Source: The Loadstar
Date: 1st December 2023
It seems China is either not alone in its concerns over a move towards global protectionism – or it’s wielding an incredible level of influence over the World Trade Organisation (WTO).
Its director general at the China International Supply Chain Expo in Beijing echoed China’s calls urging countries not to abandon globalisation.
Noting nations’ national security necessitated some re-shoring or near-shoring, the director general said: “If countries let it go down the road of large-scale reshoring, it would just be giving up the productivity gains that come with specialisation, scale and trade.
“There would be an increase in supply concentration and that would make supplies less resilient.”
The director general’s warnings come amid a groundswell of US legislation and administrative manoeuvres that many are reading as a signal that the world’s largest economy intends to regain its reputation as a manufacturing leviathan.
Dubbed “Bidenomics”, the centrepiece of this effort is the Inflation Reduction Act, which looks set to light a fire under the production line of US electric vehicle production.
It is a push that seems to have spooked the Chinese; the Asian powerhouse’s premier at the same summit urged the international community to rebuff “the rise of global protectionism”.
The Asian powerhouse’s premier said: “The international community must be warier of the challenges and risks brought about by protectionism and uncontrolled globalisation.
“China is a participant and beneficiary of global industrial and supply chain cooperation but it is also a firm defender and builder. We are willing to build closer production and industrial supply chain partnerships with all countries.”
There is a fear over what all this would do to China’s already precariously balanced economy.
The impact of the legislation on international trade may, however, be of little interest to the US president, who has sought to position himself as returning jobs and prosperity to American workers while warning international trade may be of little benefit to US firms.
Certainly, US companies have responded, at least as far as China is concerned, with sizeable reductions in both inbound investment and sourcing from Chinese manufacturers.
Another proponent of globalisation, the IMF, warned that decoupling from China would lead to a 7% reduction in global GDP, while the director general has put the cost from a break-up to trading blocs at 5%.
Together with the Asian powerhouse’s premier’s opening address to the same summit, such warnings could be interpreted as a cry for help with a system these bodies exist to serve.
This though may be part of the point: following Chinese admission to the WTO, globalisation essentially morphed into a process for wealthy nations to outsource production to China at the expense of domestic manufacturing jobs.
The policies could potentially be intended as a cure for this, reasserting the US’s position as a globalised manufacturer and rewriting the definition of globalisation.