“The pandemic tested our domestic manufacturing and revealed that our supply chains are broken. We cannot rely on China any longer to produce everything our country needs.” – Donald Trump
Following Mao Zedong’s successful revolution in China in 1949, the U.S. refused to recognize the new communist regime. Instead, America recognized the Nationalist Chinese government that had been established by Chiang Kai-shek in Taiwan. In 1950, during the Korean War, the Chinese sent war supplies to North Korea. During the Vietnamese War, Beijing supported Communist North Vietnam.
In 1978, President Jimmy Carter shocked the free world when he announced that the United States would formally recognize the communist People’s Republic of China and sever diplomatic relations with the island of Taiwan. This not only angered many members of Congress but most of our allies throughout the free world. And America is living with Carter’s foolish foreign policy blunder today.
After the Communists rose to power in China in 1949, the U.S. enacted an embargo against the sale of technology and infrastructure products to Communist China. Following the onset of the Korean War, further trade restrictions were imposed. The trade embargo on some imports was lifted under Richard Nixon in 1972. But the U.S. was not trade dependent on China for anything until mid-1990.
After 1990 economic ties between the U.S. and China grew rapidly. Following the Carter years of unemployment and inflation along with generous agreements with the labor unions, manufacturers in the U.S. saw this new relationship between China and the U.S. as an economic blessing.
“I’ve given up looking for the union label since the only label I see today is “made in China.” – Jay Leno
China has delivered some of the most notable economic growth the world has seen since 1990, mostly at the expense of American companies. Since China is Communist and untrustworthy the question many Americans ponder is why did so many companies choose China over democratic nations? Would it not be to our benefit to outsource or trade with democratic allies and friends?
Jimmy Carter set the stage for U.S. companies to cut labor and increase profits by outsourcing to China. U.S. companies began moving operations from the U.S. and other countries to China since China had cheap labor, no environmental laws or labor laws and government-run shipping ports.
Most importantly, China is still categorized as a “developing” country and enjoys the same “special global entitlements” on shipping and energy as nations like Papua, New Guinea and Zimbabwe.
With the collapse of US-China relations accelerated by COVID, building a more resilient supply chain has been America’s chief economic necessity. The pandemic exposed the weakness in our supply chain due to our dependence on China for so many essential items. This is an opportunity for us to work with democratic nations like India in building a better and more secure supply chain.
India’s transport minister Nitin Gadkari recently told the BBC that China’s weakened global position after the COVID crisis is a “blessing” for India to attract more investment. Gadkari said his nation is prepared to take on as much business as China and has the resources to do it. The state of Uttar Pradesh has formed an economic task force to search for firms seeking to relocate from China.
“India can replace China as the world’s factory if nations are willing to invest in us.” – Nitin Gadkari
Bloomberg reported India has a pool of land twice the size of Luxembourg to offer companies that want to move manufacturing out of China. And it has reached out to 1,000 American multinationals.
“After COVID, many multinational companies are looking for alternatives to China.” – Deepak Bagla
The US-India Business Council (USIBC), a powerful lobby group that works to enhance investment flows between India and the U.S., said that India can handle all of the business they can get. Nisha Biswal, president of USIBC, told the BBC, “We are seeing India prioritize efforts to attract supply chains, in both central and state governments. India is on the move and it is ready to compete. ”
Former Financial Times bureau chief Rahul Jacob said the Indian government is putting together land banks to accommodate new factories, which is a step in the right direction. “Companies that already have some manufacturing in India may be earlier movers in reducing output in plants in China and scaling up in production in India. But it will take time to convince others to relocate.”
In a recent address to the nation, Indian Prime Minister Narendra Modi made “be vocal for local” his rallying cry. And new stimulus proposals have increased opportunities for foreign companies bidding for Indian contracts. Nisha Biswal recently said, “The more India can improve regulatory stability, the better its chances of persuading more global businesses to establish hubs in India.”
With America weighing punitive action against China, Japan paying its corporations to move out of the country and English lawmakers under pressure to reconsider the decision to allow the Chinese telecom giant Huawei to build their new 5G data network, global anti-China sentiment is increasing.
Federation of Indian Export Organizations Vice President Khalid Khan said, “India is emerging as a trusted trading partner and global firms like the U.S. are reducing their dependence on nations like China for supplies.” Khan noted that nations around the world have lost trust in China after COVID.
In 2021, America surpassed China as India’s top trading partne,r which demonstrates the improved economic ties between the two countries. According to India’s commerce ministry, in 2020-2021 bilateral trade between the U.S. and India reached $119.42 billion, $40 billion higher than in China.
International trade experts predict that India increasing bilateral trade with the U.S. will continue in the coming years. With New Delhi and Washington strengthening economic ties, the entire world benefits.
“It’s important to focus on how we can strengthen international trade.” – Maggie Hassan
Intent on improving the investment climate and attract global capital, the 2013 collapse of the Rana garment factory in Bangladesh that supplied retailers like Walmart was a wake up call for India. It forced Bangladesh to significantly improve its infrastructure and safety to clinch more investment.
Henry Ford told us, “The cheapest investment is usually the most insecure.” World markets have walked on egg shells around China too long to take advantage of their cheap labor at the expense of their economic futures. We must be proactive and turn to countries like India and Mexico in the rebuilding of our supply chains. This cannot be done overnight, but the time has come for us to act now. China has proven it can bring the world economy to its knees. Are we ready for COVID-2?
“The pandemic made it impossible to ignore the vulnerability of America’s supply chains and its structural deficiencies and capacity. We can’t afford to be caught off guard again.” – Marko Rubio