MADE IN CHINA: Will the global economy reduce dependence on Chinese goods after COVID-19?

By: Andrew Moran

For the last 20 years, corporate America has shifted its manufacturing base to China, relying on the comparative advantage of low-wage labor to give Americans cheaper products and greater purchasing power. From apparel to electronics, a tidal wave of items gracing the label “Made in China” were exported to the U.S. and nations around the world. Following the made-in-China pandemic that has devastated the global economy and killed tens of thousands of people, there will inevitably be a discussion on the future of the world’s dependence on Beijing for goods and services.

Big Trouble In Little China

The COVID-19 crisis has given us a sneak peek into how countries will respond to China’s astronomical export base. Recently, several governments have turned down Chinese-produced equipment that had been manufactured to fight the virus outbreak. Dutch, Spanish, and Turkish officials confirmed that thousands of testing kits and personal protective equipment (PPE) items are defective or inadequate.

The Health Ministry in the Netherlands recalled about 600,000 certified face masks because they did not fit or their filters were insufficient. These masks were shipped from China and arrived in Holland on March 21, and they were immediately distributed to front-line workers. Spain confirmed that it experienced similar issues with roughly 60,000 Chinese-produced testing kits that failed to accurately determine if a patient had the Coronavirus. Turkey said many of the 350,000 tests had problems.

Over the next several weeks, the U.S., Canada, and Great Britain will be accepting shipments of ventilators and protective health gear. Prime Minister Justin Trudeau assured Canadians that public health authorities would not take shortcuts in making sure that thousands of medical masks, gowns, gloves, and goggles will meet standards.

Trudeau said in his daily televised address:

“We will be receiving equipment — masks and gloves and gowns — from China extremely shortly in the coming days. At the same time, I can assure people that Health Canada has very strong procedures for evaluating [and] ensuring what we get is up to the necessary standards, and there will be no corners cut on this one. We need to make sure that the equipment that our health-care workers rely on to keep them safe as they keep us safe is of a quality that is going to actually do the job.”

Neither the White House nor Downing Street has commented on defect concerns.

A Dangerous Liaison?

China’s reputation will be tainted for many years to come. When SARS originated from a wet market in Foshan, China was still in its infancy stage of becoming a global economic juggernaut. Nearly 20 years later, Beijing’s tentacles have expanded into every region of the globe as all major economies depend on China for a long list of products – shoes, children’s books, and steel. Anytime you examine an item at the store, it will inevitably bear a label informing you that it was manufactured in China.

It has been a fruitful relationship for both sides, particularly for the United States. Consumers maintain a stronger purchasing power, while businesses cut costs and pass the savings to the customer. A strengthening U.S. dollar and a devalued Chinese yuan have immensely benefited the American economy. Plus, when exporters accept dollars, the money is still invested back into the United States, which is evident in the ballooning capital inflows data over the years.

It is widely believed that China suppressed a lot of information related to the outbreak, from the severity of the virus to the death count. Beijing has denied these findings, but China is not exactly a beacon of transparency and honesty. China will inevitably be even more clandestine than it has been for all these years, making it harder to believe anything coming from the heads of the world’s second-largest economy.

China’s factories are operating 24/7 to produce masks and ventilators. The government is offering aid to several countries across the globe. Health experts are also partnering with international groups to find ways to beat this virus. While China is trying to position itself as a leader in this global pandemic, it might either be trying to save face or repent for its sins.

The world will be unable to seek reparations from China over the Coronavirus. But the U.S., Canada, the U.K., and Europe may decide to do business with Thailand, Vietnam, India, Bangladesh, and other low-wage markets. Ultimately, the globe may hit China where it hurts the most: its wallet.

Erstwhile Friends

The U.S. and China do about $800 billion annually in trade. This might have come down in the last year or two because of President Donald Trump’s tariff war, as well as the Coronavirus. The U.S. government could make a collective effort to reduce commerce with Beijing, which would only hurt American farmers and consumers. It needs to be left up to shoppers – not policymakers – to change America’s reliance on cheap imports from China. When customers show a demand for goods either produced in the United States or somewhere other than China, the private sector will respond and adapt to the change in preferences. It may cost the public more, but if they wish to remove the Made in China labels and punish President Xi Jinping, then this is the price everyone must pay.

The freedom to choose will penalize Beijing, not more government interventions.

This was originally published on Liberty Nation.