Analysts Say Biden May Back Away From Export Controls as Politicization of Supply Chains Endures
It's unclear how a President Joe Biden would try to use policy to shape the global supply chain, but the Atlantic Council's Asia Security director said that since Biden prefers a multilateral approach, he “might be less likely” to impose tariffs or export controls. Miyeon Oh, who was speaking during an Atlantic Council webinar June 26, said he might try to get allies to coordinate an effort “to rebalance the global supply chain,” and he might seek to use American participation in the Trans-Pacific Partnership as a way to do so.
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Neil Thomas, a senior research associate at the Paulson Institute's MacroPolo think tank, said the U.S. rejoining the TPP might be difficult politically, even though the trade deal is not controversial in his native Australia. He said Japan and other countries in the trade pact would prefer the U.S. join, but said, “Whether it’s going to make sense from an American political perspective remains to be seen.”
Despite the triple pressures of Section 301 tariffs, export controls and the disruptions of the COVID-19 pandemic, MacroPolo Director Damien Ma said the agglomeration effect of electronics production among Japan, South Korea, Taiwan and China has been stronger than the fear that things could get worse. He said the cost of switching out of that ecosystem “is enormous.”
Even in low-tech manufacturing, Ma said, there hasn't been “a mass movement to Southeast Asia.” While Chinese firms have done some diversification to Vietnam or Indonesia, “Southeast Asia simply cannot compete” with China's first-world infrastructure and logistics. “People are in China now not simply because of the cost,” he said. “It's also about the efficiency of the system.”
Thomas said he believes that if the U.S. had stayed in the TPP, more manufacturing would have moved to Vietnam and Malaysia in the last several years.
The panelists said the U.S. desire to hamstring Huawei through export controls may work in the short term, but maybe not in the long term. Thomas said that Huawei can design sophisticated chips, but a Taiwanese firm makes them, and the Commerce Department now has veto power over Taiwan-made chips being sold to Huawei if those chips contain any intellectual property from the U.S.
But Thomas said a risk of this approach is that European and Asian firms could cut American firms out of the supply chain so the foreign firms can keep selling to China's massive consumer electronics industry.
Whether Biden takes a sharply different tack on China trade or not, Thomas said, the heightened attention to supply chains among politicians is not going to change. “Supply chains ... have really been flying under the radar the last 20, 30 years,” he said. “Regardless of what happens in November, we’re going to see increasing focus on them.”