Економіка

Geneva — Since late last century and the early days of the web, providers of digital media like Netflix and Spotify have had a free pass when it comes to international taxes on films, video games and music that are shipped across borders through the internet.

But now, a global consensus on the issue may be starting to crack.

As the World Trade Organization opens its latest biannual meeting of government ministers Monday, its longtime moratorium on duties on e-commerce products — which has been renewed almost automatically since 1998 — is coming under pressure as never before.

This week in Abu Dhabi, the WTO’s 164 member countries will take up a number of key issues: Subsidies that encourage overfishing. Reforms to make agricultural markets fairer and more eco-friendly. And efforts to revive the Geneva-based trade body’s system of resolving disputes among countries.

All of those are tall orders, but the moratorium on e-commerce duties is perhaps the matter most in play. It centers on “electronic transmissions” — music, movies, video games and the like — more than on physical goods. But the rulebook isn’t clear on the entire array of products affected.

“This is so important to millions of businesses, especially small- and medium-sized businesses,” WTO Director-General Ngozi Okonjo-Iweala said. “Some members believe that this should be extended and made permanent. Others believe … there are reasons why it should not.” 

“That’s why there’s been a debate and hopefully — because it touches on lives of many people — we hope that ministers would be able to make the appropriate decision,” she told reporters recently.

Under WTO’s rules, major decisions require consensus. The e-commerce moratorium can’t just sail through automatically. Countries must actively vote in favor for the extension to take effect.

Four proposals are on the table: Two would extend the suspension of duties. Two — separately presented by South Africa and India, two countries that have been pushing their interests hard at the WTO — would not.

Proponents say the moratorium benefits consumers by helping keep costs down and promotes the wider rollout of digital services in countries both rich and poor.

Critics say it deprives debt-burdened governments in developing countries of tax revenue, though there’s debate over just how much state coffers would stand to gain.

The WTO itself says that on average, the potential loss would be less than one-third of 1% of total government revenue.

The stakes are high. A WTO report published in December said the value of “digitally delivered services” exports grew by more than 8% from 2005 to 2022 — higher than goods exports (5.6%) and other-services exports (4.2%).

Growth has been uneven, though. Most developing countries don’t have digital networks as extensive as those in the rich world. Those countries see less need to extend the moratorium — and might reap needed tax revenue if it ends.

South Africa’s proposal, which seeks to end the moratorium, calls for the creation of a fund to receive voluntary contributions to bridge the “digital divide.” It also wants to require “leading platforms” to boost the promotion of “historically disadvantaged” small- and medium-sized enterprises.

Industry, at least in the United States, is pushing hard to extend the moratorium. In a Feb. 13 letter to Biden administration officials, nearly two dozen industry groups, including the Motion Picture Association, the U.S. Chamber of Commerce and the Entertainment Software Association — a video-game industry group — urged the United States to give its “full support” to a renewal.

“Accepting anything short of a multilateral extension of the moratorium that applies to all WTO members would open the door to the introduction of new customs duties and related cross-border restrictions that would hurt U.S. workers in industries across the entire economy,” the letter said.

A collapse would deal a “major blow to the credibility and durability” of the WTO and would mark the first time that its members “changed the rules to make it substantially harder to conduct trade,” wrote the groups, which said their members include companies that combined employ over 100 million workers. 
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Washington — Trying to keep up with customer demand, Batesville Tool & Die began seeking 70 people to hire last year. It wasn’t easy. Attracting factory workers to a community of 7,300 in the Indiana countryside was a tough sell, especially having to compete with big-name manufacturers nearby like Honda and Cummins Engine. 

Job seekers were scarce. 

“You could count on one hand how many people in the town were unemployed,” said Jody Fledderman, the CEO. “It was just crazy.” 

Batesville Tool & Die managed to fill just 40 of its vacancies. 

Enter the robots. The company invested in machines that could mimic human workers and in vision systems, which helped its robots “see” what they were doing. 

The Batesville experience has been replicated countlessly across the United States the past couple of years. Worker shortages have led many companies to invest in machines. They’ve also been training the workers they do have to use advanced technology so they can produce more with less. 

The result has been an unexpected productivity boom, which helps explain a great economic mystery: How has the world’s largest economy stayed so healthy, with brisk growth and low unemployment, despite brutally high interest rates that are intended to tame inflation but that typically cause a recession? 

To economists, strong productivity growth provides an almost magical elixir. When companies roll out more efficient technology, their workers can become more productive: They increase their output per hour. A result is that companies can often boost profits and raise pay without having to jack up prices. Inflation can remain in check. 

The Fed’s aggressive streak of rate hikes — 11 of them starting in March 2022 — managed to bring inflation from a four-decade high of 9.1% to 3.1%. But, to the surprise to the economists who’d forecast a recession, the higher borrowing costs have caused little economic hardship. 

Perhaps the likeliest explanation is the greater efficiencies that companies like Batesville Tool & Die have managed to achieve. Before productivity began its resurgent growth last year, a rule of thumb was that average hourly pay could rise no more than 3.5% annually for inflation to stay within the Fed’s 2% target. That would mean that today’s roughly 4% average annual pay growth would have to shrink. Higher productivity means there’s now more leeway for wage growth to stay elevated without igniting inflation. 

The productivity boom marks a shift from the pre-pandemic years, when annual productivity growth averaged a tepid 1.5%. Everything changed as the economy rocketed out of the 2020 pandemic recession with unexpected vigor, and businesses struggled to re-hire the many workers they had shed. 

The resulting worker shortage sent wages surging. Inflation jumped, too, as factories and ports buckled under the strain of rising consumer orders. 

Desperate, many companies turned to automation. The efficiency payoff began to arrive almost a year ago. Labor productivity rose at a 3.6% annual pace from last April through June, 4.9% from July through September and 3.2% from October through December. 

At Reata Engineering & Machine Works, “efficiency was kind of forced on us,” CEO Grady Cope said. With the job market roaring, the company, based in Englewood, Colorado, couldn’t hire fast enough. Meantime, its customers were starting to balk at paying higher prices. 

So Reata installed robots and other technology. Software allowed it to automate the delivery of price quotes to customers. That process used to require two weeks. Now, it can be done in 24 hours. 

Many economists and business people say they’re hopeful that the productivity boom can continue. Artificial intelligence, they note, is only beginning to penetrate factory floors, warehouses, stores and offices and could accelerate efficiency gains. 

Automation raises fears that machines will replace human workers, killing jobs. Some workers supplanted by robots do often struggle to find new work and end up settling for lower pay. 

Yet history suggests that in the long run, technological improvements actually create more jobs than they destroy. People are needed to build, upgrade, repair and operate sophisticated machines. Some displaced workers are trained to shift into such jobs. And that transition is likely to be eased this time by the retirement of the vast baby boom generation, which is causing labor shortages. 

Some of today’s productivity gains may be coming not just from advanced technology but also from more satisfied workers. The tight labor markets of the past three years allowed Americans to change jobs and find others that pay better and make them happier and more productive. 

Justin Thompson, of Kalamazoo, Michigan, felt burned out by his job as a police officer, with its 16-hour workdays .”I was literally running myself into the ground,” he said. 

Thompson’s wife saw a job posting for operations manager at a charter airline. Even without airline experience, his wife felt he could use skills he gains as a Marine Corps infantryman — handling logistics for missions — during tours in Iraq and Afghanistan. 

She was right. Omni Air International hired him in 2019. 

Thompson, 43, loves the new job, which allows him to work from home when he’s not traveling. And his Marine experience — which included developing ways to improve efficiency — has proved invaluable. 

Other workers have switched from low-skill jobs to those that allow them to be more productive. 

At Reata Engineering, staffers were trained to use new sophisticated equipment. 

“The whole point is not to lay people off,” said Cope, the CEO of Reata Engineering. “The point is to make people do jobs that are more interesting” — and pay better, too. 
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TOKYO — Chip giant Taiwan Semiconductor Manufacturing Co. opened its first semiconductor plant in Japan Saturday as part of its ongoing global expansion.

“We are deeply grateful for the seamless support provided by you at every step,” TSMC Chairman Mark Liu said after thanking the Japanese government, local community and business partners, including electronic giant Sony and auto-parts maker Denso. The company’s founder, Morris Chang, was also present at the ceremony in Kikuyo.

This comes as Japan is trying to regain its presence in the chip production industry.

Japan Advanced Semiconductor Manufacturing, or JASM, is set to be up and running later this year. TSMC also announced plans for a second plant in Japan earlier this month, with production expected to start in about three years. Private sector investment totals $20 billion for both plants. Both plants are in the Kumamoto region, southwestern Japan.

Prime Minister Fumio Kishida sent a congratulatory video message, calling the plant’s opening “a giant first step.” He stressed Japan’s friendly relations with Taiwan and the importance of cutting-edge semiconductor technology.

Japan had previously promised TSMC 476 billion yen ($3 billion) in government funding to encourage the semiconductor giant to invest. Kishida confirmed a second package, raising Japan’s support to more than 1 trillion yen ($7 billion).

Although TSMC is building its second plant in the U.S. and has announced a plan for its first in Europe, Japan could prove an attractive option.

Closer to Taiwan geographically, Japan is an important U.S. ally. Neighboring China claims the self-governing island as its own territory and says it must come under Beijing’s control. The long-running divide is a flashpoint in U.S.-China relations.

The move is also important for Japan, which has recently earmarked about 5 trillion yen ($33 billion) to revive its chips industry.

Four decades ago, Japan dominated in chips, headlined by Toshiba Corp. and NEC controlling half the world’s production. That’s declined lately to under 10%, due to competition from South Korean, U.S. and European manufacturers, as well as from TSMC.

The coronavirus pandemic negatively affected the supply of electronic chips, stalling plants, including automakers, with Japan almost entirely dependent on chip imports. This pushed Japan to seek chip production in pursuit of self-sufficiency.

Sony Semiconductor Solutions Corporation, Denso Corporation and top automaker Toyota Motor Corporation are investing in TSMC’s Japan plant, with the Taiwanese giant retaining an 86.5% ownership of JASM.

Once the two plants are up and running, they’re expected to create 3,400 high-tech jobs directly, according to TSMC.

Ensuring access to an ample supply of the most advanced chips is vital with the growing popularity of electric vehicles and artificial intelligence. Some analysts note Japan still leads in crucial aspects of the industry, as seen in Tokyo Electron, which manufactures the machinery used to produce chips.

Still, it’s clear the Japanese government is intent on playing catchup. Tokyo is supporting various semiconductor projects nationwide, such as those involving Western Digital and Micron of the U.S., and Japanese companies such as Renesas Electronics, Canon and Sumitomo.
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