U.S. mulls paying companies, tax breaks to pull supply chains from China | Hacker News Reader

U.S. mulls paying companies, tax breaks to pull supply chains from China

reuters.com

38 pointselsewhen23 comments

I recently stumbled upon an old article from the 80s addressing Japanese-American relations (https://money.cnn.com/magazines/fortune/fortune_archive/1987...)

"HOW JAPAN PICKS AMERICA'S BRAINS Much of its economic success has been built on bought, borrowed, or stolen technology. Now U.S. companies are striking back -- but a two-way street is still far off.[...]"

I think it's pretty hilarious how every two decades the US apparently goes through some sort of geopolitical anxiety often combined with the fear of some Asian nation taking over the world with robots and technology. Even the recent sci-fi like Her and Westworld filming in China/Singapore reminds me of the Neo-Tokyo craze of the 80s and 90s.

Well, we all know how the American auto industry turned out after the US engaged in protectionism and shielded its industry from competition, so I can't wait to see what the outcome of this is in ~10 years.

Except China does really steal IP. It's not just a couple decades problem.

Also a pool size of 1 previous occasion isn't really a huge correlation.

Well Japan also did really steal IP. As did the United States a long time ago (https://apnews.com/b40414d22f2248428ce11ff36b88dc53). When the Germans were lagging behind in the industrial revolution they actually send businessmen to the UK for the sole purpose of copying factory layouts of chemical factories.

Nations that try to catch up will always attempt to copy, as do firms within any given country. It's not really that big of a deal because it's just one of the pathways of how information diffuses, and nobody is really in any position to throw a stone.

What is the end goal here?

Move a small number of strategic industries back? We already do that by just requiring them to produce locally. Seems much cheaper and more effective that a subsidy.

Pressure China to respect interlectual property? I don't think that will have much impact if the IP in question is worth more that 25bn.

Pressure China on other issues (Corona, Minorities, Democracy, HK)? You'll need your allies in the EU, Nafta, the middle East etc to all agree to do the same. Has anyone asked them?

The big issue with China is people have ignored them for decades hoping they'll get better if they're left to it. They haven't. So now you need a joined up policy to actually do something. 25bn USD in "look, we semi sorts tried something for a week and it didn't work" isn't gonna cut it.

It doesn’t help that the US backed out of a policy solution that would actually be cheap and orders of magnitude more effective than anything that they have cooked up since in the TPP.

Backing out of it also means that the rest of the world is unlikely to trust the US on a similar effort anymore.

I felt like that was a new height in short-term-ism and miss management for the US. Trading a permanent strategic advantage in a contested region for a few shitty jobs that will be gone in 5 years anyway!?

When China uses the threat of cutting off supply chains to a country [1] in order to advance their own political agenda, that country should obviously protect their own national security by moving their supply chains.

Edit: Additionally, other countries should take note and protect their interests also.

1. https://www.taiwannews.com.tw/en/news/3925556

All corporations should follow the idea of not putting all their eggs in one basket even if that is the cheapest/best idea if you want to over-optimize.

In IT, we have backup plans, we have backup locations and resources and yes it costs money to keep such options available. Global companies need backup countries and suppliers that can supply what they need should something happen to the main supplier/country. It doesn't have to be full equivalents in capacity but should be possible to scale eventually.

Having backups and alternatives reduces the likelihood and effectiveness of explicit threats by your main location.

In the “old days,” ICs used to be dually sourced. For example, Intel created and manufactured the 8086, but AMD also manufactured them. Not a perfect solution, but better than one single manufacturer. Sadly, one can’t really do that now because of how small the features on chips are getting.

> Has anyone asked them?

We did. And like most things in the UN, it's NATO+clients vs the rest of the world.

https://www.hrw.org/sites/default/files/supporting_resources... http://cdn.cnn.com/cnn/.e/interactive/html5-video-media/2019...

I was thinking of something a bit more meaningful than writing a letter. Trade sanctions maybe or divestment. Limits on travel (so Chinese students can't access western education)?

The US encouraging/requiring less trade with China is a lot less important than the US+EU+Canada/Mexico. Since those countries all seem on board in letter writing, why not approach them on something more?

We should use Mexico. Wages will be low. Shipping can come on trucks or rail. The labor pool is plenty large. And if we get into a large war it's close enough to more easily defend our factories. And the country is on good standing with the US, no aggression between the countries.

Mexico is preferable to China in almost every way. We start by lowering the tariffs there and raising them on a timetable in China. There's nothing that says it has to be all-or-nothing USA manufacturing. If we find another country to build up, there's only room to benefit. This is all within the scope of government powers.

The long term solution I'd mainly prefer is to directly subsidize the industries that we deem important to a manufacturing base, but beyond that at least lets find a country that doesn't threaten to destabilize what we've got going on.

Diverting some of that military budget towards something even more important strategically might help.

> A controversial idea being floated in Washington would allocate as much as $25 billion to companies that make essential goods to move production home, ensuring that even products far down the supply chain were sourced domestically, according to two administration officials.

The U.S. goods trade deficit with China was $419.2 billion in 2018. $25 billion is nothing.

It's not equivalent - that $25 billion is going to part cover the DIFFERENCE in cost of the goods created in China vs. the US.

Every dollar that is spent in the US and not China is removed from China so consider that if something is 10% more expensive to make in the US and that $25 billion covers the difference then the Chinese economy has lost 100% of that money and the US economy has gained it all at a 10% premium.

The west needs to seriously consider doing far more of this and spreading production around to countries like Vietnam, Laos, Cambodia etc.

Interestingly, Apple plans to assemble the new "AirPods Studio" in Vietnam: https://www.macrumors.com/2020/05/19/apple-over-ear-headphon...

want to bet this will be a huge sum to some five companies instead of smaller loans?

Silly rabbit. The reason why companies are in China to begin with, is because of the massive Chinese market itself.

Think about it. 1.4 billion people are finally coming online, and into the middle class.

GM, Ford, Boeing, KFC, Starbucks, McDonald’s, Apple, Microsoft, etc. And then, all the European luxury companies, Mercedes Benz, BMW, Airbus, Louis Vuitton, Gucci, Lamborghini, etc. And then, all the Japanese brands too. Toyota, Honda, etc.

If American companies leave China, then guess who is going to eat their lunch? The European and Japanese companies would love for American companies to leave. That’s just less competition for them! This is now like shooting at fish in a barrel. It’s like Capitalism on cheat mode.

And then, the big ticket. The Chinese companies themselves. If they haven’t come online yet, then they’re going to make a splash in another 10 to 20 years. Then the competition will get really interesting.

You should realize, that the Chinese love American cars. Nobody here in America, really cares about Buick, but that is a favorite brand in China. Why? Because the Chinese prefers to buy American cars instead of Japanese cars, because it doesn’t remind them of past historical grievances dating back to the Second World War. So, in this regards, American companies are operating in China on easy mode.

But with the way things are going, these American politicians, are about to squander the good will that the Chinese people have towards American companies and their brands. And once lost, this may not be easy to regain. The Europeans and Japanese (and now the Koreans) are ready to jump in, and take that lucrative market share from the Americans.

So, to the American companies, do it. Pull out at your own risk.

I think the essential stuff still needs to be made locally to handle uncertainties. I don't expect everything to move back. And certainly stuff made for consumption in China can be made there. Like American brand cars. And I think even Europe and Japan have the same concerns. We can't pull all our eggs in one basket.

And it won't do anything unless either: 1) The government commits to purchasing (some or all of) the American made essential products, or otherwise mandates their purchase by private companies. 2) Tariffs.

Capitalism will always find the cheapest materials and labor otherwise.

We could always get them addicted to opium again, worked last time. /s

Enter the Defense Production Act. When all the states declared national emergencies, that made this law obvious to invoke.

https://www.whitehouse.gov/presidential-actions/memorandum-o...

Sounds like socialism.

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