Because the Chinese market also serves American companies
That is why it will be difficult for the United States to give up China. NYT report on the sidelines of the debate between Trump and Biden
In July, former Vice President Joseph R. Biden Jr. presented an economic strategy to "rebuild national manufacturing capacity" by restoring local supply chains from semiconductors to pharmaceuticals. In September, it added a tax sanction to the plan, aimed at companies that transfer jobs to other countries, along with a tax credit for companies that take them home.
The proposals may have seemed to mirror those of President Trump – writes the NYT .
"There is a common concern that Trump's candidacy has forced many people to think more," said Jared Bernstein, a former Biden business adviser who is informally advising his presidential campaign. And this is "the extent to which globalization has left behind a significant number of people in many different communities".
These common understandings could reshape the global economy. Regardless of who wins in November, economic policy for the next few years will aim to protect American employment from outsourcing led by employers seeking to reduce labor costs, and to regain a foothold in industries that states United had given up on losing.
"If the argument is that we need high-paying jobs in the manufacturing sector, because they fit the skills of many people being left out, this is an argument for deglobalization," said Derek Scissors, an economist for the world. 'American Enterprise Institute, a conservative Washington think tank. "We should have some deglobalization for this to work."
Depending on how the next administration deploys the tools of government to serve this cause, the United States could reconfigure the global network of corporate supply chains that multinationals have established over the past four decades. A “flat world” with countries increasingly closely linked to each other through trade and investment, pursued by presidents from Ronald Reagan to Barack Obama, seems to be an outdated goal.
A Biden administration is unlikely to continue to impose tariffs on friends and foes, using protectionist tools in a more strategic and disciplined way. However, the policy proposals suggest that Biden would stick to the goal of encouraging, guiding, inciting or pushing American companies to develop strategic industries and the jobs they support in the United States.
"Biden is not blindly in favor of trade, but he doesn't want to withdraw from the world like President Trump did," said Ben Harris, a senior economic advisor to Biden and his campaign. "What the vice president is proposing is a new approach to globalization, an approach in which you are not faced with every trade agreement with the motivation that more exchanges are always better."
Trump has put tariffs on imports from rivals and allies, started a trade war with China, and blocked Chinese companies' access to American technology. It renegotiated the North American Free Trade Agreement, shorted the World Trade Organization dispute resolution system, and pulled the United States out of the Trans-Pacific Partnership.
But a membership survey released in September by the Shanghai American Chamber of Commerce found that, despite the administration's push to redirect US corporate investment to the United States, only 4 percent plan to do so; 79 percent reported no change in plans.
Furthermore, the trade war has come at a cost. According to a Federal Reserve document, US-imposed tariffs and retaliatory measures taken by damaged trading partners have reduced the US economy by billions, according to a Federal Reserve document. And a 2019 study by economists from the Fed, Princeton University, and Columbia University showed that tariffs have imposed additional burdens on American households, increasing the cost of imports and limiting exporters' access to markets.
For all these costs, there has been no improvement in Trump 's favorite indicator of economic dominance, the nation's trade balance. The balance between America's exports and imports of goods and services plunged into its deepest deficit in July since the George W. Bush administration. The balance of the trade in goods alone has registered its deepest deficit at least since the administration of the father of George W. Bush.
Over the summer, Robert Lighthizer, the leading US trade negotiator, published an essay extolling the administration's combative approach as a strategy that "finally rewards the dignity of work." Yet Moody's Analytics estimated last year that the trade war with China cost 300,000 jobs in the United States.
Under Biden's leadership, "I would expect a more judicious and targeted form of protectionism," said Kimberly Clausing, a Reed College economist who offered fiscal policy advice to Biden's campaign. “The tax reform is useful for reducing the pitch of the playing field”. Ms. Clausing supports Biden's proposal for a minimum corporate profit tax, saying it would counter the incentives introduced in the 2017 tax reform for companies to outsource production. Whatever turn American protectionism takes, it will remain focused on China. "Trump woke us up on the Chinese question," added Rob Atkinson, who heads the Information Technology and Innovation Foundation, a think tank close to the US technology industry. "He made it clear that we have to be hard on China."
At the same time, the focus of American policy is increasingly shifting from occupation to broader national security considerations, including technological primacy and intellectual property protection.
"This is a much more complicated discussion than how much we import and how much we export," said David Autor, a Massachusetts Institute of Technology economist who is not recommending a presidential campaign. Both Republicans and Democrats are keen to prevent China from becoming the dominant provider of advanced communications technologies and to ensure that the United States develops new energy technologies, advanced semiconductors and pharmaceuticals.
The effect could be to further slow down a process of globalization that was already losing momentum as companies reconsidered the distant supply chains they put in place in the decades following the end of the Cold War.
American companies may not be crowded due to the Trump administration tariffs, but globalization has shifted one gear less since the 1990s and early 2000s when American companies poured into China and beyond. other low-cost labor markets. Trade growth subsided after the 2008 financial crisis, when China and other Asian economies stepped up the technological scale to make more sophisticated parts and components they use to import and assemble into finished products for manufacturing. export. Cross-border investment flows also declined.
Production has become increasingly automated. Thus the effort of multinationals to find low-cost workers has taken a back seat to other considerations, such as the search for skilled labor, proximity to consumer markets and the guarantee that supply chains can withstand shocks such as pandemics, disasters. climate-related or even trade wars. And these companies are paying more attention to the risks associated with their complex global networks.
This has reduced the pressure on American jobs. Factory employment remains far from its peak 40 years ago, but manufacturers have added nearly 1.5 million jobs in the 10 years after employment bottomed out in February 2010, deep in the latest recession . And a white-collar job flight from the US has not yet materialized.
In August, the McKinsey Global Institute released a report suggesting a vast reorganization of global production may be underway: Production of 16 to 26 percent of global trade, worth between 2.9 and 4.6 trillion dollars, it could move elsewhere in the next five years, possibly closer to the domestic market. The engine of this change is fear – fear of natural disasters, pandemics or trade wars that could destroy some vital cog in society's production network. "The global supply chains built over the past 20 years have been shaped by cost efficiency and a just-in-time delivery mentality," said Susan Lund, co-author of the report. “Now a 'just in case' mentality has emerged. It is the beginning of a different chapter ”. The United States could emerge as winners in this process. Buy America programs and other incentives could attract national investment in new technologies. If skilled labor becomes more important to modern manufacturing than cheap labor, the United States is likely to get more. “The offshoring that occurred was 10 or 20 years ago,” Ms. Lund said. "This time it's only upside."
The United States' new approach to the world carries a certain risk, as the relationship between the two largest economies, which has driven the globalization process for decades, is getting colder.
It will be difficult for the United States to disengage from China, which remains a huge market for American companies. Yet the relationship could take a bad turn. Mister Autor, for example, thinks the new trade and investment policy is dividing the world into a Chinese bloc and a Western bloc, led by the United States. "It will be a bipolar, bifurcated world, with different standards and rights," he said. Where the jobs end up will be a secondary consideration.
(Extract from the foreign press review of Eprcomunicazione)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/perche-il-mercato-cinese-serve-anche-alle-aziende-americane/ on Sun, 04 Oct 2020 06:08:25 +0000.