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U.S. Seeks to Relocate China Supply Chains to India, Allies in Post-Coronavirus World

U.S. Seeks to Relocate China Supply Chains to India, Allies in Post-Coronavirus World

Washington “looking for ways to push companies to move both sourcing and manufacturing out of China.”

https://www.youtube.com/watch?v=lEQ2J_Z1DdA

Given recent developments following the outbreak of Wuhan coronavirus, the era of China being the go-to manufacturing destination for the U.S. companies appears to be coming to an end.

The United States seeks to decouple its economy from Communist China in a post-coronavirus scenario, media reports say. Washington wants to empower India and other Indo-Pacific allies to replace manufacturing supply chains running through China.

“The Trump administration is “turbocharging” an initiative to remove global industrial supply chains from China as it weighs new tariffs to punish Beijing for its handling of the coronavirus outbreak,” the news agency Reuters reported on May 4, citing U.S. officials. “The U.S. Commerce Department, State and other agencies are looking for ways to push companies to move both sourcing and manufacturing out of China. Tax incentives and potential re-shoring subsidies are among measures being considered to spur changes.”

While many of these measures rolled out by the White House will be to bring manufacturing jobs back home, the U.S. is also considering relocating some of those supply chains to allies in the India Pacific, including New Delhi. As U.S. Secretary of State Mike Pompeo said last month: Washington is “thinking about how we restructure these supply chains to prevent something like this from ever happening again. One example of our work together is with India.”

While President Donald Trump’s America First policy drives some of these measures, the industry in the U.S. and the West will still depend on global supply chains and foreign manufacturing partners.

This doesn’t have to be a zero-sum game. Under President Trump’s watch, the U.S. has been narrowing its trade deficit with India, from $22.9 billion in 2017 to 6.7 billion in April 2020. The U.S. can still balance the trade volumes and allow India offer an alternative to Chinese manufacturing. One big step in this direction would be to get New Delhi off its dependency on Russian military supplies. India is the largest buyer of Russian defense hardware.

The urgency to relocate supply chain is felt by the U.S. industry as well. “The coronavirus shock has accelerated the push towards supply chain diversification, as companies reassess the risks of relying on one country for supplying and sourcing and the stability of long-distance and just-in-time supply chains,” Nisha Biswal, president of U.S.-India Business Council, told Indian business daily Live Mint on Monday. “These dynamics create a significant opportunity for India, which has a large domestic market that US companies are looking to tap into, as well as large and skilled workforce.”

For India to become a counterweight to China in the region, Prime Minister Narendra Modi’s government will need to push ahead with massive infrastructure development and cut bureaucratic red tape. Decades of socialist planned economy has left India with poor infrastructure and massive bureaucracy.

In my last week’s article for the Gatestone Institute, I laid out the challenges and the opportunities India faces in emerging as a counterweight to China:

In the coming post-coronavirus world order, India is well placed to challenge China’s stranglehold over global and regional supply chains. Prime Minister Modi’s “Make in India” initiative, originally envisaged to create jobs in manufacturing sector, could also position the country as an alternative destination for rerouting global supply chain needs, especially in critical sectors such pharmaceuticals, industrial manufacturing, telecommunications and information technology.

To take advantage of a post-coronavirus realignment, India would do well to upgrade its infrastructure and seriously cut its bureaucratic red tape.

Modi came to power in 2014 on promises of streamlining the bureaucracy to foster a free economy. Since he took office, India has eased the government’s red tape and opened up the country to foreign companies and investment. During his tenure, the country advanced 79 places on the global “Ease of Doing Business” survey released by the World Bank annually, from 142nd to 63rd place. The country still trails China, which, until its pandemic, ranked 31. India, however, plans to invest $1.39 trillion on a series of critical infrastructure projects, including roads, railways, digital connectivity and power sectors.

India knows what’s at stake. New Delhi cannot afford to have any illusions about Communist China. Just last week, Chinese army breached Indian border at several locations and began a troop build-up along the country’s norther border. Having already occupied around 16,600 square miles of Indian territory in an unproved war of aggression in 1962, Beijing refuses to recognize parts of its 2,000 mile border with India.

The coronavirus pandemic has only made China more belligerent. Beijing has refused to conduct independent international inquiry into the outbreak that began late last year. It has intimidating U.S. allies in the region asking for an impartial probe, with Chinese ambassador to Australia threatening the country with a boycott of its goods if Canberra didn’t drop that demand.

Post-pandemic, the Communist regime in Beijing also reasserting its power in the region by harassing neighboring countries, and cracking down even more heavily on the democratic dissent in Hong Kong and the Mainland. The U.S. and the West must not reward China by continuing to do business with the regime. As we are leaning it the hard way: an economic strong Communist China is a threat to the Free World.

President Trump on new defense deals and trade agreements with India (February 2020)

[Cover image via YouTube]

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Comments

I think the CCP’s coverup of the Wuhan virus is the official start of Cold War 2.0. Trump has recognized that this was possible (likely?) and has been preparing for it, with his free trade deals, rewriting NAFTA to close the “backdoor” that China was exploiting, his courting of Modi since 2016, forced improvements to NATO, rebuilding our military, and withdrawing from the 1987 INF treaty (which was preventing us from developing and deploying intermediate range missiles in the Pacific that are needed to counter China).

Expect it to ramp up if he wins in November.

    Whitewall in reply to fast182. | May 25, 2020 at 12:48 pm

    I believe the WuFlu cover up has China going ahead with what they were planning for about 2030. There will be numerous small events by China like the HK crack down and India border excursion or maybe little fat man Kim launching a few missiles. There will be a major escalation as China’s hand is now open for all to see. The Big Event for them and the world will be whether Trump is re elected or not. If not, China will run wild. 2020 matters like 1980 did.

    ConradCA in reply to fast182. | May 25, 2020 at 4:13 pm

    There is no doubt that China attacked the USA and the rest of the world with a WMD, coronavirus. They kept the airlines flying to spread the virus outside of China while closing Wuhan’s borders to protect China. We are now at war with China.

Trump did offer China an out initially, he gave them every opportunity to turn the page… what did they do? Stab America and the world in the back by promoting death and mayhem throughout every country …

Somehow it is impossible to make the products in the USA, but they never explain why.

    Antifundamentalist in reply to dunce1239. | May 25, 2020 at 1:07 pm

    Minimum wage laws, environmental laws, health and safety laws….make it prohibitively expensive.

    Vijeta Uniyal in reply to dunce1239. | May 25, 2020 at 1:32 pm

    I touched on that point. America First is a reasonable policy. (Modi’s India has a similar policy: Make In India)

    But even for manufacturing in the US one will need global suppliers. With or without Coronavirus, it’s better to diversify. Why put everything in a single basket, that too a big red one?

      Barry in reply to Vijeta Uniyal. | May 25, 2020 at 2:03 pm

      “…it’s better to diversify.”

      How so? There are only two reasons to diversify – Cheaper and raw materials not available here.

      Raw material availability can often be overcome.

      When you do diversify, make sure it is with a partner that values freedom and liberty and do not put yourself into the hands of sworn enemies like China.

      DSHornet in reply to Vijeta Uniyal. | May 25, 2020 at 2:10 pm

      Agreed. Putting all our eggs in the Indian basket might look great if we want to start backing away from China, but we need to bring other countries into the mix. Among these might be Australia, Indonesia, Vietnam, and several in Central and South America. Let us be neighborly with our neighbors. It’s hard to foresee the long range benefits right now, but they’re there.
      .

        gonzotx in reply to DSHornet. | May 25, 2020 at 2:41 pm

        China is heavily invested in Vietnam and other Indo Asian countries manufacturing because they know we Americans do not want to buy from them

      stutz bearcat in reply to Vijeta Uniyal. | May 26, 2020 at 12:15 pm

      We can have diverse manufacturing right here in the USA. Why risk a conflict of national interest. When there is another crisis, with manufacturing here we will not have to deal with as many broken supply chains. Have we not learned our lesson? Apparently not.

    gonzotx in reply to dunce1239. | May 25, 2020 at 2:39 pm

    No one wants to pay American wages

    Slavery or near slavery wages are key.

    Although I will say WalMart does produce some of their own products IN America with American manufacturers, they have labels which actually explain this.

    https://cheapsimpleliving.com/post/walmart-made-in-the-usa-guide

    tom_swift in reply to dunce1239. | May 25, 2020 at 4:23 pm

    Somehow it is impossible to make the products in the USA, but they never explain why.

    A number of things, some due to government, some not. Cumulative tax burden is a big one. A factory owner pays someone to bolt widgets together, and essentially pays his taxes too; the money he pays in taxes comes from somewhere. This happens at every stop of a very long supply chain. By the time a product gets to market, a lot of money has changed hands, and the government has taken a cut every time. Any country with a lower tax burden, even if only slightly lower, has a considerable advantage.

    Another huge expense is the American legal system. There are some fields of medicine in which some 90% of an office’s revenue immediately goes to malpractice insurance, because suits are common, the payouts are enormous, and so the insurance costs are astronomical. The same thing has killed entire American manufacturing sectors; nobody can afford the goddam insurance.

    One thing which is not endemic in America is corruption. Some parts are notoriously corrupt, but nothing like the situation in Mexico, Iran, or India, where absolutely nothing can happen until everybody in sight gets his cut. In really terminal cases like India, the corruption is built-in; Nehru’s admiration for the Bolshevik economy and its apparent success in dragging a third-world society into the 20th century inspired him to require government control of—that is, licensing for—everything; and the guys granting the licenses had no trouble taking advantage of such a revenue godsend.

    Milhouse in reply to dunce1239. | May 25, 2020 at 5:50 pm

    The Wealth of Nations was published 244 years ago. Surely it’s time that its message penetrated. Even if we could make everything ourselves, we shouldn’t. It would be silly, and would impoverish us. The lesson from this crisis is not to stop trading but to stop relying on China. China’s not a bad actor because it’s foreign, it’s a bad actor because its’ communist.

notamemberofanyorganizedpolicital | May 25, 2020 at 1:02 pm

Good article Vijeta. Thanks.

2smartforlibs | May 25, 2020 at 2:23 pm

Did the lefts pals in China Military just move into India over the weekend and STAYED?

Horrible. Monstrous. Move them here where we can have single income blue collar jobs that provide a middle class living for AMERICANS.

Favor Cowboys over Indians.

Indiana is preferable to India…

To end reliance on China for anything is. essential–but the solution to of shifting to India is not much of an improvement given that no one knows India’s future. The goal should be autarky–the maximum possible degree of national self-sufficiency

Expansionist China is clearly a military, economic, and health threat to the world. But it’s reckoning time for the Chinese communist dictatorship. Washington should exert diplomatic, economic, and military pressure on Beijing that will put China’s dictator Xi Jingping, and the evil and corrupt CCP under enormous strain.
China owns approximately $1.07 trillion in U.S. Treasury bonds, according to the Treasury Department. The United States government should seize the Chinese treasury obligations that Beijing holds in their name, and inform the CCP that this is a down payment for the death of tens of thousands of American citizens and the economic devastation Beijing has unleashed on the U.S. economy
The nefarious CCP pumps over $150 million into its Confucius Institute propaganda of over 100 high school, college, and university campuses in the U.S. All should be shut down, and all Chinese “teachers” and students deported. America must end China’s unfettered access to our research centers and universities.
Seize all CCP property in the United States and selling it as reparations for the damage they have caused to our economy, including companies, real estate, bank accounts, aircraft, ocean-going vessels, and all other CCP assets in the USA.
The U.S. federal government should pay U.S. manufactures to leave China and return to the USA. It’s time to bring U.S. manufacturing back home. Americans want to buy high-quality “Made in the USA” products.

How about moving manufacturing back to the good old U.S.A.? Set up some reasonable incentive plan.

BierceAmbrose | May 27, 2020 at 7:25 pm

Since when was single-sourcing anything an acceptable, let alone good idea?

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