In the new Biden government supply chain report, G7 debates global trade and competition with China and “rebuilding a better world” or “B3W” plan This is the first step that the United States has taken against Beijing’s “Belt and Road” initiative to bring developing countries into its orbit. There has been much discussion in recent weeks about the dangers of deglobalization and protectionism. Our colleague Martin Wolf wrote a great article on this topic, Here.

I want to use this swamp note to demonstrate something different-a certain degree of deglobalization is actually very good for the global economy because it reduces concentration, increases competition, and reduces geopolitical conflict points.

Let’s take semiconductors as an example, because semiconductors are the first strategic industry in the United States that actively attempts to restore and regionalize production.According to the Boston Consulting Group’s recent report:

“Approximately 75% of semiconductor manufacturing capacity, as well as many key material suppliers-such as silicon wafers, photoresist and other specialty chemicals-are concentrated in China and East Asia, which is severely affected by seismic activity and geopolitical tensions. In addition, all of the world’s most advanced semiconductor manufacturing capabilities—nodes below 10 nanometers—are currently located in South Korea (8%) and Taiwan (92%). These are single points of failure and may be subject to natural disasters, The disruption of infrastructure closures or international conflicts may cause serious interruptions in chip supply.”

This concentration will produce a huge tailwind in the form of China’s most recent 14th annual five-year plan (from 2021 to 2025), which is specifically aimed at domestic semiconductor production. In fact, many people in the defense industry believe that China will try to annex Taiwan at some point because of the semiconductor problem. No wonder not only the United States, but also European countries are working hard to build more local supplies. The EU’s “Digital Compass Program” aims to double chip production by 2030. Europe also hopes to increase its market share in global semiconductor production by 20% during the same period.

The US Senate passed a bill to provide $52 billion to promote domestic semiconductor production, and you might see the Biden administration use the procurement procedures of the Department of Defense and other federal agencies to build domestic demand. You may also see the United States starting to work with allies such as Japan, South Korea, and even the Netherlands (through the Philips Group is an important part of the semiconductor supply chain) to create more demand for American-made chips.

This is not an overnight process-it takes ten years to build a chip foundry and re-wiring the supply chain, and it may change if the new government takes a different view. In an ideal world, the United States and the European Union will jointly formulate common industry standards to create a larger common market in which incremental innovations can be carried out. Both parties will improve back and forth in the most strategic industries, share ideas and even some intellectual property.As I argued in the past pillar, This is an important part of any alliance of new democracies.

Regionalism is different from nationalism. Not every country can or should have a chip foundry. However, the idea that 92% of an industry is concentrated in one of the most controversial geopolitical regions in the world is not only bad politics, but also bad economy. As my friend Barry Lynn, director of the Open Market Institute, said in an article about to be published in the “Foreign Affairs” magazine, such global trade diversion can also serve as an antitrust policy. Role to reduce the concentration of power of certain companies and countries, thereby creating a more level playing field.

Ed, do you agree with my analysis? How likely is it that we see China annexing Taiwan in the next five years? If so, what will be the geopolitical result?

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Edward Luce responds

I agree with you Lana. Many years ago, I conducted a series of interviews with the late Intel co-founder Andy Grove. Only paranoia can surviveGrove convinced me that the United States was grossly wrong about what we were talking about at the time about outsourcing. The financialization of the U.S. economy in the 1980s created a mentality that manufacturing is irrelevant-so it should move to a lower-cost labor market. High value-added products, including research and development, will remain in the country. It turned out not to be that way. As with any other activity in life, manufacturers are learning by doing, which means that the most effective innovation is usually carried out at the same time as production. This is why many of the most impressive companies in the United States, including Intel, have transferred large amounts of R&D to China.

One of my sophistry to what you wrote is that I don’t necessarily think this is deglobalization or protectionism, although the devil will be in the details. The “American Innovation and Competition Act” should provide strong incentives for the US chip industry to transfer innovation to the West-as you pointed out, hope to include Europe. This has strategic and economic significance. However, it would be a good thing if the Biden administration does not repeat its false promises about the new dawn of manufacturing employment. These will be highly skilled and well-paid jobs. The era of large-scale blue-collar factory work is gone forever-both here and in China, where manufacturing employment is shrinking. The sooner we honestly talk about the future of work, the better.

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Now our swamp man has a word. ..

Response: ‘Joe Biden’s strategy is boring‘:
“Completely agree that’Biden is a transitional president’, but the listed agenda items raise a question: In what way? After all, if the task list is to “reverse financialization, restore industrial policy, make… a A political party that can balance diversity and attract working people—perhaps the most profound—rethinking the place of the United States in the world”, which also describes the Republican Party’s programmatic ambitions for 2017-2021. In view of this , Maybe your policy checklist sheds light on something surprising: a broad field of political consensus, and every political party is scrambling to claim. The winner is not who wants to do it, but who does it best.” — Joshua Treviño, Austin, Texas