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Resorting to economic nationalism is the wrong lesson to take from the pandemic.
U.S.-China relations are undergoing a major challenge due to the COVID-19 pandemic. Prior to the outbreak, the United States and China had just ameliorated two years of trade tensions with the inking of the so-called “Phase One” trade deal. But the pandemic has reintensified old strains on the relationship. Instead of working together to fight off the global pandemic, the two countries’ leaders have been playing a blame game, complete with misinformation campaigns. U.S. President Donald Trump blamed China for concealing critical information about COVID-19, deliberately referred to the “Chinese virus” (despite warnings that such rhetoric instigates hatred against East Asian people around the world) and even stepped up support for the conspiracy theory that the virus escaped from a Wuhan lab. On the other hand, the Chinese government accused the U.S. military of spreading the virus in China and complained that the United States’ early travel ban was unnecessary and harmful. Tensions continue to escalate, with Trump administration recently threatening to sue China for billions of dollars in pandemic reparations while Beijing forcefully condemned such charges.
Political battles aside, COVID-19 for many Americans has revealed the danger of relying on China for manufactured goods. In fact, the U. S. was incredibly ill-prepared for the global pandemic, which revealed a lack of critical medical supplies and private protective equipment (PPE) such as masks, nasal swabs, and ventilators. The disruption of the Chinese supply chain due to the pandemic and lockdown has also caused negative shockwaves through U. S. production and markets. UU. La lesson turns out to be that production wants to bounce back. to the country, while the U. S. is decoupling from China. Help for economic nationalism is developing.
However, resorting to economic nationalism is the wrong lesson. It is not only infeasible but undesirable.
To begin with, it is about separating the two largest economies in the world. The United States and China are strongly linked, not only in terms of the global supply chain, but also in terms of their growing calling for structure. It is a myth that China only does reasonable hard work and that this position merit is temporarily eroding. In fact, China occupies a vital link in the global origin chain, as it has 270 million highly flexible migrant workers; much more technically trained personnel than in other countries; built-in infrastructure to ensure logistics efficiency; and giant and complex commercial clusters and chains of origin within the country. All these merits cannot be replicated without problems in other countries and regions. It is true that the industrial war between the United States and China generates greater uncertainty and prices for the global origin chain, leading some corporations to leave China and potentially leading to a contraction of the global price chain. But what remains in China is a production that has relatively limited room for radical change: Apple’s very slow relocation of production outside of China and the opening of a Tesla factory near Shanghai demonstrate the importance of China as a component essential. of the world market. source chain.
More importantly, even if the US government could simply impose exorbitant price lists or use executive orders to force US corporations out of China, it would be highly undesirable. First, production could simply move elsewhere rather than return to the United States after decades of productive sector stagnation and the country’s structural transformation toward a service-based economy. Second, some production may simply return to the U. S. but become increasingly reliant on automation, resulting in little employment or revenue stream. benefits for the ruling class, as the Trump administration likes to paint it.
Withdrawing from the global price chain department is counterproductive. The lesson of COVID-19 is not that the U. S. has to produce everything, but that it has to produce something. China would possibly have the merit of generating low-end masks, gowns and accessories. other PPE, but the U. S. has the merit of generating more high-tech products, such as respirators and vaccines. The shortage of ventilators in the United States was not due to a lack of domestic capacity: in fact, four of the ten most sensible ventilator brands are The challenge was the lack of a strategic stockpile of ventilators to meet the growing demand: a general failure on the part of the U. S. government, which had tried in vain to build up this stockpile since 2006.
Diversifying production sites is the most effective measure to address supply chain disruptions in the face of a global pandemic. When countries are at other stages of the curve, they can open their respective economies at other times, avoiding a complete shutdown of global production. China was the first victim of the pandemic and is now the first to reopen its economy. This allows China to produce essential PPE and medical materials for the rest of the world, and source many vital parts and factors for automotive, electronics and other brands around the world.
Moreover, the post-pandemic recovery will not be easy. The severity and duration of the COVID-19 crisis suggest that hope for an immediate V-shaped recovery in the United States is temporarily fading. Nationalism is a very costly strategy to rebuild the economy. The Trump administration is unlikely to change course and squander the industrial deals it has struck so far. China continues to be an exciting market, especially with the opening of $45 trillion worth of money markets.
Finally, in order to combat the pandemic well, it will be necessary to contain the virus at the point of the “weakest link”. Helping the most vulnerable countries cope requires coordinated assistance from the United States and China. For example, to help some heavily indebted countries for low-income countries, the U. S. can simply help the IMF generate more Special Drawing Rights (SDRs) and China can simply increase or alleviate some of those countries’ lending. A global crisis, whether a pandemic or climate change, demands coordination and cooperation. Pooling resources, sharing wisdom, and coordinating policies is key. It is more pressing than ever to build a global formula of public fitness and rebuild the global economy, which demands cooperation rather than confrontation between the world’s two largest countries.
COVID-19, like any virus, knows no borders. All countries are in this together. As the world’s two largest economies, which remain closely connected, the United States and China must work together to effectively fight the pandemic and revive the economy.
Yan Liang is a full professor of Economics at Willamette University, United States. She specializes in international trade and finance, modern money theory, and economic development, with a regional focus on China.
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U.S.-China relations are undergoing a major challenge due to the COVID-19 pandemic. Prior to the outbreak, the United States and China had just ameliorated two years of trade tensions with the inking of the so-called “Phase One” trade deal. But the pandemic has reintensified old strains on the relationship. Instead of working together to fight off the global pandemic, the two countries’ leaders have been playing a blame game, complete with misinformation campaigns. U.S. President Donald Trump blamed China for concealing critical information about COVID-19, deliberately referred to the “Chinese virus” (despite warnings that such rhetoric instigates hatred against East Asian people around the world) and even stepped up support for the conspiracy theory that the virus escaped from a Wuhan lab. On the other hand, the Chinese government accused the U.S. military of spreading the virus in China and complained that the United States’ early travel ban was unnecessary and harmful. Tensions continue to escalate, with Trump administration recently threatening to sue China for billions of dollars in pandemic reparations while Beijing forcefully condemned such charges.
Political battles aside, many Americans believe that COVID-19 revealed the danger of relying on China for manufactured products. Indeed, the United States was incredibly ill-prepared for the global pandemic, which revealed a lack of basic medical supplies and personal protective equipment (PPE) such as face masks, nasal swabs, and ventilators. The disruption of China’s supply chain due to the pandemic and lockdown also sent negative shockwaves to U.S. production and markets. The lesson seems to be that production must be brought back home, while the United States decouples from China. Support is rising for economic nationalism.
The lesson, however, is to resort to economic nationalism. It is not only unfeasible but also undesirable.
To begin with, it is about separating the two largest economies in the world. The United States and China are strongly linked, not only in terms of the global supply chain, but also in terms of their growing calling for structure. It is a myth that China only does reasonable hard work and that this position merit is temporarily eroding. In fact, China occupies a vital link in the global origin chain, as it has 270 million highly flexible migrant workers; much more technically trained personnel than in other countries; built-in infrastructure to ensure logistics efficiency; and giant and complex commercial clusters and chains of origin within the country. All these merits cannot be replicated without problems in other countries and regions. It is true that the industrial war between the United States and China generates greater uncertainty and prices for the global origin chain, leading some corporations to leave China and potentially leading to a contraction of the global price chain. But what remains in China is a production that has relatively limited room for radical change: Apple’s very slow relocation of production outside of China and the opening of a Tesla factory near Shanghai demonstrate the importance of China as a component essential. of the world market. source chain.
More importantly, even if the U. S. government could simply impose exorbitant price lists or use executive orders to force U. S. corporations out of China, it would be highly undesirable. First, production could simply move elsewhere rather than return to the United States after decades of stagnation in the productive sector and the country’s structural transformation to a service-based economy. Second, it’s possible that some production will simply return to the U. S. It will be a major threat to the U. S. , but will increasingly rely on automation, which will generate little employment or source of income. benefits for the ruling class, as the Trump administration likes to paint it.
Retreating from the global division of value chains is counterproductive. The lesson from COVID-19 is not that the United States needs to produce everything, but that it needs to produce something. China may have an advantage in producing masks and gowns and other relatively low-end PPE, but the U.S. has an advantage in producing more high-tech products such as ventilators and vaccines. The shortage of ventilators in the United States was not due to a lack of national capacity — in fact, four out of the top 10 ventilators manufacturers are U.S. companies. The problem was the lack of a strategic stockpile of ventilators to cope with surging demand — an utter failure on the part of the U.S. government, which had attempted in vain to build the stockpile since 2006.
Diversification of production locations is actually the most effective measure to deal with supply chain disruption in face of a global pandemic. When countries are in different phases of the curve, they are able to open their respective economies at different points in time, which prevents a complete halt in global production. China was the first victim of the pandemic and now is the first to reopen its economy. This allows China to produce some very essential PPE and medical supplies for the rest of the world, and to provide many important parts and components to auto, electronics, and various other makers around the globe.
Moreover, the post-pandemic recovery will not be easy. The severity and duration of the COVID-19 crisis suggest that hopes for an immediate V-shaped recovery in the United States are rapidly fading. Nationalism is a very clear strategy for rebuilding the economy. Trump’s administration is unlikely to change course and squander the industrial deals reached so far. China continues to be an exciting market, especially with the opening of $45 trillion worth of money markets.
Finally, to successfully battle the pandemic requires the containment of the virus in the “weakest link.” Helping the most vulnerable countries to cope requires coordinated assistance from the United States and China. For example, to help some of the highly indebted low-income countries, the United States could support the IMF to issue more Special Drawing Rights (SDRs) and China could extend or relieve some of these countries’ loans. A global crisis, be it a pandemic or climate change, requires coordination and cooperation. Pooling resources, sharing knowledge and coordinating policies are the key. It is more urgent than ever to build a global public health system and to rebuild the global economy, and that requires cooperation, rather than confrontation, by the world’s two largest countries.
COVID-19, like any virus, knows no borders. All countries are in the same boat. As the world’s two largest economies, which remain strongly linked, the United States and China will have to work together to combat the pandemic well and restart the economy.
Yan Liang is a full professor of Economics at Willamette University, United States. She specializes in international trade and finance, modern money theory, and economic development, with a regional focus on China.
U.S.-China relations are undergoing a major challenge due to the COVID-19 pandemic. Prior to the outbreak, the United States and China had just ameliorated two years of trade tensions with the inking of the so-called “Phase One” trade deal. But the pandemic has reintensified old strains on the relationship. Instead of working together to fight off the global pandemic, the two countries’ leaders have been playing a blame game, complete with misinformation campaigns. U.S. President Donald Trump blamed China for concealing critical information about COVID-19, deliberately referred to the “Chinese virus” (despite warnings that such rhetoric instigates hatred against East Asian people around the world) and even stepped up support for the conspiracy theory that the virus escaped from a Wuhan lab. On the other hand, the Chinese government accused the U.S. military of spreading the virus in China and complained that the United States’ early travel ban was unnecessary and harmful. Tensions continue to escalate, with Trump administration recently threatening to sue China for billions of dollars in pandemic reparations while Beijing forcefully condemned such charges.
Political battles aside, COVID-19 for many Americans has exposed the danger of depending on China for manufactured goods. In fact, the United States was incredibly ill-prepared for the global pandemic, which exposed a lack of critical medical supplies and personal protective equipment (PPE) such as face masks, nasal swabs, and respirators. The Chinese supply chain disruption due to the pandemic and lockdown also caused a negative surprise wave in US production and markets. The lesson turns out to be to bring production back home, while the United States disassociates itself from China. Economic nationalism enjoys increasing support.