All the talk of decoupling is nonsense. The US and Europe are dependent on the world's factory for both intermediate and final goods.
Asia Times
US and EU economies hang on Chinese imports
Asia Times
US and EU economies hang on Chinese imports
David P. Goldman
https://asiatimes.com/2021/11/chinese-exports-support-global-supply-chains/
10 comments:
Trade figures don't lie. Thanks to modern civilization and globalism, everyone is dependent. What could go wrong?
What could go wrong?
What are the pros and cons? What is the opportunity of cost associated with a taking a particular angle.
Pros are bigger profits and cheaper goods.
Cons are an off-shored economy and a fragile supply chain.
In case of a breakdown:
Do you want your food supply to be dependent on foreign producers?
Being dependent limits your options. So that may be the biggest con of all.
Pros are bigger profits and cheaper goods.
Competition drives price to cost. If you have lower prices due to offshoring, then so do your competitors. The excess profits are competed away, and the benefits flow through to consumers.
...fragile supply chain
The last UAW strike against Deere lasted 163 days
What competition? Domestic producers were driven out of the market. That's a reduction in competition. Importers in direct consumer goods (think Walmart) are running a monopsony. Foreign suppliers are forced to undercut ("compete") each other into the ground.
What does a labour dispute have to do with supply chains?
If John Deere were losing market share, they'd settle their disputes quickly.
Another example of "competition".
Strikes that threaten the economy are typically forced into arbitration. Why isn't this happening under the Brandon administration?
What competition? Domestic producers were driven out of the market.
In case I wasn't clear, the companies that offshore compete with other companies that offshore.
What does a labour dispute have to do with supply chains?
The reason why they offshored in the first place, and the reason not to reshore. The supply chain disruptions caused by the Corona virus are probably a once in a lifetime thing. Union strikes however are a constant threat.
John Deere says it is looking at all options to provide products to its customers, including possibly using strikebreakers or importing equipment from overseas factories it operates. —CNN
Once the supply chain disruptions end, and assuming the John Deere workers get higher pay, it's to John Deere's benefit to import more equipment. Some of these workers will lose their jobs.
Strikes that threaten the economy are typically forced into arbitration. Why isn't this happening under the Brandon administration?
I have no idea. They should be because farmers are suffering. This is class warfare of a different sort, where one class of workers tries to achieve higher pay by harming another class of workers.
In case I wasn't clear, the companies that offshore compete with other companies that offshore.
Apple, Nike enjoy large markups for their products. Where is the competition to reduce those prices?
Again, there is a difference between direct consumer goods and the components needed to manufacture them. Imports are a net benefit, mostly at the expense of foreign suppliers.
The reason why they offshored in the first place, and the reason not to reshore. The supply chain disruptions caused by the Corona virus are probably a once in a lifetime thing. Union strikes however are a constant threat.
John Deere holds a large share of the market in agricultural equipment. Why hasn't foreign competition forced them to offshore, or cut prices?
You have a distorted sense of who is in control of profit margins. There is more to trade than cheap electronics.
Unions? They are less of a threat since becoming corrupt. They are now pitting unionized workers against each other with tiered labour agreements. They may as well be an arm of management.
Despite offshoring, US-based manufacturing remains profitable, but it will never employ the number of workers it once did. High school factory jobs no longer support a middle-class lifestyle.
The wreckage has been done. The election of Trump is a warning not to offshore in the future. Globalism's days are numbered.
re: the Abba Lerner symmetry theorem
The Lerner symmetry theorem is a result used in international trade theory, which states that an ad valorem import tariff (a percentage of value or an amount per unit) will have the same effects as an export tax. The theorem is based on the observation that the effect on relative prices is the same regardless of which policy (ad valorem tariffs or export taxes) is applied.
The theorem was developed by economist Abba P. Lerner in 1936.
Trade wars don't destroy jobs on net, they shift jobs around. Here, have a quote:
The classic case for free trade argues that when people are free to trade across national borders, the producers in each country will specialize in the products they make most efficiently. The fact that U.S. steel production has fallen nearly 20% in the last decade, while steel and aluminum imports have increased, indicates that U.S. capital and laborers are better employed in other industries.
Trade neither creates nor destroys jobs on net, because the loss of jobs in a steel or aluminum industry that competes with imports is offset by job creation in U.S. export industries and other industries that use steel and aluminum in whatever they produce. Similarly, tariffs on steel and aluminum create jobs in those industries at the expense of jobs in export sectors and those that use steel and aluminum, such as the car, construction, beer, and soft drink industries.
Total long-run employment is largely a function of the size of the labor force and labor market regulations. So claims that Trump’s policies will either create or destroy jobs on net are bogus. Again, it’s the mix of jobs and what we produce in America that tariffs change—and in this case, that will be for the worse.
source: Commentary: Trump’s Tariffs Won’t Kill U.S. Jobs. They’ll Create the Wrong Ones.
Trump's tariffs increased prices and did not alter the trade balance.
Consumers lost.
Abrupt climate change may accomplish what Trump failed to do. More protectionism for purposes of self-reliance.
A social uprising wouldn't hurt either.
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