(What’s Left of) Our Economy: A Strong Fall Kickoff for U.S. Manufacturing Employment

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aircraft, aircraft engines, aircraft parts, aluminum, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Employment, fabricated metals products, health security, Jobs, machinery, manufacturing, manufacturing trade deficit, metals, metals-using industries, NFP, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, private sector, semiconductor shortage, steel, supply chains, tariffs, Trade, vaccines, Wuhan virus, {What's Left of) Our Economy

Although the disappointing official September U.S. jobs figures released this morning might have been depressed significantly by “strange [CCP Virus-related] statistical quirks around school reopening,” it’s still noteworthy that manufacturing employment rose nicely during the month – by 26,000 workers. These results are all the more impressive given all the supply chain and semiconductor shortage headwinds faced by domestic industry, especially in the automotive sector.

Moreover, revisions of the strong July and August payroll figures for U.S.-based manufacturers were only slightly negative, with the former’s upgraded 52,000 sequential gain now judged to be 57,000, and August’s initially reported 37,000 improvement downgraded to 31,000.

As a result, in September, domestic industry closed still more of the gap that had opened up in its hiring performance versus that of the total American non-farm sector (the government’s definition of the U.S. employment universe, which includes government jobs), although it lost some additional ground against the private sector.

According to this latest jobs report, manufacturing had regained 74.51 percent of the 1.385 million jobs it lost during the steep pandemic-related recession of March and April, 2020 – up from the 72.71 percent reported in the August jobs release. That’s a faster rate of improvement than for the non-farm sector (whose payroll recovery grew from 76.60 percent of jobs lost during that early spring of 2020 to 77.77 percent) but slower than that of the private sector (which has now seen an 80.71 percent employment recovery from the spring, 2020 lows – up from 78.72 percent).

It’s certainly plausible that the non-farm jobs recovery has been most recently held back by those school reopening problems, and therefore manufacturing’s laggard status will resume once they’re cleared up. At the same time, the relatively slow industry employment rebound is also explained by its superior jobs performance during the CCP Virus recession. Specifically, its payroll levels fell then by 10.82 percent, versus 16.46 percent for private employers and 17.18 percent for the non-farm sector.

And indeed, since February, 2020 (the last full data month before the pandemic and related lockdowns and behavior changes began seriously distorting the economy), manufacturing’s share of non-farm jobs has risen from 8.39 percent to 8.43 percent. In addition, it’s increased as a share of private sector jobs fromThe 9.87 percent to 9.91 percent.

Among the manufacturing sector categories broken out in the official monthly U.S. jobs reports, the biggest September employment winners were fabricated metals products (up 8,200 on month – its best performance since March’s 10,100 jump); machinery (a 6,300 sequential advance); printing and related support activities (4,200 – its best since March’s 5,300); and food products (up 3,500).

Strong machinery hiring is always particularly encouraging, as the sector’s products are used so widely in the rest of manufacturing, as well as in big non-manufacturing industries like construction and agriculture. Almost as important, whereas its August monthly job creation was previously reported as having flatlined, now its estimated to have climbed by 2,600. And fabricated metals products good recent jobs increases are noteworthy given the continuing U.S. tariffs on the steel and aluminum on which they rely so heavily – which supposedly are decimating metals-using industries.

The aforementioned U.S. vehicles and parts-makers were by far the biggest monthly jobs losers recorded in the September release, shedding 6,300 positions on month. That sequential drop was their worst since semiconductor shortage-induced layoffs plunged their employment levels down by 41,600 in April. No other major manufacturing category mentioned in the September jobs report lost more than 800 jobs.

The most detailed employment data for pandemic-related industries is one month behind those in the broader categories, but their job creation performance remained mixed in August.

In surgical appliances and supplies (the sector containing PPE – personal protective equipment – and similar goods), payrolls fell by 2,500 – their worst monthly performance since the previous August’s identical number. July’s 500 sequential jobs gain was upgraded to 900 and June’s 500 improvement remained the same, but jobs in these industries are now just 7.03 percent more numerous than in pre-pandemic February, 2020. As of last month’s jobs report, the figure was 9.22 percent.

The overall pharmaceuticals and medicines industry saw hiring dip by 400 in August – its worst monthly result since May’s 300 decrease. July’s job gains were revised up from 400 to 500, but June’s losses remained at a downgraded 2,300.

These sectors’ payrolls, therefore, have now risen by only 4.62 percent since February, 2020 – not the 4.72 percent published last month.

The pharmaceuticals subsector containing.vaccines fared better. Employment rose by 400 sequentially in August, July’s flatline was upgraded to an increase of 200, and June’s 1,000 jobs improvement remained unrevised. Whereas as of last month, this sector’s payrolls had grown by 10.21 percent since just before the pandemic hit, that figure is now 10.82 percent.

U.S. aircraft producer Boeing continues to suffer from manufacturing and quality problems, but jetliner employment inched up on month in August anyway – by 200. But July’s 1,500 sequential jobs decline was revised down to 1,600, while June’s upwardly revised 4,700 jump remained the same. All told, aircraft employment is now down by 8.04 percent since February, 2020 – a bit better than the 8.08 percent shortfall reported in last month’s jobs report.

The story was similar in aircraft engines and engine parts. These industries added 600 workers seqentially in August, and July’s previously reported payroll increase of 200 is now estimated at 300. June’s downgraded 400 jobs gain was unrevised, and so employment in these sectors is now off by 14.04 percent since February, 2020 – some progress over the 14.80 percent reported last month.

Non-engine aircraft parts and equipment are still stuck even deeper in the doldrums. August’s 500 jobs loss drove its payrolls down to 16.60 percent lower than in February, 2020, versus the 16.17 percent drop reported as of last month.

With manufacturing employment still powering ahead even with its supply chain issues (which reportedly don’t seem likely to end till sometime next year), and with the CCP Virus threat still hanging over the economy, betting against more of the same going forward seems foolish. And interestingly, industry’s jobs prospects look bright despite signs that its mammoth trade deficit is heading back up, at least in absolute terms. (We don’t yet have recent enough figures to know whether it’s rising in relation to manufacturing output, which is the much more important measure.)

As they say in the investment world, past performance is no guarantee of future results.  But domestic manufacturing’s recent employment performance has overcome so many obstacles over the past year-plus that it might be the best basis we have right now for prediction.  

(What’s Left of) Our Economy: Why That China Competitiveness Bill Urgently Needs Trade Fixes

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China, competitiveness, consumers, health security, inflation, Robert E. Lighthizer, Section 301, Senate, supply chains, tariffs, technology, Trade, Trade Act of 1974, U.S. Innovation and Competition Act, World Trade Organization, WTO, {What's Left of) Our Economy

Nearly two months ago, I complained here on RealityChek that Congress was working way too slowly on legislation aimed at helping restore the U.S. competitiveness needed to reopen a wide lead over China in the dust in the race for future global technological competitiveness. Now I see that more time to pass the bill is needed after all – because the version approved by the Senate June 8 contains some fatal trade policy flaws that urgently need fixing.

Trade policy, as I’ve explained previously is a vital dimension of beating back the China challenge. But as reported yesterday in a New York Times article by former Trump chief trade official Robert E. Lighthizer, key amendments to the U.S. Innovation and Competition Act

“would harm U.S. interests in three important ways: It would cut tariffs on medical supplies needed in a pandemic; reauthorize the so-called Miscellaneous Tariff Bill to cut tariffs on Chinese and other imports; and amend our enforcement laws in a way that will make it more difficult to battle predatory trade practices by our foreign competitors.”

And if you read the (2,300-page) bill, you see that he’s right. For example, a section titled “Facilitating Trade in Essential Supplies” (beginning on p. 1588) refers to America’s need “to maintain readiness and to surge production of essential supplies in response to an emergency” in national security and public health and safety, or in the security and functioning of “critical infrastructure.”

But consistent with an approach taken to this challenge by President Biden, the act makes clear that achieving these goals includes developing “a whole-of-government strategy to ensure that the United States has reliable access to essential supplies from its trading partners….” In other words, it will be equally fine if the nation remains dependent on imports of such goods. These two objectives clash with each other directly and violently.

If Washington could count on lots of reliable trade partners out there to step in in a pinch and fill supply gaps, this strategy of defining “Made in America” as “Made Overseas, Too” would be defensible (if not, in my view, optimal). But although the legislation directs federal officials to “identify unreliable trading partners,” its authors seem oblivious to just how many foreign governments qualified for this label with their bans and other curbs on vital medical goods during the height of the pandemic. It was 80 according to no less than the World Trade Organization (WTO).

According to Lighthizer, the bill would also undercut American industry’s broader ability to compete with China by renewing a Miscellaneous Tariff Bill that would reduce duties on more than 900 goods produced and exported by the People’s Republic. The list – which also includes hundreds of other goods, begins on p. 1526 and goes on (in tiny type) for thirty pages.

And the text also supports Lighthizer’s claims that the bill would “gut a provision that President Trump used to impose tariffs on Chinese goods in 2018,” and “also effectively surrender sovereignty over our own trade policy to the World Trade Organization by permanently weakening Section 301 unless the United States first wins a multiyear litigation before that body.”

Possibly, the most disturbing feature of the bill’s treatment of these so-called “301 tariffs” (named after the section of the 1974 Trade Act that initially authorized suc measures is the measure that bars the imposition of these duties without an analysis of their impact “on United States entities, particularly small entities, and consumers in the United States” (p. 1607), and additionally of whether they would “unreasonably increase consumer prices for day-to-day items consumed by low- or middle-income families in the United States” (p. 1609).

Although numerous RealityChek posts have documented (see, e.g., here) that none of the 301 tariffs had lasting effects on U.S. retail or wholesale price levels (largely because importers absorbed the higher costs), there’s no guarantee that significant time frames would be examined. In addition, there’s never any shortage of businesses or business organizations in particular ready to predict disastrous price hikes from any tariff increases regardless of the historical record. So the most powerful tool possessed by Washington to enforce trade agreements and combat foreign protectionism could well be neutered unless changes are made.

Finally, Lighthizer’s contention about permanently weakening America’s Section 301 authority appears borne out by pp. 1610-1611, which states that the process for excluding certain goods from that measure’s tariffs “shall not apply” in cases under consideration by the “dispute resolution process under the World Trade Organization [WTO].” In other words, if such U.S. tariffs are challenged at the WTO, they can’t legally be imposed until the WTO decides they’re kosher.

There shouldn’t be any doubt in anyone’s mind that time is not on America’s side as it tries to raise its competitiveness game, both against the Chinese and in general. But it’s also true that haste makes waste — and even worse. And these trade policy flaws in this China competitiveness bill aren’t eliminated, Americans will see a crucial economic and national security opportunity squandered.     

(What’s Left of) Our Economy: It’s an Autos Story Again for U.S. Manufacturing Production

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aerospace, aircraft, aluminum, apparel, automotive, Boeing, CCP Virus, chemicals, China, computers, coronavirus, COVID 19, Donald Trump, electronics, facemasks, Federal Reserve, health security, inflation-adjusted output, machinery, manufacturing, medical supplies, paper, pharmaceuticals, PPE, printing, real growth, semiconductor shortage, semiconductors, shutdowns, steel, stimulus, tariffs, vaccines, Wuhan virus, {What's Left of) Our Economy

Earlier in the CCP Virus era, the U.S. manufacturing production story was largely an automotive production story – because the industry shut down so suddenly and completely during the pandemic’s first wave and the deep economic downturn it triggered, and then began reopening at a record pace. And today’s Federal Reserve figures show that domestic industry’s growth is being driven by dramatically fluctuating vehicles and parts output once again – but this time it seems due significantly to the global semiconductor shortage that’s deprived the sector of critical parts.

Also noteworthy about today’s Fed manufacturing release (which covers May): It incorporates the results of the benchmark revision of these data for the 2017-19 period. As explained in yesterday’s post on the subject, the new numbers create a new baseline for pre-pandemic manufacturing growth, and therefore a new picture of how big the virus-induced downturn was, and how strong the recovery has been – at least until the next benchmark revision. And of course, the new figures therefore supersede those in the April Fed release I reported on last month.

Automotive’s influence on the May numbers is clear from the following: Total inflation-adjusted sequential growth for U.S.-based manufacturing hit a strong 0.89 percent last month. Without automotive (whose 6.69 percent monthly output pop followed a 5.57 percent April drop), the increase would have been just over half that – a still solid 0.50 percent. Don’t be surprised if the microchip shortage keeps these results on a roller coaster.

Its May increase brought total real domestic manufacturing output back within 0.31 percent of its last pre-pandemic level, in February, 2020. In March and April, such production plummeted by 19.41 percent. Since then, it’s surged by 23.90 percent. For the record, as I wrote yesterday, the pandemic-spurred Spring, 2020 nosedive was slightly shallower (0.92 percent) than judged before the revisions (1.42 percent) but the comeback through this past April was a bit weaker (22.81 percent versus 23.27 percent).

Machinery making enjoyed a good month in May, and as known by RealityChek regulars, that’s good news for all domestic manufacturing and the rest of the economy, since its products are so widely used. Constant dollar output improved by 0.78 percent last month, and consequently, the sector is now 2.35 percent bigger in these terms than just before the virus started depressing the economy. One downside should be noted, though: The new revision indicates that the machinery recovery has actually be significantly slower than previously estimated.

Manufacturing’s list of other big inflation-adjusted production winners in May featured some real surprises. The apparel and leather goods industries remain shadows of their historic selves, but their real output last month jumped 2.59 percent – their best such result since January’s 2.06 percent. Moreover, this sector has grown in real terms by 6.74 percent since just before the pandemic – much faster than manufacturing as a whole.

After-inflation production in the small printing and related activities industry grew by 2.59 percent – also its best result since January (3.99 percent).

But some big sectors saw healthy gains in May, too – notably chemicals (whose products are also used throughout the economy) and computer and electrnics products. The former saw real production advance by 2.19 percent sequentially last month – its best such result since March’s weather-aided 4.08 percent. And the latter grew in May by 1.60 percent.

The biggest losers? Paper led this pack by far, with May constant dollar production sinking by 1.59 percent on month – its worst such showing since January’s 1.78 percent decrease.

Likely due to Boeing’s continuing production and safety problems (more on which later), the aerospace and miscellaneous transportation sector’s after inflation production sank by 0.95 percent sequentially in May – and that followed a 2.55 percent nosedive (no pun intended) in April. And wood products real output fell by 0.82 percent.

But the losers’ list contains a big surprise, too. Complaints keep coming that that the domestic steel and aluminum industries (and especially the steel-makers) have responded to tariffs simply by enjoying the higher resulting prices and sitting on these winnings. So it’s noteworthy that even after a 0.82 percent monthly real output decline in May, primary metals production after inflation is slightly (0.15 percent) higher than in immediate pre-pandemic-y February, 2020 – another such performance that’s bested that for all manufacturing.

The aforementioned problems suffered by Boeing keep coming through in the real output data for the aircraft and parts sub-sector of the aerospace and miscellaneous transportation industry. In May, inflation-adjusted output was down 1.47 percent on month – much bigger than the larger industry fall-off. And that came on the heels of April’s 2.21 percent decrease. Real aircraft and parts production is still 4.36 percent above its immediate pre-pandemic level, but given the ongoing post-CCP Virus worldwide rebound in air travel, these figures are definitely disappointing – and moving in the wrong direction.

By contrast, the big pharmaceuticals and medicines sector is still benefitting from reopening headwinds. May’s 0.22 percent monthly real output increase was admittedly modest, especially since this sector includes vaccine production. But it’s grown by 8.44 percent since the virus began spreading rapidly in the United States. on g – also delivered a disappointing performance in April, especially since it includes vaccines.

But both the May real production numbers and the benchmark revision left the vital medical equipment and supplies sector a conspicuous production laggard. This industry – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators – grew in real tems by just 0.19 percent sequentially in May, and April’s after inflation output was down 1.66 percent. As a result, this sector is turning out only 0.35 percent more product than just before the pandemic’s arrival – which doesn’t seem to augur well for national preparedness for the next pandemic.

If I was a betting person (I’m not), I’d still wager on better days ahead for U.S. domestic manufacturing – because so many powerful supportive trends and developments remain in place, ranging from massive government spending and other forms of stimulus to the virus’ continuing retreat to waning consumer caution to huge amounts of pandemic-era consumer savings to ongoing Trump tariffs that keep pricing huge numbers of Chinese goods out of the U.S. market.

But no one should forget about a list of threats to the pace of manufacturing growth, if not growth itself – like the prospect of higher taxes and more regulations, and the possibility that consumer demand will keep growing but switch away from goods to the hard-hit but quickly reopening service sectors (which of course do buy manufactures). Inflation isn’t good for strong (real) growth, either, though I’m an optimist on this front.

Ultimately, though, I’m most struck by evidence of domestic manufacturers’ continuing optimism about the prospects of their businesses. If they’re still confident about their futures, that remains good enough for me.

(What’s Left of) Our Economy: A Spring-y New U.S. Manufacturing Production Report

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aerospace, automotive, Biden, Boeing, CCP Virus, coronavirus, COVID 19, Donald Trump, Federal Reserve, health security, imports, industrial production, inflation-adjusted output, infrastructure, machinery, manufacturing, pharmaceuticals, PPE, real growth, semiconductor shortage, stimulus, supply chain, tariffs, Trade, trade war, vaccines, ventilators, West Coast ports, Wuhan virus, {What's Left of) Our Economy

You might call today’s March U.S. manufacturing production figures from the Federal Reserve a good news/bad news/good news story. Moreover, the new data on inflation-adjusted factory output contained a surprise worth noting.

First the good news/bad news/good news. The Fed report showed that real domestic manufacturing output rose by 2.79 percent on month in March. That was the best such result since July’s 4.25 percent – much earlier during the recovery from the deep CCP Virus- and lockdowns-induced recession. Rebounds from major downturns tend to be strongest earliest, especially for highly cyclical sectors of the economy like manufacturing, and that surely went double for a slump largely caused by an outside shock like a pandemic and dramatic government responses, rather than one caused by a market-based economy’s ordinary fluctuations.

The bad news was that this robust growth followed a February sequential drop of 3.72 percent that was the worst monthly performance since pandemicky April’s 15.83 percent plunge. Moreover, this revised February figure was a significant downgrade from the initially reported 3.12 percent decline. The other revisions, going back to October, were too small to affect the picture over the last few months.

But then there’s that second piece of good news: As the Fed’s release explained this morning, the lousy February numbers “largely resulted from widespread outages related to severe winter weather in the south central region of the country.” So they stemmed from a (temporary) outside shock, too.

The surprise? Although the U.S. automotive industry continues reducing production due to a global shortage of semiconductors, output in price-adjusted terms grew by 2.79 percent sequentially in March. At the same time, the February fall-off was revised down from 8.26 percent to ten percent even. And the shortage is expected to undercut vehicle production until the fall, so that’s a drag likely to weigh on the overall manufacturing figures for months.

The total March manufacturing figure means that domestic industry’s after-inflation production has grown by 22.88 percent since its recent low-point last April, and has climbed back to within 1.73 percent of its last pre-pandemic reading in February, 2020.

Manufacturing’s monthly current dollar output gains were broadbased in March, including in the crucial machinery sector. In this industry, whose products are widely used not only throughout manufacturing, but in many other important segments of the economy like construction and agriculture, price-adjusted production improved by 2.87 percent. And now it actually stands 2.16 percent higher than during that last pre-CCP Virus month of February, 2020.

Although the semiconductor shortage is bound to crimp production in many industries on top of automotive, domestic manufacturing still seems to be benefiting from two headwinds other than the economy’s generally improving strength that seem to have some staying power, too. The first is aerospace giant Boeing’s continuing, but sometimes uneven, progress exiting its protracted recent safety and manufacturing problems. The pandemic’s blow to air travel worldwide clearly didn’t help, either.

But in March, real output in aircraft and parts jumped by 4.09 percent sequentially, and is now fully 5.07 percent above its February, 2020 pre-CCP Virus level.

The picture was more mixed in the pharmaceutical and medicines category – which includes vaccines. Inflation-adjusted output advanced by 2.90 percent on month in March, but the previously reported January and February numbers were both downgraded dramatically – from an upwardly revised 2.57 percent to 0.85 percent, and from a 1.29 percent rise to a 0.05 percent dip. These moves left the sector’s output 5.83 percent higher than in pre-pandemic February, 2020 with the prospect of more impovement to come as vaccine production continues to boom.

Growth is still lagging, however, in the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators. February’s constant-dollar production was revised up from a 0.56 percent monthly decline to a 0.44 percent drop – but it was still a drop. Growth returned in March – but only by 0.61 percent in real terms. So price-adjusted output in this category – which includes many other products – is still slightly (0.39 percent) below pre-pandemic February, 2020’s levels, despite all the national talk of the need to improve America’s health security.

I’m still bullish on manufacturing’s outlook, though. No one should forget headwinds facing industry aside from the semiconductor shortage – chiefly, the fading of vaccine production at some point, the distinct possibility of many more regulations and higher taxes from a Democratic-conrolled federal government, and the supply chain disruptions resulting largely from clogged West Coast ports (which on top of the Trump tariffs are slowing the import of many foreign inputs still needed by Made in the USA companies).

But arguably more than offsetting these dangers is the so far better-than-expected resumption of total U.S. growth, the virtual certainty of even yet another gigantic dose of stimulus an infrastructure spending, along with President Biden’s decision to retain every dollar’s worth of those sweeping, often towering Trump trade curbs.

Yet much more important than my views is the continuing optimism registered by domestic manufacturers in all of the soft data surveys that come out each month from the private sector and from various branches of the Federal Reserve system. If they’re full of confidence, who am I to rain on their parade?

Im-Politic: Crucial New Info on U.S. Pharmaceutical Supply Chain Weaknesses

Tags

active pharmaceutical ingredients, Bain & Company, CCP Virus, China, coronavirus, COVID 19, Cytiva, FDA, Food and Drug Administration, health security, Im-Politic, offshoring, pharmaceuticals, supply chain, Wuhan virus

Here’s a post full of data that should be of more than a little interest to folks who aren’t data geeks. That’s because it presents information shedding light on the likelihood of America getting caught dangerously short of key medical supplies – in this case, pharmaceuticals – when the next pandemic hits. As usual with CCP Virus-related info nowadays, it contains some good news and some findings that aren’t so encouraging.

First, some background. The surveys cited here underscore just how much offshoring of drugs and their chemical building blocks has taken place in the years – and possibly decades – before the pandemic. A poll of pharmaceutical executives the world over conducted by the U.S. life sciences company Cytiva found that 51 percent of the former “say that drug shortages increased in their domestic market during the pandemic, although 33% say that the issue had been increasing over the past five years.”

In other words, a series of “underlying issues around supply chain resilience…have been exacerbated — but not caused — by the pandemic.”  

In this vein, Cytiva also found that fluctuating demand is only part of the shortage problem: “About half of the executives and policymakers surveyed (47%) say their country is moderately or highly dependent on the import of drugs,” and nowhere is this problem more worrisome than with those drug building blocks, since “China and India in particular have become the epicentres of production for the generics and active pharmaceutical ingredients (APIs) that form so much of the industry’s output.”

Moreover, according to a study last fall by the American consulting firm Bain & Company, the API production picture is increasingly dominated by China. All by itself, the People’s Republic accounted for 39 percent of global output last year, up from 17 percent ten years ago. Meanwhile, the North American share has fallen from 23 percent to 19 percent.

Bain also draws a direct link between the shift of drug industry output to the developing world and the frequency of U.S. shortages:

“The transfer of pharma sourcing and manufacturing to Asia has directly affected supply chain reliability. FDA [U.S. Food and Drug Administration] data shows an increase in drug shortages [shown in the chart above] resulting from several factors, including quality issues and disruptive events, such as the 2017 fire at a Chinese API producer that led to a global shortage of piperacillin/tazobactam.”

And indirectly responsible for these shortages have been industry features like “The winner-take-all generic pharmaceutical bidding process in Germany….” This system has “produced drug shortages by reducing the number of producers or bidders over time. In some cases, for example, the winners were sales offices dependent on foreign third-party manufacturers incapable of delivering high drug volumes.”

This finding, in turn, adds to the evidence that the pharmaceutical supply chain security issue predates the current pandemic, and that the industry has been slow to respond. In fact, Bain specifies that the CCP Virus outbreak and its effects weren’t “the first warning. Tsunamis wrecked pharma manufacturing facilities in Asia in 2011 and 2012, and in 2017, Hurricane Maria knocked out Puerto Rico’s electricity supply, disabling many of the nearly 50 pharmaceutical plants on the island for months.”

Moreover, RealityChek readers might remember the post reporting that in 2011, a U.S. Commerce Department study discovered not only that troubling pharmaceutical supply chain vulnerabilities had developed, but that the companies themselves were pretty blasé about the problem.

Like I said at the outset, however, the pharmaceutical supply chain news is by no means all discouraging. The Cytiva survey found that 59 percent of the executives “say that the era of offshoring drug manufacturing to low-cost countries is over, and 67% say that the manufacturing of biopharma staples such as biologics would dramatically increase in their own countries over the next three years.” And given the U.S. industry’s global prominence, it seems safe to assume that many of these executives work at American-owned firms.

In addition, the Biden administration has designated improving health security as a high priority – although as I’ve reported, the President’s plans so far seek to treat as reliable suppliers many countries that have curbed or outright banned exports of medical supplies during the height of the pandemic. And these nationalistic impulses clearly are alive today in the pandemic era’s current “vaccine phase”

Finally, a big shout out to the Cytiva folks for including a URL for the aformentioned FDA shortage database – which I’ve been trying to find for months. It’s not only searchable, but it’s updated daily.

Glad I Didn’t Say That! Free Trade Bolsters Security…Except When it Counts?

Tags

CCP Virus, coronavirus, COVID 19, export bans, free trade, Glad I Didn't Say That!, health security, medical devices, national security, PPE, protectionism, supply chain, The Washington Post, Trade, Washington Post, Wuhan virus

“Mutually beneficial exchange among countries,

conducted freely within a legal framework, is the path to

maximum security, economic and strategic. Autarky, by

contrast, is a dead end.” 

 

– The Washington Post, February 25, 2021

 

“As demand soared for masks and gloves, more than 100

countries and territories imposed export restrictions on

coronavirus-fighting essentials, according to the

International Trade Center.”

 

– The Washington Post, February 10, 2021

 

(Sources:  “America needs to shore up its supply chains. That shouldn’t become an excuse for protectionism,” Editorial Board, The Washington Post, February 25, 2021, https://www.washingtonpost.com/opinions/biden-trade-supply-chain-protectionism/2021/02/25/3dd0a164-7787-11eb-948d-19472e683521_story.html and “Trump  tried to block her. Now Ngozi-Iweala is about to make history,” by Danielle Paquette and David J. Lynch, ibid., February 10, 2021, https://www.washingtonpost.com/world/africa/ngozi-okonjo-iweala-wto/2021/02/09/99e3b028-67eb-11eb-bab8-707f8769d785_story.html) 

 

 

 

 

Our So-Called Foreign Policy: Why Scalpels Won’t Cut it Against China

Tags

Biden, China, China Strategy Group, decoupling, Donald Trump, Eric Schmidt, EU, European Union, FDI, foreign direct investment, Germany, Google, health security, Made in America, manufacturing, multilateralism, national security, Our So-Called Foreign Policy, semiconductors, Silicon Valley, supply chain, Taiwan, technology

Yesterday’s RealityChek post argued made clear that one of the two recent blueprints for China policy offered to President Biden from the foreign policy and technology establishments suffered from crippling internal contradictions.

The second effort, from the Silicon Valley-dominated “China Strategy Group,” can be read more profitably by the President, because popping up here and there are some insights that are genuinely valuable especially since they come from analysts once strongly supportive of what they themselves call the pre-Trump strategy of “near-unbounded integration.”

Principally, the group, which notably is co-chaired by Google co-founder Eric Schmidt, calls for recognizing that “some degree of [U.S.-China] disentangling is both inevitable and preferable. In fact, trends in both countries—and many of the tools at our disposal—inherently and necessarily push toward some degree of bifurcation.” In other words, it’s endorsed a limited version of what’s now commonly called economic and technological decoupling.

In addition, it argues that both this decoupling, along with tariffs that it acknowledges may be needed to push back against certain Chinese offenses and provocations, should be pursued even though they will entail costs – a refreshing and crucially important departure from the long-time pre- and post-Trump consensus in the mainstream American political, business and policy communities that any increased consumer or producer price, or loss of even a smidgeon of market share in China resulting from retaliation from Beijing, proves conclusively the folly of placin any significant curbs on doing business with the People’s Republic.

Finally, the group points out that efforts to rebuild domestic supply chains to reduce reliance on China for critical goods must involve “more than a focus on the end products. Safeguarding key technologies requires the United States to define and secure the entire ecosystem of production, from fabrication to supply to talent to cutting-edge innovation.” In other words, Washington can’t simply seek to become self-sufficient, or largely so, in face masks or ventilators or semiconductors. It needs to become self-sufficient or largely so in all the materials, parts, and components required to make these products.

Yet many of these important insights (and useful recommendations for restructuring the U.S. government to foster the competition with China more effectively) are kneecapped by equivocation and a resulting failure to understand that sometimes policy scalpels cut too finely, and some policy needles are too small to be threaded – especially considering the “all of society” drive China’s totalitarian system is making to gain global technology leadership, and the dangers to America’s “security, prosperity, and way of life” Chinese success would create.

For example, the group emphasizes that decoupling policy mustn’t invite “escalatory cycles of confrontation, retaliation, or unintended conflict” or overlook those areas “where cooperation, collaboration, and exchange with China is in our interest, as severing ties and closing off the United States to the ideas, people, technologies, and supply chains necessary to compete effectively will undermine U.S. innovation.” At the same time, the authors acknowledge that China will respond to any further U.S. decoupling moves “more aggressively” precisely because “China’s leaders understand U.S. dependency as an important source of leverage.”

So although in principle, this omelet can be made without breaking many eggs, Beijing won’t be cooperating in fact. And the circle can’t be squared with clever phrase-making like “navigating the asymmetric competition” that look satisfactorily reassuring on paper and in speeches to conferences but that need to survive the body blows that will inevitably be delivered by reality.

The group’s approach to Chinese investment in the United States (whether in the form of creating new businesses or taking over or contributing capital to existing firms) illustrates the other big drawback of granular approaches when it comes to China: They ignore how any Chinese entity big enough to play in any foreign market, and especially America’s, is under Beijing’s thumb in every important respect.

As a result, there’s no point in taking the time and expending the resources to follow the group’s recommendations to figure out which Chinese tech platforms (whose importance it emphasizes) are and are not violating American privacy standards or conducting misinformation campaigns dangerous to democracy, or censoring content Chinese authorities don’t like, or helping suppress human rights in China or anywherer else, or stealing valuable data, or helping terrorists and criminals launder money; or whether these activities matter enough to merit official U.S. attention, or whether troublesome practices can be negotiated away through talks with Beijing on technical and other fixes.

In this instance, Washington should stay out of the black holes of setting priorities and especially monitoring and enforcing agreements, and assume that by simply banning these platforms from operating in the United States and in fact prohibiting all Chinese entities from owning U.S. hard assets. The latter step would add the benefit of shielding participants in America’s economy from competition with subsidized, market-distorting outfits from China. At the very least, Chinese entities should be required to prove that they’re not controlled or subsidized in any way by Beijing, or engaged in the above malign activities, before gaining entry.

In addition, despite the group’s understanding that entire manufacturing eco-systems, not just final products, need to be rebuilt and nurtured to ensure supply chain security, it appears to underestimate just how widely these relationships extend. After all, most of the numerous inputs to goods like mechanical ventilators (like its controls, power sources, monitors, and alarm systems) depend on big and complex supply chain and manufacturing eco-systems themselves.

Further, just as before the pandemic, few expected face masks and surgical gloves to become products vitally important to the nation’s well-being, the list of critical goods is likely to change and grow over time as new threats emerge. Therefore, the group is correct in warning that “any product or service could be termed essential to national security in an extreme hypothetical.” But what’s the basis for confidence that many products or services can safely be ruled out, and that such hypotheticals will always remain extreme?

At least as important, like the Biden administration, the group’s determination not to ruffle too many international feathers has also clearly led it to back the notion that the definition of “Made in America” for supply chain purposes should actually mean, “Also Made in Lots of Other Countries” that it considers trusted suppliers. Unfortunately, many of the countries so classified imposed export controls on critical medical goods during the pandemic’s first wave last spring. That is, when cooperation was most needed, they built walls – meaning that their trustworthiness isn’t exactly ironclad.

And as then President-elect Biden learned when the European Union rebuffed his entreaty to consult with Washington before signing an investment agreement with China, the allies remain determined to fence sit in the U.S.-China technology competition. The group acknowledges that the list of anti-China partners “may include all of the [European Union], though in some cases EU position/member states’ positions are too ambiguous today with respect to China for inclusion in all instances, and members may need to be considered on an individual basis.” But simply stating this position and its EU-splitting ambitions is enough to make clear its absurdity – especially since the EU country most reluctant to cooperate against China is economic kingpin Germany.

None of this is to say that all trade with (as opposed to investment in hard assets from) China should be cut off completely, or that international cooperation can be of no use to the United States in its struggle versus the People’s Republic. In particular, (and due largely to recklessly indiscriminate free trade policies), America urgently needs products and knowhow now dominated by foreign producers (notably Taiwan’s semiconductor manufacturing industry, and Japanese and Dutch suppliers of key microchip production equipment and materials). And if other countries are willing to cooperate with Washington on various China containing initiatives at acceptable prices, more help is indeed better than less. But the United States will never safeguard its interests adequately without realizing that multilateralism can’t be an end in and of itself, and that against monumental threats, axes are usually more effective than scalpels.

Our So-Called Foreign Policy: Biden’s Just Been Fooled Twice by Europe

Tags

alliances, allies, America First, AstraZeneca, Belgium, Biden, CCP Virus, China, coronavirus, COVID 19, EU, European Union, Financial Times, globalism, health security, Northern Ireland, Our So-Called Foreign Policy, supply chains, The New York Times, Trump, United Kingdom, vaccines, Wuhan virus

It’s beginning to look like a pattern: President Biden keeps making clear that he’s determined to repair the vital U.S. alliance relationships he believes Donald Trump disastrously weakened, and the Europeans, anyway, keep flipping him the bird either explicitly or implicitly. And as the old saying goes, shame on anyone who’s been fooled more than once.

The explicit example came before Inauguration Day. The European Union (EU) – whose members were touted by candidate Biden as eager potential partners in a multilateral coalition against a common Chinese economic and national security threat – were on the verge of finalizing an investment treaty with Beijing. A top Biden aide publicly asked the EU to think twice and consult with the United States before proceeding. In response, the Europeans…proceeded. (See here for the details.) 

The implicit example came last week. During the campaign Mr. Biden, as noted here, made clear (except to every American journalist who covered the matter) that his plan to strengthen U.S. supply chains and make sure that the nation would never again be reliant on adversaries like China for crucial medical equipment and other vital products was by no means an “America Only” or even an “America First” proposal. Instead, one of its planks pledged to

“engage with our closest partners so that together we can build stronger, more resilient supply chains and economies in the face of 21st century risks. Just like the United States itself, no U.S. ally should be dependent on critical supplies from countries like China and Russia. That means developing new approaches on supply chain security — both individually and collectively — and updating trade rules to ensure we have strong understandings with our allies on how to best ensure supply chain security for all of us.” (Here’s the full document.)

In principle, this characteristically multilateral Biden approach made sense. Yet the blueprint came out scant months after (as reported here) many of these allies reacted to the outbreak of the CCP Virus by blocking exports of key medical equipment to ensure they could supply themselves.

You’d think that Mr. Biden, therefore, would have learned this lesson and recognized that the United States simply can’t afford to define “Made in America” as “Made in Lots of Other Countries, Too.” But you’d be wrong.

The day after his inauguration, the new President issued an executive order to create “a Sustainable Public Health Supply Chain.” And one of it directives charged various Cabinet and other agencies and senior advisers to study “America’s role in the international public health supply chain, and options for strengthening and better coordinating global supply chain systems in future pandemics….”

Again, therefore, Mr. Biden specified that this “sustainable public health supply chain” would stretch far beyond America’s shores, and that he believed various kinds of these “global supply chain systems” could ensure the nation’s health security in “future pandemics.”

How did the Europeans react? Little more than a week later, the European Union moved to restrict exports of the CCP Virus vaccine made by pharmaceutical giant AstraZeneca because its own supplies were so short. As a top EU official explained, “The protection and safety of our citizens is a priority and the challenges we now face have left us with no choice other than to act.”

The EU almost immediately reversed its decision – but only in part. It agreed to maintain shipments to the United Kingdom (which has recently left the union under a complicated agreement negotiated after the “Brexit” referendu vote of 2015) and to Northern Ireland (which is a part of the UK, but which remains part of the Union’s single market for goods). But the Europeans, according to The New York Times, still intend “to introduce export controls that could prevent any vaccines made in the European Union from being sent to non-E.U. countries, but without involving Northern Ireland….”

For good measure, great potential remains for a big vaccine-related dispute between the United Kingdom and the EU due to differences over which party is contractually entitled to the highest priority when it comes to vaccine shipments.

And the Financial Times reported that “Belgium, a key location for vaccine production in the EU, has notified the Commission of a draft health law that would give it new powers to curb medicines exports. The proposed legislation would allow Belgian authorities to restrict or ban the shipment of critical medicinal products and active ingredients, in case of shortages or potential shortages.”

Vaccines apparently are not included, but how could any responsible leader inside the EU or outside count on Belgium keeping its word during emergencies?  The same goes, incidentally, for the word of a United States led by an adult thinker, as opposed to a globalist determined to return to the pre-Trump days of Uncle Sucker.   

President Biden clearly needs to learn that lesson, too – and also needs to start asking himself whether the Europeans are holding his administration and his allies uber alles globalism up for ransom, and if the price for securing their cooperation on any number of issues is turning out to be dangerously unaffordable.

Im-Politic: Advice Biden Should Reject, but Probably Won’t

Tags

Alibaba, Andrew Ross Sorking, Biden, Biden administration, China, foreign policy, globalism, globalists, health security, Henry Kissinger, Im-Politic, Jamie Dimon, Joseph C. Tsai, JPMorgan Chase, multilateralism, nationalism, The New York Times, Tony Blair

All Americans of good will should hope for the Biden administration’s success. In fact, on a trouble-shadowed Inauguration Day, it seems especially appropriate to create and nurture the brightest feel-good glow possible.

Nonetheless, it’s also vital to keep something else in mind: Powerful forces are acting more determined than ever to convince the public that the new President should double down on the same major policy blunders that ensured the elites’ own power and wealth, but that dangerously weakened U.S. security and prosperity. For good measure, of course, these decisions brought hardship, despair, and (as demonstrated by the country’s deep polarization), bitterness to tens of millions of Americans. And there’s every reason to believe they have a willing audience.

And before you dismiss those thoughts as the sour grapes of a Trump policy supporter, I hope you’ll read this column from Monday by The New York Times‘ Andrew Ross Sorkin, who the paper seems to be enabling to settle into a role of out-and-out establishment mouthpiece.

According to Sorkin, “a provocative memo [is] being circulated among policymakers on both sides of the aisle and the Biden transition team ahead of his inauguration.”

Continues Sorkin, “It is even more notable for who wrote it….an under-the-radar group of global boldfaced names that act as a private advisory committee to JPMorgan Chase. Among others, they include Tony Blair, the former British prime minister; Condoleezza Rice and Henry Kissinger, two former secretaries of state; Robert Gates, the former secretary of defense; Alex Gorsky, chief executive of Johnson & Johnson; Bernard Arnault, chairman of LVMH; and Joseph C. Tsai, executive vice chairman of Alibaba.”

These globalist A-listers “typically [meet] once a year in a far-flung location with JPMorgan’s chief, Jamie Dimon.” Their discussions “are usually kept private. But given the precarious state of the world during a pandemic and change in leadership in Washington, the group put its views on paper in hopes of persuading policymakers to address what it sees as the most pressing priorities.”

Sorkin at least has the…honesty?…to describe their musings as “ a manifesto of sorts calling for a reset, a return to the pre-Trump days. It seeks to turn back the clock to a time when being called a globalist wasn’t an epithet….”

And although he adds that it “acknowledges the failures of globalism and seeks to correct them,” the group’s intentions (which readers need to take on face value, since the full document itself isn’t reproduced), justify deep skepticism for several reasons, starting with its make-up.

After all, it’s one thing to include a former foreign leader (the United Kingdom’s Tony Blair) and the head of a foreign multinational company (French-owned luxury goods maker LVMH). There’s no reason to believe that they have any special concern for America’s security and well-being, but at least they come from allied democracies.

But Joseph C. Tsai, a bigwig at Alibaba? JP Morgan’s Dimon is of course free to seek his advice on various matters, too, but maybe a senior executive from a Chinese entity that by definition is ultimately controlled by China’s hostile thug dictatorship could have been included out of the group’s effort to provide advice to an American President?

So not that other members of the group (like Kissinger for much of his post-government career) don’t have long records as China apologists and lobbyists for companies hungry to do business with and therefore curry favor with Beijing.

But Tsai’s involvement casts in an especially suspicious – and suspiciously defeatist – light the recommendation that “The best outcome for U.S.-China relations is likely managed competition — an accommodation that avoids military conflict while allowing for limited cooperation. It is impractical to think that supply chains and manufacturing can be moved simply, affordably or comprehensively out of China.”

If anything’s impractical, and indeed a spectacularly proven failure, it’s their stated belief that (in Sorkin’s words), U.S. interests can adequately be served by “a return to engaging with China, especially on climate issues and global health, while acknowledging the ‘significant challenge’ the country poses.” This soothing formula is exactly what’s led to the U.S. economic and technology policies that led directly to the rise of the Chinese threat.

The group’s perspectives on the CCP Virus and what it’s taught us about global supply chains and public health security and the like is no more impressive: “The near-total absence of American leadership, coupled with the nationalist approach of too many countries, have come at the expense of a strategically coherent, international response to the pandemic.”

Of course, it’s precisely because so many countries responded nationalistically to the virus – ostensibly when a globalist perspective was needed most – in particular blocking the export of crucial healthcare goods to ensure that their own supplies would be sufficient, that the United States can’t afford to be an exception, and needs to achieve self-sufficiency.

As for the group’s notion (as explained in the words of member Robert Gates, a former U.S. defense secretary) that “international cooperation and engagement on the international front and the relationships with our allies, …serves America’s self-interest,” it simply doesn’t suffice in bromide form any more. Now’s the time to explain exactly why this stance amounts to something more than what it turned into under the last few pre-Trump Presidents – a formula for needlessly risking nuclear war by coddling wealthy but militarily free-riding allies, and winning international friends and influencing people by giving away huge chunks of the U.S. economy’s productive heart.

Perhaps most revealing of all – both of the group’s cynicism and possibly Sorkin’s – was Dimon’s statement to the latter that “The first thing businesses should do is separate their company’s interests from what’s in the interest of the country.” This from a finance sector that has worked tirelessly for decades to push the offshoring of American manufacturing, with all the national security dangers and economic ruin it’s produced – as Sorkin conspicuously failed to point out.

Sorkin’s contention that “the message the group is advancing is common sense” makes clear that he’ll be an eager collaborator. And that probably goes for much of the rest of the establishment-idolizing and Never Trumper Mainstream Media. Fortunately for these elites, but worrisomely for the American people, everything known about Mr. Biden’s career is telling us that he will be, too.

Note: Eagle-eye readers may notice that I just called the new President “Mr. Biden” rather than “Biden.” That’s because he’s the new President, and therefore, at least in my view, deserves to be identified in a manner as distinctive as the authority of his office when the name is being used as a noun. By the same token, Donald Trump will be called “Trump” – a designation I’ve used for all other individuals I’ve written about in RealityChek, except when referring to them for the first time in a particular article.

But I’ll still restrict myself to using the family name when it functions as an adjective (e.g., “Biden administration,” “Biden policy”).

Truth to tell, I’ve had some ongoing trouble figuring out how to treat former Presidents. The tentative solution I’ve come up with is using that last-name-only form when they’re recent (e.g., “Obama”) and tending (not entirely consistently, I’m sure) to use their full names more frequently the further back in time we travel. (E.g., “former President Richard Nixon” or “former President Ulysses S Grant.”)

Even in such instances, though, I’ve struggled to be consistent without being overly pedantic with the exceptionally well known Presidents (like Washington and Lincoln). And when it comes to “Bush” and “Johnson” and “Roosevelt” and “Adams” I’ve needed to make clear whether I’m talking about George H.W. or George W.; Lyndon Baines or Andrew; Franklin D. or Theodore; and John or John Quincy, respectively.

And another complication: Sometimes, the temptations of stylistic diversity have led me to refer to former Presidents by their first and last names (e.g., “Barack Obama,” “Bill Clinton”). I’m sure these temptations will continue, but I just wanted to let you know that I’m trying to be as consistent as possible. Kapische?

(What’s Left of) Our Economy: U.S. Manufacturing Revival Plans Still Need Trump-like Tariffs

Tags

Buy American, carbon tariff, carbon tax, Dan Breznitz, David Adler, health security, infrastructure, Joe Biden, manufacturing, manufacturing trade deficit, research and development, supply chains, tariffs, taxes, technology, The New York Times, Trade, {What's Left of) Our Economy

I was thrilled to see today’s op-ed piece on U.S. manufacturing in The New York Times, and not just because co-author David Adler is a good friend. I was also thrilled to see it because a careful reading reenforces the essential notion that all the worthy proposals made by policy analysts and politicians lately (including apparent President-elect Joe Biden) on reviving industry will either come to naught or greatly underperform without steep, and indeed Trump-like, tariffs to shut a critical mass of imports out of the economy.

Those domestically-focused manufacturing revival measures have included more federal funding for research and developments, greater federal efforts to help smaller manufacturers in particular learn about and access research breakthroughs in academia and existing government labs, measures to help these smaller industrial firms access capital more easily, tax breaks to foster production and innovation in the United States, and more ambitious and better enforced Buy American requirement for federal purchases of manufactured products. In general, I’m strongly supportive, and have even criticized the Trump administration for giving them short shrift (even on the tax front, where the big 2017 cuts should have come with more investing and hiring strings).

From knowing David, I feel sure that he backs these intiatives, too; indeed, the article concentrates tightly on the Buy American slice of this agenda. And the piece gratifingly (but probably unknowingly) endorses an idea that I’ve made for many years, but that has gotten zero traction: requiring “all manufacturing industries to disclose how much of their sourcing and critical production takes place in the United States.” After all, how can Washington make the right manufacturing policy decisions when it relies so heavily for such crucial information from crumbs self-servingly cherry-picked by offshoring-happy companies themselves?

Yet as also suggested by David and co-author Dan Breznitz – who studies innovation policies at the University of Toronto – except for the Buy American proposals, the standard raft of manufacturing revival plans could work to  stimulate more production and supply, but pays inadequate attention to ensuring that all that supply is actually bought – which would eventually make companies think twice about producing more.

The authors place much stock in government’s ability to soak up this output, and so does Biden – who on top of making sure that more of what government currently purchases is American-made, has pledged to spend “$400 billion in his first term in additional federal purchases of products made by American workers, with transparent, targeted investments that unleash new demand for domestic goods and services and create American jobs.”

The former Vice President correctly contends that these measures will “provide a strong, stable source of demand for products made by American workers and supply chains composed of American small businesses.” The history of U.S. industrial policy also shows that early guaranteed government purchases helped new industries demonstrate the usefulness of innovative products that eventually interested the private sector and produced enormous new markets for their products on top of federal contracts. (Think “computers” and all the hardware and software used pervasively now not only in technology sectors but in virtually the entire economy.)

But U.S.-based manufacturers turned out just over $2.35 trillion worth of goods in 2019 (the last full pre-CCP Virus year). And the manufacturing trade deficit that year was $1.03 trillion. So unless it’s supposed that that 2019 level of domestic manufacturing production is remotely adequate (and clearly, the manufacturing policy reform supporters don’t), or unless they believe that government should buy much more of the output than the $400 billion Biden proposes over not one but four years (to sit in warehouses?), generating more private demand for industry’s output will be essential as well.

As indicated above, David and Dan Breznitz argue that more detailed, accurate labeling will help by enabling more consumers and private businesses to act effectively on their naturally strong preferences for Made in the USA goods – not only out of patriotism, but because of reasonable convictions that their quality and safety are superior. I remain all in favor, but the immense popularity of imports among both classes of customers (made clear by the huge and chronic manufacturing trade deficits) despite numerous news accounts over the years of shoddy, outright dangerous foreign-made products (especially from China), demonstrates that much more will need to be done to spur demand for U.S.-produced manufactures.

RealityChek regulars will not be the slightest bit surprised that I’m ruling out overseas demand as a promising net new source of customers for American domestic manufacturers. Unfortunately, the persistence of the huge manufacturing trade deficits is also evidence that most of America’s international trade partners are far too devoted to the health of their own industrial bases to permit major U.S. inroads. In fact, if anything, they’re likely to step up their own efforts to strengthen their own domestic industries by further curbing U.S. and other foreign competition. And that’s where the tariffs come in.

Not that David and Dan Bernitz, or Biden, overlook the need for U.S. market protection entirely. The former, for example, call for “Stopping predatory pricing by foreign manufacturers” – which entails slapping tariffs on these usually government-subsidized artificially cheap goods. The latter makes similar points, and has also mentioned a carbon tariff on products from countries that base their competitiveness on ignoring “their climate and environmental obligations.” (At the same time, Biden could use a similar levy to punish domestic companies that don’t measure up in his administration’s eyes climate-wise, leaving the net benefit to U.S.-based manufacturing minimal.)

Moreover, to ensure adequate domestic supplies of the healthcare goods needed to fight the next pandemic, simple stockpiling of products by government will be necessary. And since practically everything wears out over time, or becomes outmoded, lots of re-stockpiling will be necessary. Meanwhile, it should go without saying that many of the government purchases of manufactures will be used for critical national purposes – like repairing and building all kinds of traditional and technology infrastructure systems, and producing whatever new military equipment or refurbishing of old equipment the new Congress and the likely new administration wind up supporting.

But these are of course public purposes, and since the United States is still a strongly private sector-driven economy, that’s what’s inevitably going to determine the success of most manufacturing revival efforts. So unless manufacturing revivalists want government to play a veritably dominant role in production and consumption decisions, their strategy will employ tariffs – but not in a targeted, sector-specific, and reactive way, much less as an afterthought to domestic initiatives. Instead, they’ll be proactive, come in a flat-rate form, and stand high enough to encourage plenty of new market entrants that it makes sense to join established enterprises in vigorous, overwhelmingly domestic competition for America’s immense pool of customers.