Dig deeper, though, and you find that America’s reliance on China remains intact. America may be redirecting its demand from China to other countries. But production in those places now relies more on Chinese inputs than ever. As South-East Asia’s exports to America have risen, for instance, its imports of intermediate inputs from China have exploded. China’s exports of car parts to Mexico, another country that has benefited from American de-risking, have doubled over the past five years. Research published by the imf finds that even in advanced-manufacturing sectors, where America is keenest to shift away from China, the countries that have made most inroads into the American market are those with the closest industrial links to China. Supply chains have become more complex, and trade has become more expensive. But China’s dominance is undiminished.
What is going on? In the most egregious cases, Chinese goods are simply being repackaged and sent via third countries to America. At the end of 2022, America’s Department of Commerce found that four major solar suppliers based in South-East Asia were doing such minor processing of otherwise Chinese products that they were, in effect, circumventing tariffs on Chinese goods. In other areas, such as rare-earth metals, China continues to provide inputs that are hard to replace.
More often, though, the mechanism is benign. Free markets are simply adapting to find the cheapest way to supply goods to consumers. And in many cases China, with its vast workforce and efficient logistics, remains the cheapest supplier. America’s new rules have the power to redirect its own trade with China. But they cannot rid the entire supply chain of Chinese influence.
Everybody who is not completely incompetent could see that this was going to happen from the beginning. China makes the products. America needs the products. Unless and until America re-constructs the entire manufacturing base of China somewhere, whether that’s spread out across their (ever-weakening) allies or inside America, Chinese products are going to find their way to America. Biden and his administration cannot cross their arms in a huff and go “Well, now that we’ve cut our ties with China, we are patiently waiting for that good ol’ free market to supply us the things that we need! Just, uh… waiting…” and then be surprised when countries seek to fill that gap by simply buying from China and then re-exporting to America. This isn’t even economics 101, it’s so basic, it’s more like “recognizing that matter-energy cannot be created nor destroyed”.
Much of the decoupling, then, is phoney. Worse, from Mr Biden’s perspective, his approach is also deepening the economic links between China and other exporting countries. In so doing, it perversely pits their interests against America’s. Even where governments are worried about the growing assertiveness of China, their commercial relationships with the biggest economy in Asia are deepening. The Regional Comprehensive Economic Partnership, a trade deal signed in November 2020 by many South-East Asian countries and China, creates a sort of single market in precisely the intermediate goods in which trade has boomed in recent years.
For many poorer countries, receiving Chinese investment and intermediate goods and exporting finished products to America is a source of jobs and prosperity. America’s reluctance to support new trade agreements is one reason why they sometimes see it as an unreliable partner. If asked to choose between China and America, they might not side with Uncle Sam.
It’s the contradictions of capitalism! Honestly, we really should be glad that these people don’t study Marxism, or maybe they’d have a competent idea for once in their lives.
I still love that Jake Sullivan talk where he admits that the whole free market bullshit they’ve been promoting can’t actually compete with what China is doing. It’s an absolutely incredible read, Sullivan claims that the American economy lacks public investment, as it did after World War II. And that China is actively using this tool.
last few decades revealed cracks in those foundations. A shifting global economy left many working Americans and their communities behind.
The People’s Republic of China continued to subsidize at a massive scale both traditional industrial sectors, like steel, as well as key industries of the future, like clean energy, digital infrastructure, and advanced biotechnologies. America didn’t just lose manufacturing—we eroded our competitiveness in critical technologies that would define the future.
He also opined that the market is far from being able to regulate everything, and “in the name of overly simplified market efficiency, entire supply chains of strategic goods, along with the industries and jobs that produced them, were moved abroad.”
Another problem he identified is the growth of the financial sector to the detriment of the industrial and infrastructure sectors, which is why many industries “atrophied” and industrial capacities “seriously suffered.”
Finally, he admitted that colonization and westernization of countries through globalization has failed:
Much of the international economic policy of the last few decades had relied upon the premise that economic integration would make nations more responsible and open, and that the global order would be more peaceful and cooperative—that bringing countries into the rules-based order would incentivize them to adhere to its rules.
Sullivan cited China as an example:
By the time President Biden came into office, we had to contend with the reality that a large non-market economy had been integrated into the international economic order in a way that posed considerable challenges.
The People’s Republic of China continued to subsidize at a massive scale both traditional industrial sectors, like steel, as well as key industries of the future, like clean energy, digital infrastructure, and advanced biotechnologies. America didn’t just lose manufacturing—we eroded our competitiveness in critical technologies that would define the future.
In his opinion, all this has led to dangerous consequences for the US led hegemony:
And ignoring economic dependencies that had built up over the decades of liberalization had become really perilous—from energy uncertainty in Europe to supply-chain vulnerabilities in medical equipment, semiconductors, and critical minerals. These were the kinds of dependencies that could be exploited for economic or geopolitical leverage.
Today, the United States produces only 4 percent of the lithium, 13 percent of the cobalt, 0 percent of the nickel, and 0 percent of the graphite required to meet current demand for electric vehicles. Meanwhile, more than 80 percent of critical minerals are processed by one country, China.
America now manufactures only around 10 percent of the world’s semiconductors, and production—in general and especially when it comes to the most advanced chips—is geographically concentrated elsewhere.
At the same time, according to him, the United States does not intend to isolate itself from China.
Our export controls will remain narrowly focused on technology that could tilt the military balance. We are simply ensuring that U.S. and allied technology is not used against us. We are not cutting off trade.
In the most egregious cases, Chinese goods are simply being repackaged and sent via third countries to America. … Free markets are simply adapting to find the cheapest way to supply goods to consumers.
This is what happens when the bulk of the ruling class has absolutely no grasp of the mechanisms that underpin their power, except as ‘common sense’. Or, as you put it, less than economics 101 knowledge. These are the same people who see themselves (and unfortunately, somehow are) the world’s ruling intellectual force. It can’t last.
Unless and until America re-constructs the entire manufacturing base of China somewhere ….
Unfortunately for westerners but fortunately for most of the rest of the world, the US/west is run by neoliberals who couldn’t see this sentence if you wrote it in the biggest neon letters you’ve ever seen. They are fundamentally incapable of understanding your twelve/thirteen words if they are put in that order. (Is a hyphenated word one or two words?)
The west is soon to face the comeuppance it should have faced before playing its get-out-of-jail-free card in the 60s by exporting the contradictions of capitalism to the ‘ex’-colonies. They can’t do it twice and now they face double the contradictions: first, within the imperial core, as the recent waves of industrial action and riots, etc, are showing; and second, in the neo-colonies, as in Niger.
The paper that speaks for millionaires isn’t going to have anyone to speak for before long.
Everybody who is not completely incompetent could see that this was going to happen from the beginning. China makes the products. America needs the products. Unless and until America re-constructs the entire manufacturing base of China somewhere, whether that’s spread out across their (ever-weakening) allies or inside America, Chinese products are going to find their way to America. Biden and his administration cannot cross their arms in a huff and go “Well, now that we’ve cut our ties with China, we are patiently waiting for that good ol’ free market to supply us the things that we need! Just, uh… waiting…” and then be surprised when countries seek to fill that gap by simply buying from China and then re-exporting to America. This isn’t even economics 101, it’s so basic, it’s more like “recognizing that matter-energy cannot be created nor destroyed”.
It’s the contradictions of capitalism! Honestly, we really should be glad that these people don’t study Marxism, or maybe they’d have a competent idea for once in their lives.
I still love that Jake Sullivan talk where he admits that the whole free market bullshit they’ve been promoting can’t actually compete with what China is doing. It’s an absolutely incredible read, Sullivan claims that the American economy lacks public investment, as it did after World War II. And that China is actively using this tool.
He also opined that the market is far from being able to regulate everything, and “in the name of overly simplified market efficiency, entire supply chains of strategic goods, along with the industries and jobs that produced them, were moved abroad.”
Another problem he identified is the growth of the financial sector to the detriment of the industrial and infrastructure sectors, which is why many industries “atrophied” and industrial capacities “seriously suffered.”
Finally, he admitted that colonization and westernization of countries through globalization has failed:
Sullivan cited China as an example:
In his opinion, all this has led to dangerous consequences for the US led hegemony:
At the same time, according to him, the United States does not intend to isolate itself from China.
This is what happens when the bulk of the ruling class has absolutely no grasp of the mechanisms that underpin their power, except as ‘common sense’. Or, as you put it, less than economics 101 knowledge. These are the same people who see themselves (and unfortunately, somehow are) the world’s ruling intellectual force. It can’t last.
Unfortunately for westerners but fortunately for most of the rest of the world, the US/west is run by neoliberals who couldn’t see this sentence if you wrote it in the biggest neon letters you’ve ever seen. They are fundamentally incapable of understanding your twelve/thirteen words if they are put in that order. (Is a hyphenated word one or two words?)
The west is soon to face the comeuppance it should have faced before playing its get-out-of-jail-free card in the 60s by exporting the contradictions of capitalism to the ‘ex’-colonies. They can’t do it twice and now they face double the contradictions: first, within the imperial core, as the recent waves of industrial action and riots, etc, are showing; and second, in the neo-colonies, as in Niger.
The paper that speaks for millionaires isn’t going to have anyone to speak for before long.
Neoliberalism is a failure.