From war zones to enterprise zones
EDITOR'S NOTE
To say that Covid-19 came from China is meant to be a simple matter of fact, much like saying "West Nile" virus, "Lyme" disease, or "Hong Kong" flu. We tend to use the names of where things came from to differentiate them. Although most people other than President Trump right now are simply calling this "coronavirus" or "Covid-19." But the president has been insistent upon calling this the "Chinese virus" when possible.
Again, I think this suggests a desire to maintain in the public consciousness that this coronavirus came from China. It helps the president deflect blame for how his administration has handled its response to this pandemic. It implies we didn't start this, they did.
I don't think China will actually "pay" financially for the fact that coronavirus came from Wuhan. For one, it can't. It doesn't have trillions in cash lying around. It won't sell its massive U.S. Treasury hoard, because then its own currency would spike higher and further undermine its already eroding cost advantage. And second, and for good reason, there's not exactly a track record of forcing countries to pay for diseases that originate within their borders.
That's not to say this president wouldn't suggest it. He has already said "the world is paying a very big price for what they did." By what "they did," he specifically means not fully sharing information about coronavirus sooner with the rest of the world.
But the real threat to China right now isn't the world's wrath over Covid-19, it's that Covid may accelerate a trend already taking place: that China isn't as attractive anymore as America's manufacturing base. As Graham Copley, the founder of C-MACC (Chemical market analysis & consulting), puts it: "Every U.S. importer of goods from China is currently examining the logic of being overly reliant on China."
The U.S., for instance, still exports millions of tons of plastics and chemicals each year and reimports finished goods from China and elsewhere made of them. In the "old world" of the early 2000s this made more sense, when Chinese labor was much cheaper, manufacturing was more labor intensive, and shipping was cheap and easy.
Now, the labor savings aren't as great, the manufacturing is more mechanized and less labor-intensive anyway, and shipping isn't as reliably cheap or easy. The coronavirus is the third time in the past decade that supply chains from China have been majorly disrupted, per Copley. On top of all that, these supply chains also generate a big carbon footprint that many companies may now want to avoid.
If ever there were a time to launch American tax-incentivized "Enterprise Zones" to help reshore manufacturing, this would seem like it. Governments are desperate for ways to help restart their post-coronavirus economies, and a move like this not only offers work, it meets a desire by producers to use more domestic products, and offers a hopeful vision of the future that is sorely needed right now.
For chemicals and polymers, as Copley explains, these would ideally be 1000+ acre parcels along the Gulf Coast with proximity to water barges, rails, and highways. For other industries, they might look different. For some products, like clothing, which are still quite labor-intensive, reshoring probably wouldn't work. But for a growing number of other U.S. industries, America is looking more and more attractive as a manufacturing base.
Such enterprise zones have already been successful in places like Eastern Germany and Saudi Arabia, anchored by companies like Dow Chemical and BP. The idea of creating them here, as Copley says, simply needs a "champion" to help make it happen.
Would make for a great scene in the White House rose garden: the CEOs, the president, the local officials, and maybe the president of a nearby trade school, all gathered to make the announcement. And that is how the fury over Covid-19 could instead become the flowering of American industry.
See you at 1 p.m!
Kelly
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