
U.S. mulls paying companies, tax breaks to pull supply chains from China - elsewhen
https://www.reuters.com/article/us-usa-china-supply-chains/u-s-mulls-paying-companies-tax-breaks-to-pull-supply-chains-from-china-idUSKBN22U0FH
======
Barrin92
I recently stumbled upon an old article from the 80s addressing Japanese-
American relations
([https://money.cnn.com/magazines/fortune/fortune_archive/1987...](https://money.cnn.com/magazines/fortune/fortune_archive/1987/12/21/69996/index.htm))

 _" 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.

~~~
sieabahlpark
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.

~~~
Barrin92
Well Japan also did really steal IP. As did the United States a long time ago
([https://apnews.com/b40414d22f2248428ce11ff36b88dc53](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.

------
LatteLazy
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.

~~~
Fjolsvith
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](https://www.taiwannews.com.tw/en/news/3925556)

~~~
ScalaFan
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.

~~~
colejohnson66
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.

------
thekingofh
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.

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

------
Donald
> 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.

~~~
richliss
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.

~~~
teknologist
Interestingly, Apple plans to assemble the new "AirPods Studio" in Vietnam:
[https://www.macrumors.com/2020/05/19/apple-over-ear-
headphon...](https://www.macrumors.com/2020/05/19/apple-over-ear-headphones-
vietnam)

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

------
blackrock
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.

~~~
pkaye
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.

------
Sabinus
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.

~~~
Fjolsvith
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...](https://www.whitehouse.gov/presidential-
actions/memorandum-order-defense-production-act-regarding-3m-company/)

------
DarthGhandi
Sounds like socialism.

