[Peace-discuss] Trump May Get Much of the World’s Manufacturing Out of China, But It Won’t Be Coming Back to the U.S.

Tue Sep 24 14:41:28 UTC 2019

*- CounterPunch.org - https://www.counterpunch.org
<https://www.counterpunch.org> -*Trump May Get Much of the World’s
Manufacturing Out of China, But It Won’t Be Coming Back to the U.S.Posted
By Marshall Auerback On September 24, 2019 @ 1:59 am In articles
2015,Leading Article | Comments Disabled
<https://www.counterpunch.org/2019/09/24/trump-may-get-much-of-the-worlds-manufacturing-out-of-china-but-it-wont-be-coming-back-to-the-u-s/print/#comments_controls>

Photograph Source: The White House from Washington, DC – Public Domain

“Chimerica” is a term originally coined by the historian Niall Ferguson and
economist Moritz Schularick to describe the growing economic relationship
between the U.S. and China since the latter’s entry into the World Trade
Organization (WTO) in 2001. In the words of Ferguson
<https://tinyurl.com/y6kclylx>: “The Chinese did the saving, the Americans
the spending. The Chinese did the exporting, the Americans the importing.
The Chinese did the lending, the Americans the borrowing.” Much of the
pre-crisis boom in global trade was driven by this economic symbiosis,
which is why successive American presidents tolerated this marriage of
convenience despite the increasing costs to the U.S. economy
<https://www.epi.org/publication/the-china-toll-deepens-growth-in-the-bilateral-trade-deficit-between-2001-and-2017-cost-3-4-million-u-s-jobs-with-losses-in-every-state-and-congressional-district/>.
The net benefits calculation, however, began to change after 2008, and the
conflict has intensified further after the 2016 presidential election
result. Today, the cumulative stress of Donald Trump’s escalating trade war
is leading to if not an irreparable breach between the two countries, then
certainly a significant fraying. The imminent resumption of trade talks
notwithstanding, the rising cost of the tariffs is already inducing some
U.S. manufacturers to exit China. But in most instances, they are not
returning to home shores.

It may have taken Trump to point out the pitfalls of the Chimerica link,
but coming up with a coherent strategy to replace it is clearly beyond the
president’s abilities. America is likely to remain a relative manufacturing
wasteland, as barren as Trump’s own ill-conceived ideas on trade. At the
same time, it’s not going to be an unmitigated victory for China either, as
Beijing is increasingly suffering from a large confluence of internal and
external pressures.

Chimerica helped to launch China as a global trade power. To the extent
that this marriage helped the U.S. economy, it skewed toward the largely
blue state coastal regions. Wall Street banks located on the East Coast
happily collected lucrative commissions and investment banking fees, as
China’s export proceeds were recycled into U.S. treasuries, stocks, and
high-end real estate while the capital markets boomed; on the West Coast,
“new economy” companies thrived, their growth and profitability unhindered
by the onslaught of Chinese manufactured exports. By contrast, facilitated
by technological advances that permitted large-scale outsourcing by U.S.
manufacturers, Chimerica laid waste to much of what was left of America’s
Rust Belt, and the politics of many of the displaced workers mutated to the
extent that Donald Trump became an appealing alternative to the
establishment in 2016.

The major legacy of Chimerica, then, is that too many American workers have
been semi-permanently replaced by low-cost offshored labor. Prior to great
advances in technology, along with globalization, displacement of the
current labor force could only have occurred through immigration of workers
into the country. Historically, displacement by immigrants generally began
at the menial level of the labor force, and became more restrictive as when
it became correlated with significant unemployment. Given the rise of
globalization and the corresponding liberalization of immigration in the
past few decades, however, policy no longer arrests the displacement of
American workers. The policy backlash has consequently manifested itself
more via trade protectionism. Trump has sought to consolidate his Rust Belt
base of supporters by launching a trade war, especially versus Beijing, the
ultimate effects of which he hoped would be to re-domicile supply chains
that had earlier migrated to China.

Early on in his presidency, there was some hope that Trump’s protectionism
was at best a bluff or, at worst, an aberration, and that the return of a
Democrat to the White House in 2020 would eventually reestablish the status
quo ante. But the president still can’t get a wall, and his protectionism
has become more pronounced almost as if to compensate. The problem today is
that even if Trump is voted out of office in 2020, corporate America is
becoming less inclined to wait out the end of his presidency to return to
the pre-Trump status quo of parking the bulk of their manufacturing in
China. There is too much risk in putting all of one’s eggs in the China
basket, especially given growing national security concerns
<https://beta.washingtonpost.com/opinions/global-opinions/national-security-isnt-a-bargaining-chip-with-china/2019/07/25/ae609934-af1f-11e9-a0c9-6d2d7818f3da_story.html>.
Hence, U.S. companies are taking action. In spite of decades of investment
in these China-domiciled supply chains, a number of American companies are
pulling out: toy manufacturer Hasbro
<https://www.cnbc.com/2019/08/27/hasbro-ceo-moving-out-of-china-has-gone-very-well-for-us.html>
, Illinois-based phone accessories manufacturer Xentris Wireless, and
lifestyle clothing company PacSun
<https://www.asiatimes.com/2019/09/article/tariffs-push-some-us-manufacturers-to-exit-china/>
are
a few of the operators who are exiting the country.

But they are not coming back to the U.S., relocating instead to places like
Vietnam, Bangladesh, Mexico, the Philippines and Taiwan. The chief
financial officer of Xentris, Ben Buttolph, says
<https://www.asiatimes.com/2019/09/article/tariffs-push-some-us-manufacturers-to-exit-china/>
that
the company will never return to China: “We are trying to have multiple
locations certified for all of our products, so that if all of a sudden
there’s an issue with one of the locations, we just flip the switch.”
Likewise, the CEO of Hasbro, Brian Goldner, recently spoke of
<https://www.cnbc.com/2019/08/27/hasbro-ceo-moving-out-of-china-has-gone-very-well-for-us.html>
“great
opportunities in Vietnam, India and other territories like Mexico.”

All is not lost for the U.S., however, as Goldner did celebrate the success
of Hasbro’s facility in East Longmeadow, Massachusetts, which has resumed
production of Play-Doh in the U.S. for the first time since 2004
<https://fortune.com/2017/02/27/play-doh-is-coming-back-to-the-u-s/>. It is
doubtful, however, that this represents the recapturing of the high
value-added supply chains that Trump envisaged when he first launched his
trade assault on Beijing.

In general, as Julius Krein
<https://www.nytimes.com/2019/08/20/opinion/america-industrial-policy.html>,
<https://www.nytimes.com/2019/08/20/opinion/america-industrial-policy.html>
editor
of *American Affairs*, writes: “United States industry is losing ground to
foreign competitors on price, quality and technology. In many areas, our
manufacturing capacity cannot compete with what exists in Asia.”

These are not isolated examples. *Defense One*
<https://www.defenseone.com/ideas/2019/09/welcome-new-phase-us-china-tech-competition/159598/>
also
notes the following development:

“It came without a breaking news alert or presidential tweet, but the
technological competition with China entered a new phase last month.
Several developments quietly heralded this shift: Cross-border investments
between the United States and China plunged to their lowest levels since
2014, with the tech sector suffering the most precipitous drop. U.S. chip
giants Intel and AMD abruptly ended or declined to extend important
partnerships with Chinese entities. The Department of Commerce halved the
number of licenses that let U.S. companies assign Chinese nationals to
sensitive technology and engineering projects.”

This development consequently makes it hard to proclaim Beijing a winner in
this dispute either. The country still needs access to U.S. high tech. The
government announced yet another fiscal stimulus to the economy
<https://www.nytimes.com/2019/09/06/business/china-economy-reserve.html>
earlier
this month in response to a cluster of weakening economic data, much of
which is related to the trade shock. It is also the case that China is
being buffeted politically, both externally and internally: externally, in
addition to the escalating trade war, China’s own efforts to counter the
effects of rising protectionism by creating a “reverse Marshall Plan
<https://www.alternet.org/2018/12/chinas-belt-and-road-initiative-marshall-plan-reverse/>”
via the Belt and Road Initiative is floundering
<https://www.scmp.com/economy/china-economy/article/3023574/chinas-belt-and-road-cargo-europe-under-scrutiny-operator>
. China’s “iron brother,”
<https://www.samaa.tv/news/2019/03/pakistan-is-chinas-iron-brother-says-chinese-foreign-minister-wang-yi/>
Pakistan,
is increasingly being victimized by India’s aggressive Hindu-centric
nationalism <https://www.nytimes.com/2019/08/07/opinion/kashmir-india.html>.
It is hard to imagine the Modi government opportunistically taking the step
of annexing Kashmir and undermining Pakistan, had it not sensed Beijing’s
increasing vulnerability.

Internally, Beijing is finding it increasingly challenging as it seeks to
enforce its “One China” policy in Hong Kong and Taiwan. The withdrawal of
the controversial extradition law
<https://www.vox.com/world/2019/9/4/20849058/hong-kong-carrie-lam-withdraws-extradition-bill-protests>
that
first precipitated widespread demonstrations in Hong Kong has not
alleviated the political pressures in the territory, but simply allowed an
even bigger protest culture to take root and strengthen an independent
political mindset. Similarly, Taiwan has also openly supported the Hong
Kong protesters, pledging help to those seeking asylum
<https://www.theguardian.com/world/2019/jul/19/taiwan-pledges-help-for-hong-kong-protesters-seeking-sanctuary>.
Both regions now constitute both a huge humiliation and challenge to the
primacy of China’s ruling Communist Party. And now on top of that, foreign
manufacturers are leaving the country, weakening a totally leveraged
manufacturing complex.

The implications of this divorce go well beyond the U.S. and China. They
constitute another step toward regionalization, another step away from a
quaint ideological “post-history” construct that saw Washington, D.C., as
the head office and the rest of the world as a bunch of branch plants for
“America, Inc.” It’s hardly comforting to contemplate that the last time we
reached this historic juncture was the early 1900s, when a similarly
globalized economy broke down, followed by the Great War. As Niall
Ferguson points
out <https://tinyurl.com/y6kclylx>, “a high level of economic integration
does not necessarily prevent the growth of strategic rivalry and,
ultimately, conflict.” There’s no doubt that both Washington and Beijing
will likely making soothing noises to the markets in order to create
favorable conditions for the trade talks in October, but their actions
suggest that they are both digging in for a longer struggle
<https://www.scmp.com/economy/china-economy/article/3025725/xi-jinping-rallies-china-decades-long-struggle-rise-global>.
Today’s trade wars, therefore, are likely to morph into something more
destructive, which is a lose-lose in an era where human advancement depends
on greater integration between economic powers.

*This article was produced by **Economy for All*
<https://independentmediainstitute.org/economy-for-all/>*, a project of the
Independent Media Institute.*

Article printed from CounterPunch.org: *https://www.counterpunch.org
<https://www.counterpunch.org>*

URL to article:
*https://www.counterpunch.org/2019/09/24/trump-may-get-much-of-the-worlds-manufacturing-out-of-china-but-it-wont-be-coming-back-to-the-u-s/
<https://www.counterpunch.org/2019/09/24/trump-may-get-much-of-the-worlds-manufacturing-out-of-china-but-it-wont-be-coming-back-to-the-u-s/>*

Click here to print.
<https://www.counterpunch.org/2019/09/24/trump-may-get-much-of-the-worlds-manufacturing-out-of-china-but-it-wont-be-coming-back-to-the-u-s/print/#Print>
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.chambana.net/pipermail/peace-discuss/attachments/20190924/cb980ca0/attachment-0001.htm>