YCLOAK

Sometimes, it just doesn’t pay to manufacture in the United States. Labor and land are expensive. It is why most consumer products sold here come from overseas. But a multinational electric guitar manufacturer still produces one-third of its instruments near where it started decades ago. Arash Arabasadi names that tune from Maryland.
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Hansaben Rasid knows what it is like to live without a water tap or a toilet of her own, constantly fearful of being evicted by city officials keen on tearing down illegal settlements like hers in the western Indian city of Ahmedabad.

The fear and lack of amenities are but a memory today, after she became a community leader in the Jadibanagar slum and pushed residents to apply for a program that gave them facilities and a guarantee of no evictions for 10 years.

“We didn’t even have a water tap here — we had to fetch water from the colony near by, and so much time went in just doing that. People kept falling sick because there was just one toilet,” she said.

“Now that we have individual water taps and toilets, we can focus on work and the children’s education. Everyone’s health has improved, and we don’t need to be afraid of getting evicted any day,” she said, seated outside her home.

Jadibanagar, with 108 homes, is one of more than 50 slums in Ahmedabad that have been upgraded by Parivartan — meaning “change” — a program that involves city officials, slum dwellers, a developer and a nonprofit organization.

Every household pays 2,000 rupees ($31) and in return, each home gets a water tap, a toilet, a sewage line and a stormwater drain. The slum gets street lights, paved lanes and regular garbage collection.

Each home also pays 80 rupees as an annual maintenance fee, and the city commits to not evicting residents for 10 years.

Negotiation skills

A crucial part of the program is the involvement of a woman leader who brings residents on board, deals with city officials and oversees the upgrade.

Nonprofit Mahila Housing Trust has trained women residents to be community leaders in a dozen cities in the country, including more than 60 in Ahmedabad.

“Women are responsible for the basic needs of the family, and most also work at home while the husband works outside, so the lack of a water tap or a toilet affects them more,” said Bharati Bhonsale, program manager at Mahila Housing Trust.

“Yet they traditionally have had little influence over policy decisions and local governance. We train them in civic education, build their communication and negotiation skills, and teach them to be leaders of the community,” she said.

About 65 million people live in India’s slums, according to official data, which activists say is a low estimate.

That number is rising quickly as tens of thousands of migrants leave their villages to seek better prospects in urban areas. Many end up in overcrowded slums, lacking even basic facilities and with no claim on the land or their property.

Yet slum dwellers have long opposed efforts to relocate them to distant suburbs, which limits their access to jobs. Instead, they favor upgrading of their slums or redevelopment.

Earlier this month, officials in the eastern state of Odisha said they would give land rights to slum dwellers in small towns and property rights to those in city settlements in a “historic” step that will benefit tens of thousands.

In Gujarat state, as Jadibanagar is on private land, it is not eligible for the city’s redevelopment plan.

“These homes are all illegal, but that doesn’t mean the people cannot live decently,” said Bhonsale.

“With redevelopment, there is demolition and a move, and that can take longer to convince people of, with the men usually making the decision. But with an upgrade, the women make the decision very quickly by themselves,” she said.

Bottom up

Elsewhere, in Delhi’s Savda Ghevra slum resettlement colony where about 30,000 people live, nonprofit Marg taught women residents to demand their legal right to water, sanitation and transport.

A group of women then filed Right to Information petitions, to improve their access to drinking water, buses and sanitation.

“The women bear the brunt of not having these amenities, and are therefore most motivated to do something about the situation,” said Anju Talukdar, director of Marg.

“The leaders are the ones who show up for meetings, are engaged and keen to learn how to use the law to improve their lives,” she told the Thomson Reuters Foundation.

Contrary to perceptions that slums are run by petty criminals who resist efforts to redevelop or upgrade, women leaders in Jadibanagar and Savda Ghevra are actively engaged in bettering everyone’s lives.

Leaders often emerge from a bottom-up process, with reputations for getting things done — in particular, resisting evictions and securing basic services, according to research by Adam Auerbach at the American University and Tariq Thachil at Vanderbilt University.

“They are themselves ordinary residents, living with their families and facing the same vulnerabilities and risks as their neighbors; they, too, want paved roads, clean drinking water, proper sanitation and schools for their children,” they said.

Women leaders, while still a minority, are “rarely token figures” serving male heads of households, and are “just as active, assertive and locally authoritative as their male counterparts,” they said in an email.

Rasid in Jadibanagar, whose two sons and their families live in homes alongside hers, is certain her leadership helped residents improve their homes and their lives.

“Everyone wants security and nicer homes, and they are willing to pay. Someone just has to get it done,” she said.

“I am illiterate, I cannot read, but I know now how to talk to officials and the developer and tell them what we want, and make sure they deliver,” she said.
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Like all North Korean adults, Song Un Pyol wears the faces of leader Kim Jong Un’s father and grandfather pinned neatly to her left lapel, above her heart. But on her right glitters a diamond-and-gold brooch. 

 

Song is what a success story in Kim Jong Un’s North Korea is supposed to look like. Just after Kim assumed power in late 2011, she started managing the supermarket floor at a state-run department store, which has freezers stocked full of pork and beef and rows of dairy, bakery and canned goods. She watches as customers fill their shopping carts, take their groceries directly to be scanned at the checkout counter and pay with cash or bank debit cards. 

 

Song is part of a paradigm shift within North Korea: Three generations into the Kim family’s ruling dynasty, markets have blossomed and a consumer culture is taking root. From 120 varieties of “May Day Stadium’’ brand ice cream to the widespread use of plastic to pay the bills, it’s a change visibly and irreversibly transforming her nation.

Market forces will out

While Kim has in recent weeks gained attention for his threat to fire missiles near Guam, his trademark two-track policy focuses on the development of both nuclear weapons and the economy. His acceptance of a more consumer-friendly economy is meant to foster economic growth and bring profits into the regime’s coffers. But like his pursuit of nuclear weapons, it’s a risky business. 

 

Facing even more international sanctions and a flood of Chinese imports that has generated a huge trade imbalance, there are good reasons to believe the North Korean economy is in a bubble that could soon burst. Prices for gasoline imports have soared more than 200 percent in less than six months, the AP has found. The price of rice is also believed to be sharply rising, although harder to independently confirm because of the difficulty in visiting local markets.

 

The new round of sanctions announced by the U.N. earlier this month will make it harder for the North to export its goods, cap the number of laborers it can send abroad — an important source of foreign currency for the regime — and limit the growth of joint ventures. North Korea will be hit particularly strongly by a Chinese ban on several key products, including coal, iron ore and seafood.

 

The problem, however, goes deeper than that. 

 

Market forces bring new forms of competition, uncertainty and change that are the antithesis of the centrally controlled, state-run economy of the North Korea of old. Markets are like a genie offering to grant the wish of wealth, but at the potential cost of political instability. 

 

Once the genie has been released from its bottle, it’s very hard to put it back in.

Guns and butter

 

The North Korean consumer landscape has evolved dramatically under Kim Jong Un. 

 

In keeping with his father, whose motto was “Military First,’’ Kim devotes nearly a quarter of North Korea’s estimated $30 billion GDP to defense spending, which is a far higher military burden than any other country in the world. But his new slogan of “Parallel Development’’ — guns and butter, so to speak — reflects an inescapable reality of his era.

 

In the 1990s, North Korea nearly imploded when the Soviet Union and its satellite empire collapsed. Reeling from floods, famine and an overwhelmed bureaucracy, it could no longer afford the public distribution system many North Koreans had depended on for their basic needs. This change sparked a wave of grassroots barter and trade, which has swollen into the burgeoning market economy today. 

Life in rural North Korea is still marked by far more hardship and scarcity than in its urban areas, and is hard even to compare to the showcase capital, Pyongyang. Yet there is, surprisingly, a bustling, almost booming, feeling in many parts of the country. 

Local control and entrepreneurs

Under a five-year plan for the economy Kim Jong Un announced last May, North Korean factories are putting a new priority on making more and better daily-life products. Managers, meanwhile, have more freedom to decide what to make, how much to pay their workers and how to forge profitable partnerships. 

 

Along the roads into virtually every city, street vendors, usually weather-beaten old women, sell fruits, vegetables and other food. In the cities, bazaar-style markets, shops and department stores are full of people. The shelves are lined with dozens of brands of domestically made cigarettes, sugary soft drinks and colorfully packaged chips or canned soups. 

 

In specialty shops, the latest “Pyongyang’‘ model smartphones, probably Chinese-made but rebranded to have a locally made appearance, go for $200. Apps to put on them, like the popular “Boy General’’ role-playing game, are $2 a pop. Pyongyang’s premier brewery, Taedonggang, just added an eighth kind of beer to its product line, which already includes beers dark and light, and even one that is chocolatey. 

 

Despite the ever-tightening sanctions, consumer products are still coming in from around the world. Buying a can of Pokka coffee from Japan is easy, and costs about 80 cents. Purchasing a Mercedes-Benz Viano might require some connections, but it is doable, for a $63,000 sticker price. 

 

Trade, yes; advertising, no

On the country’s bumpy highways, caravans of cram-packed long-distance buses and trucks hauling goods from city to city are common. More products made in Pyongyang are found in rural areas these days, and vice versa. Although the use of U.S. dollars or Chinese yuan remains widespread, more people are using prepaid cards or local bills at the checkout counter, suggesting greater buying power in general and more confidence in the stability of the national currency.

 

Some blatant manifestations of commercialism remain taboo. There are only three billboards in Pyongyang, a city of about 3 million. They advertise the local automaker, Pyonghwa Motors, and are more for the benefit of impressing foreign visitors than selling cars. There are no advertisements on television or in the newspapers. 

 

But stores are under instructions to be more consumer-friendly.

 

“At first, we opened the store from 10 in the morning to 6 in the evening,’’ said Song. “But in 2015, our dear respected Marshal Kim Jong Un made sure that we serve from 10 in the morning to 8 in the evening so one can use late night at any given time, as many working people often used the shop during the evening after work.’’

Stores now commonly offer buy-two-get-one-free type sales and discounts on products the management wants to move off the shelves. Posters for new medicines or sports drinks can be seen inside shops and customers can sign up for “loyalty cards’’ to get points toward ever more discounts.

 

“In today’s North Korea there is a growing competition between the domestic companies themselves as they try to attract customers and establish reputable brands,’’ said Michael Spavor, a Canadian entrepreneur who visits the North frequently and is one of the only Westerners to have ever met Kim Jong Un. 

 

Spavor calls it a “brilliant strategy.’’ 

 

But the emphasis on locally produced consumer goods isn’t just because Kim wants to make good on his promise to give his people a higher standard of living. 

 

It’s also an attempt to counter the gravitational pull of China.

The power of China

 

As sanctions advocates rightly point out, cutting off trade with China would be catastrophic for Pyongyang. But North Korean leaders, including Kim Jong Un, have shown a great deal of concern over the flip side of that coin: What might happen to their country if trade continues, or grows larger. 

 

The expansion of trade increases Chinese leverage on the ground and feeds market forces that are hard for Pyongyang to keep under control. China accounts for nearly all of North Korea’s trade and its fuel. While the North has minimal dealings with the rest of the world, it did $2 billion worth of business with China in the first five months of this year alone.

 

During Kim Jong Un’s first three years in power, North Korea’s exports to China of coal, garments, minerals and seafood were all growing. But what North Korea was able to sell to China fell far short of what it needed to buy, particularly because of its need for oil and fuel products. 

 

That imbalance has widened dramatically this year as China cut back on buying from the North. The new U.N. sanctions will further squeeze the North’s main sources of export income.

​Signs of trouble

 

Georgetown University economist William Brown estimates the North is suffering an outflow of $200 million in foreign exchange every month. This is crucial because the more Pyongyang owes Beijing, the less it has to spend on other things. But it still needs essential commodities like food and fuel, which can deepen the problems of both shortages and inflation.

 

Right around April, according to data compiled by the AP, gasoline prices started to soar. Many stations either closed their gates or restricted the amount they would sell each customer. As of late July, the price surge had yet to abate.

 

Few North Koreans have their own cars. But gasoline, virtually all of which comes from China, fuels the transportation of goods and people in the new economy. 

 

Brown said the price of rice was also up nearly 20 percent in July from May and was significantly higher than a year ago. There could be a trickle-down effect, since tractors and even the fertilizer used to grow rice require petroleum products. Fears of a poor harvest in the fall could send prices shooting up.

 

“This may represent the greatest near-term threat to the regime stability,’’ Brown said.

 

North Korea has proven it is nothing if not resilient, often finding a way out of its economic problems. Even so, the longer-term changes to society won’t be easy to address.

 

The goods and trading opportunities spilling across the Chinese border are also spurring the growth of profitable enterprises, which has substantial financial benefits for well-connected individuals and, at least initially, the regime’s elite. For this tier of North Korean society — and for farmers who can profit from their excess produce — the new economy has opened up a way to get money from sometimes under-the-table businesses.

 

Loyalty to the regime and party ties remain an important means of social advancement. But, in Kim Jong Un’s North Korea these days, so is a good sense for how to run a proper side hustle to augment what are often paltry official paychecks.

 

However, the same opportunities have widened the gap between the rich by North Korean standards and the poor. The haves benefit disproportionately from the new economy, while a far larger number of have-nots live mostly outside the Pyongyang bubble of affluence. Ambiguity over what officials will overlook and what they will strictly enforce has also created a gray area that opens the door to corruption and bribery. 

 

Double-edged sword

 

The regime is not blind to what’s happening. It knows the new consumerism can be a destabilizing force. But it also knows it needs the markets.

 

North Korean officials insist markets are a stopgap coping measure for the economy that will be overcome. Kang Chol Min, a researcher with the Economics Institute of the Academy of Social Science, said the regime is trying to produce more, and better, goods to woo consumers away from the markets and back to state-run businesses. 

 

“The number of people relying on the state-run commercial networks is increasing,’’ he said in an interview with AP Television News. 

 

But many outside experts believe state enterprises and farms are too inefficient to provide enough goods and services for the whole nation without the help of markets and private activities. 

 

If they are right, it’s hard to imagine North Korea’s economic future will lie in Kang’s vow to produce more goods locally. Nor is it likely to be model worker Song, the state-sanctioned success story.

 

It might, however, be a Miniso store. 

 

Miniso is decidedly not trying to appeal to the shoppers by filling its shelves with products made in North Korea. It’s an international brand name — found in Hong Kong, Tokyo, Sydney — selling bargain-priced goods such as backpacks and consumer electronics. Its Pyongyang store just opened in April, near two of the capital’s most prestigious universities in a newly built high-rise district appropriately called Ryomyong Gori, the “Avenue of Dawn.’’ 

 

It’s the trendiest shop in town.

 

And it’s a joint venture. With China.
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Steps away from this week’s NAFTA trade negotiations, business unified in hopes of sending a singular message: do no harm.

Representatives from the United States, Canada and Mexico convened behind closed doors at a Washington hotel in an effort to strike a new North American Free Trade Agreement. And not far away, industry representatives from all three nations sat waiting and hoping to influence the talks.

After two days of meetings, lobbyists admitted privately that they remained mostly in the dark, swapping rumors about dates and times of future meetings but unsure what progress was being made in the first round of discussions. The meetings were largely expected to be procedural, with little discussion on substance in the early days.

The decision to renegotiate NAFTA has largely been driven by politics, chiefly U.S. President Donald Trump, who earlier this year threatened to withdraw entirely.

Business, on the other hand, has largely praised the agreement and hopes to persuade all three governments to make minimal changes to the pact.

More than $1 trillion in trade

U.S.-Canada-Mexico trade has quadrupled since NAFTA took effect in 1994, surpassing $1 trillion in 2015.

“We’re all in the same boat,” said Flavio Volpe, president of the Canada’s Automotive Parts Manufacturers’ Association. “In the end we all serve primarily the U.S. consumer. So if you’re going to raise the cost structure, or if you’re going to change the dynamic flow of goods or people in those three countries, you’re really hurting the cost to market for the U.S. customer.”

The U.S. had an autos and auto parts trade deficit of $74 billion with Mexico last year, without which, there would have been a U.S. trade surplus

The United States had a much smaller $5.6 billion automotive trade deficit with Canada last year, but autos was the still a major component of an $11.8 billion overall U.S. goods trade deficit with Canada last year. But including services trade, the United States ran an overall surplus with Canada.

Volpe’s counterparts from the United States and Mexico were also on hand, with hopes of presenting a united front not to see a disruption to the auto industry.

Matt Blunt, president of the American Automotive Policy Council, which represents General Motors, Ford and Fiat Chrysler Automobiles, stopped by the talks hotel to chat with negotiators, answer questions and “glean information” about U.S. negotiating objectives.

However, he said insights into the talks were hard to come by, as negotiating teams had not yet revealed details of their proposals to each other.

“There are a lot of poker-faces around here,” he said.

Lobbyists always nearby

He wasn’t the only American lobbyist floating in and out of the hotel. Some held lunch meetings in the hotel restaurants and then returned to their downtown offices. From mining, to textiles to dairy farmers, various groups held sideline meetings.

About 100 business representatives from Mexican companies waited in a meeting room to see if there were any questions negotiators might have for them. And Canadian industry groups mostly worked on their own.

For the most part, the business groups presented a united front.

Juan Pablo Castanon, president of the Mexican business group Consejo Coordinador Empresarial, said his group has been working with the U.S. Chamber of Commerce for three years. After the November U.S. elections, they began working to tout the benefits of NAFTA.

“The level of contact and communication is intense and one of collaboration,” Castanon said.

The U.S. Chamber of Commerce, the largest business lobby in Washington that represents companies big and small across the country, confirmed they plan to attend all the sessions, where they expect to hold sideline meetings with other business groups and government officials. The Chamber may also hold sideline events or briefings during future discussions.

Even industry groups who weren’t in agreement with their North American counterparts found other stakeholders to discuss common ground.

The Canadian Dairy Farmers are at odds with their American counterparts, but still found a chance to talk, said the Canadian group’s spokeswoman Isabelle Bouchard.

“To have discussions with counterparts within our own industry and even different industries who are in similar situations than us, it’s important, and we have seen though past trade negotiations how important it is,” Bouchard said.

 
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Auto industry groups from Canada, Mexico and the United States are pushing back against the Trump administration’s demand for higher U.S. automotive content in a modernized North American Free Trade Agreement.

At talks underway this week in Washington, automaker and parts groups from all three countries were urging negotiators against tighter rules of origin, said Eduardo Solis, president of the Mexican Automotive Industry Association.

But U.S. Trade Representative Robert Lighthizer confirmed the industry’s fears that the administration of President Donald Trump was seeking major changes to these rules to try to reduce the U.S. trade deficit with Mexico.

“Rules of origin, particularly on autos and auto parts, must require higher NAFTA content and substantial U.S. content. Country of origin should be verified, not ‘deemed,’” Lighthizer said on Wednesday in opening remarks.

Fiat Chrysler, Ford, GM represented

Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland both said they were not in favor of specific national rules of origin within NAFTA — a position that the industry agrees with.

“We certainly think a U.S.-specific requirement would greatly complicate the ability of companies, particularly small- and medium-size enterprises, to take advantage of the benefits of NAFTA,” said Matt Blunt, president of the American Automotive Policy Council.

The trade group represents Detroit automakers General Motors, Ford, and Fiat Chrysler.

His comments were echoed by Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association.

“Anytime you say this list or a part of this list has to come from one specific country you’re going to hurt all three countries,” he said.

Deficits can’t continue to grow

The United States had an autos and auto parts trade deficits of $74 billion with Mexico and $5.6 billion with Canada, both major components of overall U.S. goods trade deficits with its North American neighbors — deficits that Lighthizer said could no longer continue.

Lighthizer’s mention of tightening verification requirements is a reference to expanding the parts tracing list, which is used to determine whether companies meet the 62.5 percent North American content requirement for autos and 60 percent for components.

Devised in the early 1990s, the tracing list covers almost none of the sophisticated electronics found in today’s cars and trucks, most of which come from Asia. Putting these on the tracing list could force suppliers to source these components from North America or pay tariffs on them.

Software content a new issue

Volpe said any changes to this must also capture the North American system design work and software content for these components that is not currently included.

“A car today probably has 25 to 30 percent advanced electronics, software content in it. In 1994, it had zero or 1 percent,” Volpe said. “Could you address the tracing to help you get to NAFTA compliance level by capturing some of the work that’s being done in Silicon Valley or Waterloo, Canada? Yes.”

John Bozzella CEO of the Association of Global Automakers, which represents international-brand carmakers, said NAFTA has allowed a major expansion of auto exports, with more than 1 million more vehicles built annually in the United States than in 1993.

“Negotiators should be mindful of this success as they work to modernize the agreement,” Bozzella said, whose organization represents international brand carmakers with U.S. plants, including Toyota, Honda and BMW.

 
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