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Tags: supply chain | china | pandemic

Broken US Supply Chain Linked to Alarming China Dependence

Broken US Supply Chain Linked to Alarming China Dependence
An aerial image taken on October 28, 2021 shows the Palos Verdes Peninsula (L) and cargo container ships (back) waiting in the Pacific Ocean to unload at the Port of Los Angeles and Port of Long Beach as seen above the coast of Palos Verdes, California. (PATRICK T. FALLON/AFP via Getty Images)
 

Larry Bell By Monday, 01 November 2021 09:40 AM Current | Bio | Archive

If all those empty store shelves across the United States could talk, they would be begging for mercy in Mandarin.

Let America’s supply chain goods disaster serve as a wakeup call of a grave threat posed by crippling economic and social dependence we have accepted in exchange for outsourcing major industries, jobs, and fruits of production to lower wage nations – most particularly, China.

According to the U.S. Department of Commerce, China was America’s largest supplier of imports (18.1%) in 2019, with top categories including electrical and other machinery, toys and sports equipment, and plastics… up dramatically since 2001 when President Bill Clinton promoted China into membership in the World Trade Organization (WTO).

And we’re not alone in this trend.

Between 2004 and 2017, the global share of manufacturing shrank from 15 to 10 percent as reliance on Chinese imports doubled. The country became the world’s largest exporter of goods in 2009, and the largest trading nation in goods in 2013.

This dangerous pattern of dependence entails nearly endless items including finished products and key components ranging from medical equipment and pharmaceuticals to critical rare earth materials and high-tech systems.

When China cannot (or decides not to) supply these parts, whole industries suffer debilitating supply chain shortages.

President Biden’s hard push into renewables threatens to further bolster China’s dominance of the solar panel industry and production of the essential metals needed to produce “clean” energy and electric cars.

Beijing also controls production of critical components for U.S. military goods, some of which increase threats of sabotaged equipment and espionage.

China’s expansive agenda seeks to dominate such fields as artificial intelligence, bio-medicine, and the dominance of space. In the process, the Communist regime employs its power to restrain and even imprison the country’s entrepreneurs that defy its authority.

Predating the current crisis, a McKinsey and Company survey of executives last year found that nearly all respondents believed their supply chains are too vulnerable.

We can be encouraged that many companies are awakening to these vulnerabilities and moving operations to locally sourced materials and services. A March 2020 Thomas Industrial Survey indicated that up to 70 percent of firms polled said they were “likely” or “extremely likely” to re-shore in the coming years.

A similar UBS study revealed that as many as 50 or 60 percent of firms, including some major U.S. companies now producing in China, have either moved or are planning to relocate back.

Black and Decker has relocated China production to a new facility in Fort Worth, Texas, as part of its reshoring strategy, and American toy maker Little Tikes has begun shifting production out of China and back to Ohio.

Such moves involving manufacturing have one of the greatest local, state, and regional direct and indirect job and revenue multiplier effects of any business sector. In addition, they dramatically reduce freight expenses and delivery schedules.

Now add to this, China’s expanding role in the epicenter of current and future global seaport congestion disasters.

Witness as many as 60 vessels, mostly from Asia, waiting sometimes for as long as three weeks for unloading at California Long Beach and Los Angeles harbors… a shipping crisis now projected to last through 2023.

So far, these are the worst delays in modern history, with the price per container having already risen to as much as 10 times costs before the pandemic. Combined with COVID shutdown shortages of parts and labor, the congested ports have conspired to create an inflationary spike, with shipping rates doubling on some routes.

The cost of shipping a 40-foot container from China to the U.S. West Coast has soared from 11,000 dollars in July, to almost 20,000 dollars in August.

Trade flowing into and out of U.S. ports is increasingly vulnerable to market turmoil as China strengthens its investment foothold around the world.

At least two-thirds of the world’s top 50 container ports are owned by the Chinese or supported by Chinese investments, up from roughly 20% a decade ago. Those investments include terminals at major U.S. container ports in Los Angeles and Seattle.

China is buying up shipping assets and port terminals around the world, including stakes in 13 ports in Europe which handle about 10 percent of its shipping container capacity.

On top of gaining operational control in ports around the world, according to South China Morning Post, six of the world’s 10 busiest ports are in China itself.

Testifying during an Oct. 17, 2019 congressional hearing in Washington on China’s Maritime Silk Road initiative, Carolyn Bartholomew, chair of the U.S.-China Economic and Security Review Commission, said: “By owning and/or operating a network of logistical nodes across Asia, Europe and Africa, China can control a significant portion of its inbound supply chain for essential commodities and outbound trade routes for its exports.”

Bartholomew warned: “In the event of conflict, China could use its control over these and other ports to hinder trade access to other countries,” adding that China could use that leverage to achieve diplomatic and political gains and potentially “shut down our ports.”

As recognized by former President Donald Trump, this Chinese influence and control over shipping ports constitutes an American national security threat as well as an economic issue.

For this reason, back in 2018 the Trump administration rescinded a 40-year Port of Long Beach terminal lease agreement between Orient Overseas International Limited (OOIL) of Hong Kong signed by the Obama administration, which was up for purchase by Chinese state-owned COSCO, among the world’s largest container shipping lines.

COSCO officials had acknowledged in 2018 that the company had connected its shipping routes along its Maritime Silk Road with emerging regional markets in West Africa, Northern Europe, the Caribbean and the U.S. “to form a more comprehensive and balanced globalized network layout.”

The Chinese state shipping behemoth halted trading of shares in its oil transport unit as it attempted to contain the fallout from Trump administration blacklisting of two COSCO shipping companies for allegedly moving illicit Iranian oil in that “balanced network.”

In sharp contrast to previous Democratic Clinton and Obama administrations – as well as the current one – President Donald Trump had an uncanny record of being right on Beijing.

Larry Bell is an endowed professor of space architecture at the University of Houston where he founded Sasakawa International Center for Space Architecture and the graduate space architecture program. His latest of 10 books, "What Makes Humans Truly Exceptional," (2021) is available on Amazon along with all others. Read Larry Bell's Reports — More Here.

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President Donald Trump had an uncanny record of being right on Beijing.
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2021-40-01
Monday, 01 November 2021 09:40 AM
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