US-China Decoupling Gathering Strength-- Border Control for Taboo Goods and Re-Directing Global Supply Chains

 

Pix Credit HERE

 

The decoupling of the two great market drivers of global production is proceeding apace.  It is now well enough advanced that even the relatively official presses in the West are beginning to take notice.  The Wall Street Journal reported (at long last) the slow moving journey of even the stubbornest of the great American drivers of global production (Apple, Inc) that both Xi Jinping and Donald Trump-Joe Biden meant what they said about decoupling and about dual circulation economies. The move is important in two respects.  First with respect to the action by Apple to re-structure its global production to align with markets decoupling; and second focusing on  the decision by the editorial staff of the Wall Street Journal to run the story in a prominent place. Strategically, the action and its announcement in press organs also emphasizes a larger policy trajectory to align defense and production objectives along the new borderlands of post-global empire, while retaining  a more well managed connection between them. The reporting makes this clear enough.

Apple Inc. has told some of its contract manufacturers that it wants to boost production outside China, citing Beijing’s strict anti-Covid policy among other reasons, people involved in the discussions said. India and Vietnam, already sites for a small portion of Apple’s global production, are among the countries getting a closer look from the company as alternatives to China, the people said. * * *   Any move by Apple, the largest U.S. company by market capitalization, to emphasize production outside China could influence the thinking of other Western companies that have been considering how to reduce dependence on China for manufacturing or key materials. Such consideration has stepped up this year after Beijing refrained from criticizing Russia for its invasion of Ukraine and carried out lockdowns in some cities to fight Covid-19.  * * * China’s travel restrictions have meant that Apple has curtailed sending executives and engineers into the country over the past two years, making it hard to check production sites in person. Power outages last year also dented China’s reputation for reliability. (Apple Looks to Boost Production Outside China)

One speaks here of dual circulation strategies in the context of two decoupling imperial cores. The Chinese dual circulation policy will acquire teeth, even if understood from the perspective of protecting Chinese economic security against the Liberal Democratic West and meeting the ideological challenge of the principal contradiction at this stage of Chinese historical development  (see eg here, and here). The American project (allied if not entirely aligned with that of the EU) of targeted sanctions, based on security, human rights and sustainability and political-trade objectives will ensure effectively an American version of a dual circulation economy (eg here, and here) despite the skepticism of the influence-chattering classes (eg here) many of whom appear to belief that it is still 2002. 

It is important to emphasize that the policies on both ends emphasize DUAL circulation.  Decoupling ought not to be understood as simpleminded detachment. Rather, decoupling might better be conceptualized as a series of concentric trade (and dynamic) rings. At the core of these rings are the great post-global drivers and consumers of production and their 'inner circle' partners. This core of production and consumption (economic but also cultural production) would be insulated from targeted projections of power from outside. Beyond the core there is a strong trade sector (well managed and subject to intensified surveillance) between the cores. These have been organized for public consumption as either a Belt and Road Initiative or an America First/Brussels Effect structure, through which systems of economic reward-dependency may be organized and protected. One does not speak here about territory or direct control, but of management and mutually beneficial relations along chains of production and consumption (nicely captured by the Chinese discursive 'win-win strategy)  The WSJ story hints at this system. Thus, for example, Apple might continue to rely on another great multinational, Foxconn (Hon Hai Precision Industry Co., Ltd., HQ'ed in Taiwan) with strong ties and production capability within and outside of China) for production, but shift the site of that production from Foxconn's Mainland plants to those say in India (see image above).

At the same time, elements of those parts of the state apparatus that drives policy appear to be pushing for more effective use of borders to ensure that taboo goods. The drive is important for the effective implementation of detachment, as these tend to underscore and embody the fundamental  ideological dividing lines between Socialist and liberal democratic production. Its manifestation is built around the implementation of policies of identification of taboo objects of production and the suppression of domestic markets for its consumption. Decoupling, then, is to be manifested at borders.  Among the thought leaders at the official level is the Congressional Executive Commission on China (CECC; more here). CECC forms an important element of the emerging US two thrust strategy that complements and mirror the Chinese dual circulation policy (See, The US Two Thrust Strategy Against Chinese Interests on the Anniversary of the Tiananmen Incident: Targeted Sanctions from the Biden Administration; Discursive Projections from the Congressional-Executive Commission on China (CECC); see also here).The current focus, and template, is centered around the Uyghur Forced Labor Prevention Act. UFLPA "establishes a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur [SAR], or produced by certain entities, is prohibited . . .  and that such goods . . . are not entitled to entry to the United States." (US Customs and Border Protection Act Information Website). 

CECC recently has lobbied for more stringent enforcement of UFLPA:

Pix Credit and Report here

[The Co-Chairs] released a letter to the Chairs and Ranking Members of the Homeland Security Subcommittees of the House and Senate Appropriations Committee requesting expanded funding for U.S. Customs and Border Protection (CBP) to vigorously enforce the import restrictions required by [UFPA]. The Chairs were also joined on the request letter by Senator Marco Rubio (R-FL) and Representative Christopher Smith (R-NJ), the CECC’s ranking members. “We championed the Uyghur Forced Labor Prevention Act because of the appalling evidence of widespread forced labor in the [Xinjiang Uyghur Autonomous Region], as well as elsewhere in China via coercive labor transfers, and our conviction that U.S. consumers should never be unwittingly complicit in supporting slavery,” said the bipartisan group of CECC Commissioners. “Enactment of this law sent a resounding signal of the U.S. commitment to address the activities that fund genocide, protect U.S. consumers, and defend human rights. Fully funding the CBP request will support the bipartisan, bicameral vision of the U.S. Congress.”

Pix Credit and Timeline HERE

In both cases, the dual circulation (two thrust) policy appears in more visible form.  On the private side, these take the form of more pragmatic judgments about dividing operations and then strengthening supply chains within Chinese and US trade areas in accordance with their respective logic.  At the same time, both public  and private actors will continue to re-constitute trade between the two economic cores, but now more intensely managed through sanctions regimes, national security protocols, product inspection, IP, markets integrity structures, and other regimes that will serve--not as  traditional trade barriers--but as the new porous but managed borders between competing economic cores.  On the one side is the protection of the territorial integrity and economic-political model of Chinese Marxist-Leninism and its spokes through the developing world.  On the other, the post 1945 markets driven and human rights based liberal order with its center in Anglo-European-Japanese convergence and interlinkages. 

For both, a primary objective is the protection of their core institutionalized economic engines (private in the liberal democratic camp and state owned in the Marxist Leninist camp) against interference by the other. For rest of the 'greater' states, each faces both a choice of main patron, and the task of developing  strategies of accommodation that permits survival at worst and development at best.

The full CECC Co-Chairs Letter follows below.

Dear Chair Murphy, Ranking Member Capito, Chair Roybal-Allard, and Ranking Member Fleischmann:

 

As you develop the fiscal year (FY) 2023 appropriations bill for the Department of Homeland Security, we respectfully ask that you fully fund the request in the U.S. Customs and Border Protection (CBP) budget to enforce the Uyghur Forced Labor Prevention Act (P.L. 117-78). The CBP budget includes $70,309,000 to add enforcement personnel, technological capability, training, and other activities necessary to faithfully implement the law. We strongly support this request given the critical need to support compliance with this new law, protect U.S. consumers from products tainted by forced labor, and reduce unintended adverse impacts on supply chains.

 

In light of the high prevalence of forced labor in the Xinjiang Uyghur Autonomous Region (XUAR) and in coercive labor transfer programs elsewhere in China, the Uyghur Forced Labor Prevention Act, signed into law on December 23, 2021, presumptively bans the import of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the XUAR or by certain entities that are engaged in labor transfer programs. The legislation also sets out a process for the Forced Labor Enforcement Task Force, led by the Department of Homeland Security, to devise and implement a strategy to prevent such goods made from forced labor from entering the United States, including a process by which importers can provide evidence that XUAR-connected products were not made with forced labor.

 

The FY 2022 omnibus appropriations bill provided $27,495,000 to facilitate compliance with these requirements. That appropriation appropriately reflected the urgency of increasing U.S. Government resources to crack down on the import of products of forced labor and the overwhelming bipartisan support to do so. With enforcement burdens set to increase following the implementation of the aforementioned import prohibition, to be implemented 180 days from enactment of the Uyghur Forced Labor Prevention Act, the additional funding requested by CBP will support compliance by addressing staffing, technological, and administrative shortfalls. CBP estimates that enforcing this prohibition would substantially increase the number of transactions subject to review and enforcement from less than one million to more than 11.5 million per year. This request would support hiring 300 additional positions as well as increasing capacity for technology, training, strategy, and outreach.

 

We championed the Uyghur Forced Labor Prevention Act because of the appalling evidence of widespread forced labor in the XUAR, as well as elsewhere in China via coercive labor transfers, and our conviction that U.S. consumers should never be unwittingly complicit in supporting slavery. Enactment of this law sent a resounding signal of the U.S. commitment to address the activities that fund genocide, protect U.S. consumers, and defend human rights. Fully funding the CBP request will support the bipartisan, bicameral vision of the U.S. Congress.