Category Archives: regulation

Foreign Business Inside the PRC

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The Qualcomm’s acquisition of NXP Semiconductors is supposedly in jeopardy as the People’s Republic of China threatens approval of the acquisition in its prosecution of its long-term trade fight with the US.

But wait—Qualcomm is an American company, and NXP is a Dutch company.  Why does the PRC even have a say in this?

[The PRC] is the last of nine markets where Qualcomm and NXP need approval from competition authorities….

There’s a perfectly straightforward way around this.  The two could stop doing business in the PRC, which is not a business-friendly nation, anyway, what with the nation’s demands that foreign companies give up their technology to domestic “partners” and that they install backdoors into their core softwares so the PRC government can go in and poke around at whim.

Certainly, there would be large initial costs from walking away from such a large market, and there would be market share reduction in the middle term from ceding that market to competitors.  But what would be the costs, really?  Less anticompetitive restrictions on the combined company’s operations, less government sanctioned—even demanded—theft of proprietary and intellectual property, saddling the PRC albatross to those competitors anxious to fill the “gap.”

And real gains from quitting the PRC market: more efficiencies from better focus on the other eight markets, and a better ability to keep and expand the combined company’s technological edge over its competitors by not having to give up that edge to the PRC.

Auditors and Regulators

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American regulators regularly inspect American auditors—particularly the Big Four accounting firms, Ernst & Young, Deloitte & Touche, KPMG, and PricewaterhouseCoopers—in order to give confidence to investors and the market at large that the auditors are giving accurate and balanced reports on balanced and accurate audits of the companies they audit.

Inspecting the auditors in the People’s Republic of China is a different matter.

Big Four accounting firms use their Chinese and Hong Kong affiliates to do significant work on the yearly audits of dozens of US companies doing business in China, including Walmart, Pfizer, and 3M, according to regulatory disclosures the auditors recently made for the first time.

Those “affiliates” actually are separate entities, and the PRC won’t allow those auditors to be checked up on by our regulators.  That’s a problem, as The Wall Street Journal put it:

The arrangement could leave investors in some of the world’s largest multinationals feeling like they can’t have full confidence that the auditors who scrutinize the companies’ finances have themselves been fully vetted by US regulators. And the regulators have no way of knowing whether those companies’ tens of billions of dollars of Chinese business has been subjected to outside scrutiny to help prevent errors or fraud.

It’s not small potatoes, either.

Walmart, which has more than 400 stores in China, is primarily audited by the US arm of Ernst & Young, but Ernst & Young’s Chinese affiliate did 10% to 20% of the work on the company’s latest audit, according to an EY filing with regulators. Pfizer, which got 7% of 2017 revenue from China, is primarily audited by KPMGs US firm, but KPMG China did 5% to 10% of the work.

Obviously, the PRC’s block needs to be an item of “discussion” in trade talks between the US and the PRC.  In the interim, the regulators should think—hard—about requiring companies doing business in the PRC that are audited, at least in part, by PRC auditors to report the details of those PRC auditors’ audits.  That way investors and the market at large could have some idea, at least, of the quality of the books of those American companies’ PRC branches.

Musical Desks

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The Acting Director of the Veterans Administration is replacing his acting head of Veterans Health Administration with another acting head.  The current acting head needs replacement, not through any malfeasance, but because the incumbent acting head is moving to take another position within the VA.

Bad as the VA is, it isn’t helped by this instability in its management team.  Not a bit.

This continues to illustrate the waste of resources that is the VA.  Get rid of it, and use its current and future budgets for vouchers for our veterans.

Veteranos Administratio delende est.

Free Food Stamps

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The House passed a farm welfare bill that includes a requirement for food stamp recipients to work for their welfare payouts last month, and the Senate passed its version—carefully without that requirement for actual work. Or perhaps just timidly passed, since Senate Agriculture Chairman Pat Roberts (R, KS) was intimidated by Progressive-Democrat Ranking Member Debbie Stabenow (D, MI) and couldn’t find the backbone to oppose her.

Now the two bills go to conference for resolution, and the outcome doesn’t look promising for work.

In today’s tight employment environment, that work would be easy to find, too, and in light of that, The Wall Street Journal‘s Editorial Board made the comment

What’s bewildering is that Democrats seem willing to write off so much human potential as permanent wards of the state.

There’s nothing at all mysterious about that, though. The only potential that Progressive-Democrats see in these unfortunates is their votes, not their human potential. Indeed, that’s the Progressive-Democrat work-for-welfare program: vote for us Prog-Dems, or we won’t pay you any money.

President Donald Trump should support the House and inject some backbone into Senate Republicans, including especially Roberts, and announce he’ll veto any farm welfare/food stamp bill that doesn’t include the House’s work-for-stamps requirement.

Pick One

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Tony James, Blackstone Executive Vice Chairman, thinks his Progressive-Democratic Party needs to become a party of growth and inclusive prosperity.

The problem is that the Party is a Progressive one and becoming a socialist one.  This is not contradictory; the two ideologies are political allies if not siblings, too, and they’re not far apart economically.  The Party’s embrace of the former is demonstrated by Barack Obama’s, Hillary Clinton’s, House Minority Leader Nancy Pelosi’s (D, CA), Senate Minority Leader Chuck Schumer’s (D, NY), Senator Elizabeth Warren’s (D, MA), Senator Kamala Harris (D, CA), newly ascendant Alexandria Ocasio-Cortez’ (D, NY), and a host of others’ loud and enthusiastic embrace of progressivism.  The Party’s embrace of the latter is demonstrated by the strength of Senator Bernie Sanders’ (I, VT) and Ocasio-Cortez’ socialism within Party circles.

But progressivism is inherently exclusionary.  Progressivism insists that ordinary Americans are morally and intellectually inadequate to serious and consistent conception of [their] responsibilities as…democrat[s], and so we must be instructed and led by our Betters.  We must be excluded from the heady responsibilities of governance and of economic independence.  More, those proud Progressives have proclaimed us ordinary Americans to be irredeemably deplorable homophobic misogynist racists, and all of us Middle Americans in flyover country are just bitter Bible-clinging gun-toters.  These proud Progressives and their acolytes on the Left openly act on this exclusionary attitude with their constant harassment of those of us who are so impertinent (if not outright dishonest) as to disagree with them, with their overt calls to bar those of us not toeing the Party’s line from public places, and with the violence with which they threaten us and often inflict against us, whom they’ve termed fascists and Nazis.

Socialism is inherently anti-growth.  These adherents demand to set all performance goals, for everyone, from the hallowed halls of government instead of a free market doing so for us as individuals and owners/operators of our private enterprises.  Their demand for equal outcomes necessarily caps growth by sapping the abilities of the best among us because others can’t—or won’t—keep up and by denying the ability of any of us to to show the best that there is in [us] and to maximize our personal prosperity, which of necessity maximizes the prosperity of all of us.  These socialists demand to raise our taxes—to take our money—and to give—give!—Medicare to all, Federally guaranteed jobs to all, thereby reducing growth capacity by taking money away from us.

The Party can have a pro-growth platform, or it can be progressive socialist; the two are mutually contradictory.

For the Progressive-Democratic Party to become an inclusive, pro-growth party, though, it must remake itself 180 degrees away from where it currently, proudly stands: it must recreate itself a party of conservatism.

That’s an impossible task for progressive socialists.