Think Tank Says COVID-19 Likely to Accelerate Decoupling
The Council on Foreign Relations said that U.S., European and Japanese pushback over Made in China 2025, at least the part on high performance medical devices, may ebb after the coronavirus pandemic has passed -- because other countries will want to implement their own versions. “If any country knows a little bit about reducing industrial dependence on the rest of the world through conscious industrial choices, that would be China,” said Brad Stetser, a CFR senior fellow for international economics, during a webinar April 16. He said China is displacing imported semiconductors, but has been less successful in displacing imported aircraft.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Still, even as China is less dependent on imported inputs and on exports than it was five years ago, economic nationalism or supply chain diversification does pose some challenges to China's economy, he said. “China still runs by far the largest manufacturing surplus in the world, $1 trillion,” he said. So any move toward diversification of supply chains is a move away from buying Chinese products.
Elizabeth Economy, CFR's director for Asia Studies, said China “doesn’t want an acceleration away from manufacturing in China until it’s ready.” On the upside for China, Stetser said, the World Trade Organization or G-20 might be able to “reach agreement on what is allowed and isn’t allowed in those efforts” to improve supply chain resilience.
Section 301 tariffs in the U.S. are based in part on the argument that Made in China 2025 is an anti-market industrial policy and that U.S. manufacturers are disadvantaged by its existence. Stetser did not directly address the consequences for tariffs if other countries decide more active industrial policy in the medical field is permitted.