Biden Pushes Competition in Economic
President Biden signed a sweeping directive that aims to foster greater competition in the U.S. economy.
Biden’s executive order contains 72 initiatives with the goal of encouraging more competition among companies to bring prices down but also increase competition for labor so people can earn more.
“The heart of American capitalism is a simple idea, open and fair competition,” Biden said.
A major part essentially requires federal agencies to take a tougher stance on antitrust. In remarks at the White House, he highlighted former President Theodore Roosevelt’s efforts to break up monopolies in the early part of the 20th century and former President Franklin Roosevelt’s later efforts during the Great Depression.
Pharmaceutical companies are in the cross hairs of an effort to lower prescription drug prices. That includes allowing imports of Canadian prescription drugs. Hearing aids could be bought over-the-counter instead of by doctor’s orders, lower the cost of them.
Big technology, the airline industry, shipping companies, meat processing and other industries where there are few players will face greater scrutiny, particularly when proposed mergers arise that would further consolidate the industry.
The order is also an effort to give small business a better shot at competing.
Other elements include banning or limiting non-compete agreements that prevent employees from changing jobs and earning more money.
He also seeks a ban on occupational license restrictions. On that he pointed out that someone who is licensed to braid hair in one state may have to apprentice for months in another state before the person can get a license. Biden said that puts a strain on finances and discourages mobility.
After the announcement, the U.S. Chamber of Commerce criticized the order. Neil Bradley, the group’s chief policy officer, wrote on Twitter that “if the issue were only non-compete agreements for lower wage workers, we could find agreement quickly and it wouldn’t require a 72-point EO that proposes to return to an era of (government) regulation that even Jimmy Carter found excessive.”
In a statement through the chamber, Bradley said the order was “built on the flawed belief that our economy is over concentrated, stagnant, and fails to generate private investment needed to spur innovation.”
Kansas Sen. Roger Marshall, a conservative Republican, told a television station in Wichita, Kansas, that Biden’s executive order could give farmers and ranchers more power when negotiating with food processors.
“The central issue is this, we have four packing plants that control about 90% of the meat processing in America right now,” Marshall said. “Whenever there is that type of consolidation of the industry, someone is going to get hurt by it.”
He said Biden’s order is a short-term solution and that needs a permanent fix with legislation.
Shipping Costs Jump
The cost of shipping by container has skyrocketed with the disruptions to the supply chain, particularly between China and the United States.
According to an index by London-based Drewry Shipping Consultants shows that shipping a 40-foot container from Shanghai to New York cost $11,708 for the week that ended July 8, a 232% increase over the past year. It was little changed from the previous week.
The price to get from Shanghai to Los Angeles rose 5% to $9,631 from the previous week and is up 222% for the year.
Shanghai to New York, though, wasn’t the priciest route. A container from Shanghai headed to Rotterdam, Netherlands, cost $12,795, a 596% increase over the past year.
Drewry’s composite index shows that pricing is far above 2019 levels prior to the pandemic. The firm expects prices to continue rising.
U.S. demand for consumer goods is outstripping the ability to supply the goods, while a shortage of shipping containers has added pressure. A coronavirus outbreak in the largest manufacturing area in China prompted south China ports to curtail activities, causing delays in a major piece of the global shipping chain already disrupted when a massive container got stuck for days in the Suez Canal.
Levi’s Expands Distribution Capability
In early July, Levi Strauss & Co.’s largest distribution center became the first one the denim jeans maker owns to begin fulfilling e-commerce, retail and wholesale orders.
Chip Bergh, the San Francisco-based clothier’s CEO, told investors on its earnings call its Henderson, Nevada, operation reflects the company’s push to expand fulfillment capabilities as digital sales grew during the pandemic.
The company’s digital sales remained strong in its second quarter ended May 30 even with a foot traffic increase in brick-and-mortar stores that reopened, Bergh said.
Bergh said the company’s other two distribution centers it owns eventually will fulfill e-commerce orders as well.
In the United States, Levi Strauss owns a distribution center near Jackson, Mississippi, and one in the Cincinnati-area, along with the 638,000-square-foot Nevada building.
Levi Strauss quarterly revenue hit $1.2 billion, substantially higher than the $497.6 billion in the comparable quarter last year. The company said revenue from U.S. operations were higher than same quarter in 2019.
Within the Americas region, the U.S. business is structurally a lot stronger today than it was pre-pandemic for several reasons, Harmit Singh, the company’s chief financial officer, said on the earnings call.
“It has a larger digital business, a higher share of revenues with financially healthier and more premium customers, more full-price sales, pricing power and a higher retail productivity, especially critical, as we open more full-priced stores.”
Levi Strauss has about 360 retail stores around the United States. Much of its brick-and-mortar business is through department stores. The company has a partnership with Target with brand named Levi’s Red Tab.
They recently announced an expansion of that partnership. Bergh said on the call that the company is expanding the Levi’s Red Tab to 500 Target stores in time for back-to-school sales.
Global Tax Accord Reached
Top finance officials from the world’s largest and wealthiest countries agreed to institute a global minimum tax for multinational companies.
The G20, as the group is known, agreed to set a corporate rate of at least 15%. The countries want to crack down on multinational companies to shield profits from income taxes through subsidiaries with headquarters in countries that have much lower taxes for foreign investors.
The accord follows an agreement in June among the Group of Seven made up of the United States, Canada, Germany, France, Italy, Japan and the United Kingdom.
Now it will be a matter of whether countries can follow through on instituting the tax. In the U.S., specifically, reforming the tax law to create such a tax is expected to face obstacles in Congress.
Now, 131 countries, which make up most of the world’s economy, have agreed to setting a minimum tax rate, according to statement from U.S. Treasury Secretary Janet Yellen.