steel business. They were much cheaper than US counterparts. I know this because my own father (we're from Michigan) started buying Canadian steel products because of this. As far as I know the Canadian steel is so much cheaper because the production is subsidized by the government. Canada is a bit more socialist than the US so the taxpayers foot the bill in getting industries the help they need. Result is that it's cheaper for us than US products.
Things like NAFTA are fair only when employers are playing on the same ground across countries and that just doesn't happen in this economy. US employers are -strapped- with taxes that other countries just don't see and sure as hell aren't helped out by the government. Save the "what about Enron" combacks too -- I'm talking about good honest businesses. We're fucked in a global economy.
not bad (Score:2, Interesting)
Hopefully this trend will continue so places where they pay their workers $5 a day or give huge illegal donations to a dying company will end so not all our American tech companies don't leave the US. I have seen a disturbing trend in companies leaving the US to take advantage of other countrys less strick workers benifits and rights.
Although I might just be totally biased as I used to live in Boise and have many friends who work at Micron, although Samsung is more than enough competition left for Micron in the dram industry.
The WTO will overturn it. . . (Score:3, Interesting)
I can't see any reason why this would be different. It seems highly likely that the WTO will rule in favor of Korea blocking this particular tariff.
I'm torn on this. I despise the WTO and how they have the power to to step in and tell our democratically elected government what to do, but this might be the one time I'll be glad for their interfering. I gots to have my computer parts on the cheap. . .
Gee where have I heard this before (Score:5, Interesting)
Korean chaebol and 'unfair' competition (Score:3, Interesting)
The 44% tarriff is excessive, but that's the whole point: it's a slap in the face to wake the Koreans up. Eventually, this will get watered down in the WTO, but not until the same WTO pushes Seoul to tone down it's own corporate capitalism efforts.
I see all the standard anti-US rhetoric is in full swing already, so I won't broach that one....
Re:Just like Canadian Softwood. (Score:1, Interesting)
The US does this with wood every couple of years, and everytime they get the same result, "It's not a subsidy, pay back the damages caused"
Lobbying sucks.
Re:Well (Score:3, Interesting)
the Government tells them what to build and they build it.
government controled capitolism...a weird idea but it seems to work in most cases.
the government does not mind itself with the running of the business like in communism, but if there is a product that they want built, they tell a company...normaly a well run one to build it.
it is very efficent in many ways.
Re:Tariffs are wrong... (Score:1, Interesting)
Re:Well (Score:5, Interesting)
You mean, like the US is doing with steel, agriculture, airlines, and defense contractors?
we can get rid of the last vestiges of this type of protectionism
"Vestige"? This isn't a "vestige", it's worse than it has ever been.
I think all nations should just drop the pretenses of "fairness" and "openness" and just assume that protectionism is a fact of life. Then, democratically elected governments can negotiate about it rationally and without all the bluster and lies, and without having the WTO interfere.
Vietnamese 'basa' IS a kind of Catfish... (Score:3, Interesting)
Re:Business as usual (Score:4, Interesting)
Korean chaebol developed with close ties to and huge amounts of funding from their government, so I wouldn't be surprised if the American allegations here are true.
For my source and an understanding of this important country, see Bruce Cumings' brilliant and excellent Korea's Place in the Sun. My dear professor from this spring [who is a friend of Cumings] teaches the book, and my dear friend at the U. of Chicago has Cumings as his professor. He probably understands Korea as well as anyone outside that nation.
Re:Yeah, this is Bush's version of "free trade" (Score:3, Interesting)
Just in case you haven't noticed, virtually all manufacturing operations have moved to Mexico or China. Now computer geeks are in trouble, as most big software makers are exporting technical jobs to India and China.
Bush is doing the right thing. Drop the price of the dollar to give struggling US industries a chance to export something and impose tariffs to raise revenue and level the playing field.
The Broken Window Fallacy (Score:5, Interesting)
There is a shop with a store front window. A vandal comes by and throws a rock right through the window. At first the store owner is disstressed about this. However, he then realizes even though he has to pay for a new window and installer. The window guy will in turn hire a plumber, who will buy a sandwich, the chef will buy a microwave, the consumer electronics guy will buy something from his shop. It will be great for everyone. Accordingly, he decides we need more vandals to make the world a better place. You heard a lot of this weak argument during 9/11. Although, 9/11 is more complex since it involved huge sums of insurance money, reinsurers, etc.
What is wrong with this argument? Well, the answer is simple the store owner would have spent his money on something else beside the window. While the window guy is certainly happy, the refridgerator guy is now seriously bumming that he didn't get a sale. Or let's say he bought the window instead of shoes, the shoe guy would be bumming.
Now I have seen several people arguing the South Korean government subsidizing memory is bad for the United States. This the broken window fallacy in REVERSE. When someone gives you something it is a net positive. It's better than if you had made it yourself. You now have money you can spend on other things. While it might be hard for micron its GOOD for computer users. They will have more money to spend on new nVidia GeForce 5800FX Ultra Deluxe Turbo Gold Millenium Edition cards or whatever.
Remember, other peoples governments giving us money (even in the form of memory) is a good thing for our economy. Don't be led into this fallacy that its more important to keep our money "internal." The greedy strategy tends yield an amazingly near optimal solution. Government intervention will always lead something ineffecient taking place.
Yes, there is the case where there could be a strategic move to lower prices to force out a competitor and in the long term raise prices. However, this market has way too many firms for any one firm to gain that kind of control.
I would much rather have more money rather than letting the U.S. government and Micron have it. As a side note, luckily they didn't implement quotas which would have just given Hynix the ability to sell at a higher price...
Re:Worst part is tariff goes directly to Micron (Score:3, Interesting)
Baseline magazine profiled US Steel a few months ago. Thanks to robotics and other automation, it takes 2 workers to produce a quanity of steel that 35 Koreans produce. They also make the steel for at 1/5 of the cost of the Koreans.
So why has US Steel been near bankruptcy for years? Pension & Healthcare costs (many government mandated), which consume nearly 80% of revenues.
If you want the trappings of a civilized society, (things like disability insurance, healthcare, pensions) there is a cost associated with that.
This will do exactly nothing... (Score:3, Interesting)
And don't forget that pre-built computers can still get in the US with Korean DRAM with no tariff. This only applies to DRAM not in a computer already.
Re:Yeah, this is Bush's version of "free trade" (Score:3, Interesting)
You do realize that a higher Canadian dollar means that Canada is mildly less competitive at exporting products to other countries, such as, say, the U.S. Since 40% of Canada's economy is dependent on trade, a strong C$ could cause some dislocations. TINSTAAFL. Silly people don't seem to realize that a high standard of living comes about from a complex balance of a large number of monetary factors, and not just how big your buck is.
Some facts about Micron (Score:2, Interesting)
Is being investigated by DOJ for price fixing.
Tried to force smaller manufacturers out of business with predatory pricing, which is part of the reason for huge losses and cheap DRAM.
Never intended to buy Hynix and unlikely to have capital to do so anyway. Just wanted to look at the books which has lead to the current tariffs being imposed against Hynix.
Re:Well (Score:5, Interesting)
Hmmm. You weren't around the last time this happened were you?
The main result of the last RAM tarrif was to throw all of North America into a deeper recession than it already was, and the economy at that time was in much better shape then than it is currently. Everybody else in the world got cheap RAM except the US and Canada. We got all that nice expensive RAM that was produced by the one company in the US that still manufactured it. As I recall, the one protected company still went tits up.
I guess it will all work out better this time around. Computers and embedded systems are too cheap right now, we really should double the prices so that we can keep electronics out of the hands of consumers. Y'all might want to ask your parents about how the computer industry <sarcasm>surged</sarcasm> during the Regan years.
If a foreign country wants use their citizen's tax dollars to support our computer consuming habits, let 'em I say.
Re:You mean good for Bush, this isnt good for us. (Score:5, Interesting)
Well no you are right, all the jobs should be kept here.
I'm bitching at the President because hes the leader of the free world and hes not doing shit. Hes not doing anything at all to improve this economy, he has done absolutely NOTHING thats why I bitch.
Until he produces results, I'm going to be pissed, oh and wheres Bin Laden, wheres Saddam? Wheres the weapons of mass destruction? Why arent our borders secure?
Oh and Bush is currently being investigated, for all we know the whole Iraq war could have been one big hoax.
Re:background to the dispute (Score:2, Interesting)
Although most of the banks that loaned money to Hynix are government-owned, some were private. (You have to understand that about half of banks in Korea are owned by the government. This wasn't the case before financial crisis in 1997. During the crisis, the gov't was forced to choose between acquring troubled banks -- through debt-equity swap -- or face complete financial meltdown.) Gov't-owned banks and private banks all agreed make additional loans when Hynix requested a bailout.
As for keeping Hynix Korean, the gov't had no problem selling some of their banks to foreign investors. (I don't think anyone is hoping for Samsung Electronics to acquire Hynix. After all, Samsung is being accused of artificially lowering prices to drive Hynix out of business. Micron also tried to get Samsung's chips tarriffed.)
Anyhow, a large portion of Hynix chips are made in Eugene, Oregon. How will this tariff thing work if the chips are produced dometically?
Re:Extreme (Score:1, Interesting)
Oil. Car companies. Campaign donations.
I'm done.
I'm not a potato farmer (Score:5, Interesting)
I live in Boise, ID, headquarters of Micron Technology. Micron is the the largest private employer in Boise (and Idaho, for that matter), so criticizing the company is often risky business considering all the company loyals in town, as well as the clout they hold on local leaders. There has been almost no direct negative press about MU in the local newpapers or media.
In January, Micron CEO Steve Appleton held a press conference [idahostatesman.com] and announced a "product misstep" was to blame for several quarters of steep losses. This "misstep" is Micron's leapfrog to DDR400, which essentially left them out of the hot market for all of 2002. This press conference was covered lightly, and the media certainly didn't dwell on it this revelation.
By March, nearly everybody had forgotten about Appleton's admission of "misstep"ing the company into perpetual quarterly losses, and decided to go on the spin campaign. Another press conference [idahostatesman.com] was called to announce the company's losses were the fault of subsidized Korean chip maker Hynix. This time, every media outlet in driving distance was notified. U.S. Senator Mike Crapo was on hand to lend his support for the home-town corporation and blast the Korean government for propping up Hynix and running Micron into the ground. This story ran for several days in the local media.
Appleton masterfully deflected earnings shortcomings from himself to the Koreans, and at the same time positioned Micron to be the beneficiary of "emergency" protection from the the US International Trade Commision [usitc.gov], the body who deals with trade complaints from US companies. Interestingly, according to US trade law, it is not necessary for the ITC to have conclusive evidence of dumping/subsidies/etc to grant short-term protective tariffs. They need only have proof that there may be "unfair" trade practices taking place. In addition, the ITC may levy countervailing duties against foreign offenders if a company is harned, or may be harmed, by fair and legal trade .
As with most protection, the consumer ends up footing the bill. The greatly inceased duty on Korean chips will drive up the price in the DRAM market and force US consumers to pay artifically high prices. Meanwhile, Micron recovers and Appleton saves face. These duties are NOT about Korean subsidies, they are about Micron trade protection wrapped in an All-American, patriotic, apple-pie-loving shell.
Just remember who's paying for the "product misstep": YOU!!!
No, YOU are wrong (Score:4, Interesting)
All industries face that kind of price competition when they cease to innovate significantly. Decades ago, cloths, steel, shipyards, cars etc... became commodities and their production was gradually transferred to emerging countries. This is a Good Thing (TM) as it both lowers the price of standard products in developped countries while stifling growth and wealth in emerging countries.
The only solution for western producers is to continually innovate to support a superior price. Nowadays, nobody still produces cloth in developped countries except for high quality, high tech speciality stuff. The western car industry suffered tremendously in the 70's when the technology became mundane enough for Korea to mass-produce cars cheaply. The western industry reacted by a massive rightsizing, innovation (ABS, air-bags...), superior development process, better design and good marketing.
The steel industry is no different. The world's largest steel producer is Arcelor, an French-Belgian conglomerate. They have outsourced standard production to emerging countries and have developped high value added products (flat steels) that justify a double or triple price. And believe me, with all their taxes and social contributions, labor costs in France or Belgium are not cheaper than in the US.
Cost dumping will always exist. It drives costs down, stimulates innovation and allows third world development if managed correctly. Tariffs are a short-sighted answer. They delay the inevitable while artificially maintaining high prices and inefficient businesses.
wealth production or wealth rearranging (Score:2, Interesting)
There's no way around it, any successful nation will manufacture and have agriculture as a business, once it stops those two things it's economy starts to slide downhill. They can exist for awhile trading around other nations manufactured and grown and mined products, but eventually those people will cut you-the middleman-out. They won't need you. And once you don't have any of your own products, then even your fiat money ceases to be valuable, exactly what is happening to the US dollar. The US dollar is known in slang terms under two versions, the world reserve currency and also the petro dollar. It became the reserve currency because of being the petrodollar currency(simplistic, obviously more factors involved, ww2 reconstruction was a large one for example). It was the petrodollar because the cash went to oil producing nations, because that's all we offered in exchange for the oil, and the only reason they took those petro dollars in the first place is because they could turn around and purchase US manufactured or grown products, and part of those products were the oil business machinery, then weapons, which every goombah in the middle east loves. Now that that is no longer necessary, because we short sightedly exported our manufacturing, there is less and less need to even use US dollars. They can continue to devalue the dollar, but it's a vicious circle, because as fast as we destroying manufacturing in the US, that makes the dollar even of less worth to purchase the remaining manufactured goods. So they devalue again, we sell a few things, but then it doesn't matter, they are worth less, so they have to further devalue. On and on, rinse lather repeat.
Canada can delay it longer than the US because it has a much lower per capita ratio to your own still useable natural resources, which allows you to create wealth vertically. The smart thing to do is to keep manufacturing, to refine your grown and mined natural resources into saleable products. Just do it wisely, you'll stay one of the wealthier nations for a much longer time. If you demonize your miners, energy producers and agricultural/timber people like we have in the US, you'll suffer the same fate we are, getting raped by the internationalists, who are only one generation long thinkers and short term profiteers who don't care, they have no social niceties to them.
You have to strike a balance between the extremes, and you have to also remember the first rule of wealth production, back to my first statement, it ALWAYS starts with either grown or mined/pumped out of the ground. Anything else is not wealth production, it's wealth re-arranging, or skimming, it's a net loss compared to creation, and vertical industries work the best for wealth creation-if you want any sort of technological based existence. In Canada in particular you are fabulously well off to keep doing that for hundreds of years, don't blow it is my best recommendation. The US is counting on just being big enough to keep intimidating other nations to do our wealth creation for us, so we can just skim, middleman, trade for stuff. The world doesn't need to do that anymore, there is little of anything the US produces that isn't cheaper anyplace else (some exceptions still but the trend is dropping), so the need to use petrodollars is dropping fast as well. They have obviously shifted to a looter/threat based economy now, basically what imperial rome had to do once they had foreigners doing all the work for them, they had nothing more to offer than taking by force. People here are dancing around it, but strip away wealth creation, lose
Good article - "Enslaved by free trade" (Score:5, Interesting)
The US is certainly very good at hypocrisy, I suppose that comes with diversity and arrogance ;)
Here is an excerpt :-
THE founding myth of the dominant nations is that they achieved their industrial and technological superiority through free trade. Nations that are poor today are told that if they want to follow our path to riches they must open their economies to foreign competition. They are being conned. Almost every rich nation has industrialised with the help of one of two mechanisms now prohibited by the rules of global trade. The first is "infant industry protection": defending new industries from foreign competition until they are big enough to compete on equal terms. The second is the theft of intellectual property. History suggests that technological development may be impossible without one or both.
It seems the US and Britain were quite ruthless in their "infant industry protection".
Shame the article is locked up in the closed New Scientist archive. Great resource, well worth the subscription cost.
US protectionlism (excuse the spelling hang over) (Score:2, Interesting)
Cheap computer parts are more then just lining the pockets of outside producers, it also drives economic growth, education and research.
And it's not just computers that helps economies. Steel and lumber imports don't make it worse for the US as a whole. Sure some people lose their jobs but then again job security is so hard to find today. Why should University grads have to expect to work under contracts because of out sourcing to india when a bunch of lumber jacks can lobby for government protection of their industry?
In a way if you think about it protectionlism contributes to the inability of (because it's slashdot) tech workers to compete with cheap off shore out sourceing. Protectionlism contributes to a higher living cost as inefficent domestic industries drives prices up. Higher prices for goods means higher living cost. Which means workers requires higher wages.
Of course the whole situation is much more complicated then that. And job losted aren't good because real people are behind those jobs. But you know politicians always have a way of hiding the truth don't they? During electections they'll say how their government created so many jobs last year while when the other party was in power they lost so many jobs. I am pretty sure i never heard any of them been asked by a reporter where those jobs are and how much they paid.
Ah welll democratic leaders aren't really chosen just for their abilities. I tend to think of it as a oversized version of school yard politics. You just know the players even then then the people in the school yard that's all.