Wednesday, December 24, 2014

What Russia (Doesn't) Makes

According to the all knowing, peacemaker Obama, Russia is a country that does not make anything.

Well, I will let you, dear readers, judge for yourselves. Everyone knows about our top rate military equipment, with many systems literally decades ahead of the West, but here is our non-military technology on display.


Anonymous said...

Mr. Mishin:

I viewed the video of the RostSelMash combine harvester with some interest so I decided to look into the combine harvester industry specifically and the agricultural equipment industry generally.

How well has mercantilism worked for the Russian combine industry? I was able to find only two major manufacturers, RostSelMash and Rosautoexport - and I couldn't find any actual information on models, capacities, etc., for Rosautoexport. Just two brands does not seem like the development of the vigorous internal market you described in your article on mercantilism. Interestingly, RostsSelMash purchased the Canadian combine manufacturer Buhler a few years ago - a free-market purchase of a company developed in the free market. At least in this one purchase, Russian business seems to be embracing the idea of a global free market.

I further found that the large-scale combine harvester market is dominated by equipment manufactured in the US by CNH (Case New Holland), AGCO (with their Gleaner line) and of course John Deere with a 45 percent share of the global market. A smaller market player is Germany's Claas. what is RostSelMash's market share? I couldn't find it, but I know it exports to enormous markets such as Kazakhstan. Until recently it also exported to Ukraine. I wonder how that's going?

Given that the US is the largest agricultural equipment market, you might suspect that there are barriers to entry. The only barrier is whether the equipment is any good. In small-to-medium sized tractors for instance, major players beside the American big three are Argo Tractors S.p.A. (Italy), Kubota Tractor Corporation (Japan), the Mahindra Group (India), SAME-Deutz-Fahr (Italy), Daedong Industrial (Korea), the Yanmar Co., Ltd. (Japan), and Zetor a.s. (Czech Republic). There are also many Chinese and Indian manufacturers of smaller scale combines and a variety of other equipment. What about Russian brands? Those are some of the things that Russia doesn't make.

Of course RostSelMash is a dominant player in the Russian market, thanks to more Putin protectionism. But they aren't the only major player. In combines and other equipment, John Deere, New Holland and others have a significant presence. I've provided some links to videos of their equipment to compare with the RostSelMash video. Some are in Russian. Because I don't speak Russian I don't know if the videos praise the equipment or not, but they look favorable.

And here is a John Deere tractor assisting a Russian tractor to pull a Russian truck out of the mud after it ran off the road:

Stanislav said...

You seem to be very confused on what Mercantalism is. There is nothing in the theory that precludes a company from country A from purchasing a company in country B. Please read the theories and practices and find an example where this goes against it.

The point is to manufacture internally in your own country. If two major manufacturers is what is needed to fill in the local demand than that is what it is. Further, the market entry has actual high barriers internally, considering the amount of capital needed and the limited market space.

There are only two major brands world wide in the large scale civilian airline industry and that market is much larger than agriculture in Russia. Your point and what you draw from it prove nothing.

Free Trade is a socialist disaster, which is why Marx was so much in favour of it. Read "On the Question of Free Trade" by Karl Marx.

The US has 94 million adults out of work, a work force in actual physical numbers of the same size as 1978 but with 120 million more citizens, and 20 million plus illegals. The US does not practice protectionism because the US is run by its oligarchs who put profit well ahead of the domestic good. 48 million US citizens on food cards says it all for the richest nation in the world...oh and 23 trillion in debt, 18 trillion federal (the official debt) and 5 trillion from your states.

That same Japan and Korea and China have very high protectionism and with the exception of Japan (also a rather new development) try to reach maximum employment.

You have an overall very low grasp of what the foundations of Mercantalism are. I am assuming a modern western economics education which is big on Kensyan financing and Free Trade and zero on most anything else.

Stanislav said...

The point is to manufacture internally in your own country, for your own market first and export later. Again, nothing stops you from in parallel purchasing a company in another country and manufacturing for that market, especially if that country also practices mercantilism where it defends its markets with tariffs or import quotas...which is, by the way, how your own Reagan saved the US automanufacturing, by placing import quotas on foreign companies thus forcing them to open plants in the US>

Anonymous said...

Ok Staislav,

I won't listen to your dumbass politicians - if you stop listening to ours? Next time they'll be trading insults over the attractiveness of their daughters? (rolling eyes)

Anyone with exposure knows of Russia's scientific accomplishments and the competence of its technologists. That was never, can never, be an issue.

The ability of Russians to stifle themselves and their own good judgement might? Russian sheeple may be more potent than even American sheeple in avoiding truth.

Vice news is a scrappy outfit and they often make the large networks look senile. Many of their reporters are Russian speakers...and I've kinda started watching their view on things.

And while the consensus seems to be that Russia is up to it's neck in this thing, there's also some support for your view:

And the views of others:

Hopefully adults will resolve this. Have no desire to have bad relations with Russians or Ukrainians. Their leaders? Well, that's a different story.

Punks are punks.

Ever notice certain kids in kindergarten *always* trigger fights?

Anonymous said...

Mr. Mishin:

Considering the density of errors per word you've written it's difficult to know where to begin offering corrections. I'll simply refer you to the US Bureau of Labor Statistics website for the correct information.

You said, "The US has 94 million adults out of work . . ." That is actually the number of adults not in the labor force and includes retirees, students, stay-at-home parents and more, and the correct number as of November, 2014, is 92.4 million. The current number of unemployed is actually 9.1 million, a rate of 5.8 percent.

Anonymous said...

Mr. Mishin:

You said "The point is to manufacture internally in your own country, for your own market first and export later." One wonders how much later on Russia will be able to export anything that markets actually want.

Relative to the global market, I've already shown that Russia exports very little agricultural equipment. In another thread here on your blog I've shown the dire straits of the Russian auto industry, the utter dearth of export capability, and how it was only by the Russian government's favorable treatment of imported auto goods and encouragement of foreign direct investment that the industry was revitalized. Perhaps we can look to some other industries for Russian exports:

Large jet engines
- US: General Electric; Pratt & Whitney
- UK: Rolls-Royce

Home appliances
- Italy: Indesit, De Longhi, Smeg
- Germany: Bosch, Liebherr, Braun
- New Zealand: Fisher & Paykel

Electrical switchgear
- US: General Electric
- Germany: Siemens

- US: Dell, Hewlett-Packard
- China: Lenovo
- Taiwan: Acer, Asus
- Japan: Sony, Toshiba

TVs and stereos
- Japan: Sony, Panasonic, Toshiba, Yamaha, Kenwood,
- Korea: Samsung
- US: Harman

Healthcare equipment
- US: General Electric
- Germany: Siemens
- The Netherlands: Philips

Medium-sized jet aircraft
- Canada: Bombardier
- Brazil: Embraer

You also said, "nothing stops you from in parallel purchasing a company in another country and manufacturing for that market, especially if that country also practices mercantilism where it defends its markets with tariffs or import quotas . . " except that the example we've been discussing, the purchase by Russia's RostSelMash of Canada's Buhler, is not like what you just described because Canada does not practice mercantilism.

How many decades before Russia's protected industries will be able to meet even domestic demand, and when they do export, will the global market actually want Russian goods and services? The answer to the first question remains to be seen. The answer to the second question so far has been no.

Anonymous said...

Tom Brokaw, a well respected "old school" news hand recently was interviewed on CSpan. One of the takeaways was how no one in the US government was listening to "average Iraqis" before the invasion. Both Shia and Sunni citizens warned us to stay out of their business.

Fast forward. Well, we broke that country. And now their disease has metathesized into the incredibly virulent form of Isis. How do you put that Genie back in the bottle? careful what you ask for in Ukraine. Once conflicts are started they rarely play by plan. Ukrainians know Russian culture intimately and can pass as Russians. These could be very dangerous people if aroused. As dangerous as Isis.

It's late in the day to settle grievances, but settlement with an option for future reconciliation may be far cheaper than other remedies.

If the purpose of all this is to protect Russian speakers - demand those protections. A Bill of Rights. Then *sell* it to all Ukrainians as protecting them too. And when the Ukrainians demand their quid pro quo - pay it. Even if it stinks. The fact Russia *could* have gone to war but *chose* not to will resonate. It will be remembered.

Ukraine's problems can't be fixed by Russia or Europe. Only by Ukrainians. But if they succeed - you'll be proud too. And those good deeds may eventually be reciprocated....

What you don't want are "wronged" Russian speakers with motivation attacking your country.

Maybe I'm projecting (don't think so)...but if this country fell into the wrong hands and started attacking my state - many wouldn't play their game. There would be immediate attempts to decapitate the national government. Might succeed.

That's what observed law does for you. It eliminates the need for such fights. And if Russian/Ukrainians are demonstrably protected by law - how long will it be before Russians start demanding the same protections for themselves? Could that be a game changer?

Think of the ironies here. Berlin was the ultimate loser last century - yet it's now the hotbed of free speech and free speech protection? While this country wallows in stasi/nsa? Hurts when I even think about it :(

Similarly, Russia could show the world how to "settle things" right. Mostly because it understands just how bad things can get? And is smart enough/wise enough not to go there.

Anonymous said...

Mr Mishin:

You said of US auto import quotas of the '80s, "your own Reagan saved the US auto manufacturing, by placing import quotas on foreign companies thus forcing them to open plants in the US"

Perhaps that was the inspiration for a recent Putin recent wheeze:

Only just into the WTC, Russia has established new customs barriers that are higher than those it has just abolished. The new "recycling tax" will be applied to vehicles when they enter the Russian market from 1st September 2012. It will be used to create a future deconstruction network for vehicles that have reached the end of their life cycle. Both the aim and amount of this recycling tax have been decided somewhat precipitously. Before the Russian government had even decided the method of operation or the economic model of the future deconstruction circuit and before providers had been chosen or even approached, the amount of the tax to fund the operations had already been decided on by the administration. It will be between $860 and $3500 for imported vehicles depending on their horsepower, $5000 on average for LCV utility vehicles and up to $17,000 for trucks. The amount will compensate for the reduction in customs duties which fell from 30% to 25% for vehicles in the summer of 2012 as part of the process for entering the WTC. Subsequently, customs duties will fall progressively from 25% to 15% over the next six years.
Ecological reasons have been advanced to justify the new tax: "Almost 6% of deaths can be linked to ecological causes", said Timur Mikaya, head of the Automobile Department at the Ministry of Industry at a seminar in Moscow in 2012. What is the link between ecology and imported vehicles? The ecological situation in Russia is certainly precarious but this is due to polluting industries and locally-designed over-age vehicles and trucks that cannot satisfy pollution standards. The progressive rejuvenation of the fleet particularly due to imported vehicles will improve the ecological situation. However, civil servants are pointing fingers at importers accusing them of not wanting to be responsible for the entire life cycle of their vehicles. "These are "disposable" companies created for an import contract that will disappear subsequently. They must pay the ecological tax on imported vehicles", announced M. Mikaya. Consequently, he has applied his tax to all imported vehicles by all major manufacturers. These are everything except "disposable"...
Manufacturers already working in Russia will have to implement their own measures aimed at deconstructing their vehicles at the end of their lives. The first measure planned is a network to collect and store vehicles whilst a decision is made about what to do with them.
Since it was introduced in September, the new fiscal regime has already been contested by local coachbuilders who build bodies adapted to the local market using chassis or utility vehicles provided by Western manufacturers. This includes Nizhegorodets, a coach builder from Nijni Novgorod that assembles up to 700 vehicles per month: "Peugeot already paid the recycling tax when bringing our chassis into Russia, but we have a problem with the Ministry of the Interior who is asking us to pay another 150,000 roubles ($5000) on the pretext that we transformed the chassis into new vehicles!", the coachbuilder’s management complains.
At the end of 2012, the European Union presented the WTC with its grievances over the new customs barriers to entry into the Russian market and particularly this "recycling tax" on imported vehicles. The fight against the Russian government's protectionist policy will be a long one.

Article from "France-Russia Automotive" newsletter, December 2012.

Stanislav said...

Thank you for listing off so many companies that now manufacture IN RUSSIA, again supporting Mercantilism. Also, for companies like DELL, the US portion is marketing and distribution as the design work is mostly done either in Taiwan or Japan and the manufacturing in China and only a matter of time before the US portion is made obsolescent and driven out of business....which is exactly what companies like Lenovo are doing, having learned the tricks from their former/present US clients and now taking over the markets.

Siemens has many manufacturing plants in Russia and is building many more, much of the design work is being done in Russia now. As a matter of fact, Boeing's main design beuro is now in Moscow and is the office, with 700+ engineers, that created Beoings latest models.

Russia's protected industries are protected from imports. Nothing stops foreign companies from building internally in Russia and enjoying that same protection. Thank you for prooving my point again. As a final example: 1999 19 auto manufacturing plants, up go the tariffs and the IMF declares the death of the Russian auto market. 2014, 38 auto manufacturing plants and more on the way. Again, high duties and other structures and demand for local content that grows every year as a % of the total parts spurs local manufacturing, meets the market demand and spurs exports of finished goods. All quite well support the concept of Mercantilism.

Stanislav said...

@anonymous 4:39

You have your Ukrainian warnings backwards. It is the US/EU that broke yet one more country who's psychotic and klepto oligarchial leaders and their mindless minions have been jumping up and down screaming Russians on the Knife, Russians on the Pitchfork and so on.

It is us Russians who are yet to arouse and arouse not just against these idiots in Kiev but the idiots in the rest of the West.

What the West relearns every 100 years is that we Russians are slow to anger but we are very very very good at killing. We will not stand by and watch Russians murdered or surpressed in the eastern half of Ukraine. Just in this last week Russian partisans and guerilla movements have struck in 3 different locations in the occupied portions of Novorossia, killing several Kieven nazi thugs. This is just starting to heat up, as 20 million people in Novorossia are starting to rise up as they watch 6 million of their brothers hold off the Kieven war machine and grind it down.

Berlin might be the center of free speech, except the admission by German journalists that many of them have been working directly for the CIA writing on commission and that it got so bad the CIA just started ghost writing their stories.

However, the Merkel doesn't seem to give much of a damn about what the majority of Germans want. She is bought and paid for and is bleeding support and business support like crazy.

Stanislav said...

***That is actually the number of adults not in the labor force and includes retirees, students, stay-at-home parents and more, and the correct number as of November, 2014, is 92.4 million. The current number of unemployed is actually 9.1 million, a rate of 5.8 percent.***

Come come, you are either being willfully ignorant of reality or obsificating on purpose. Everyone who's unemployment benefits end are dumped into that column. I follow economics and dig quite a bit. That is the reason that in December 2013, when 1.2 million Americans lost unemployment checks the US unemployment rate went from about 6.7 to 6.3%.

Any serious analysis of what actually constitutes those numbers shows instantly that the government in the US is lieing about the state of employment. There are dozens upon dozens of articles one needs to only read to get that point...none of them US government.

Just like the US inflation rates are not 2-3% as states "core" inflation, as that core inflation ignores food, fuel, utilities and so on, the very items people buy daily and watch rise daily.

You can name a pig as a stallion but that will not make it a stallion.

Anonymous said...

Dunno. Rascal governments look the same....all over the world.

Truth never seems to matter much, only the propaganda narrative.

Anonymous said...

Real statistics:

Don't believe the raw data has been falsified (yet). Just the reports which reference that data.

Seems like every government has a "ministry of lies" these days.......

Hopefully some of these "economists" will find re-employment picking up dog poop someday.

Anonymous said...

Stanislav said...

@anonymous 4:39

What's clear is that both countries have a substantial build of "hurt inventory"....and that history probably feeds conflict more than any idiot foreigners.

While I'll agree those foreigners were not helpful - this conflict probably would have happened with idiots, without idiots, in spite of idiots.

With that out of the way, both parties just need to decide if they *really* want an out-of-control war which will only bring sorrow and misery.

Not baked in - it's a choice.

The tragedy here is that most outside your culture really see both parties as "same". One group of Slavs pissed off at another group. And both quite capable of inflicting damage to the other.

If Russia/Ukraine ever needed a clever one to defuse this mess - that time is now. Both parties certainly have little to lose by making those efforts.

Russians and Ukrainians will have a long time to think about "might have beens" during a long drawn out war. Doubt anyone will call it "victory" at the end.

Show the world some Russian cleverness and wisdom. It's time.

Your demagogs look the same as our demagogs. (yawn) They spout the same bullshit.