If some other country starts to develop an in-house supply chain for some specific item, exports for that specific item are turned back on and possibly sold at a loss until the threat ceases. That's what happened with rare earths. Remember rare earth shortages. China cranked up the price, Molycorp got the Mountain Pass CA mine going again, China dropped the price, Molycorp went bankrupt. Same strategy Amazon uses with Amazon Basics.[1]
This is an explicit national strategy of the PRC. There's no secret about it.
[1] https://www.mining.com/caught-between-rare-earths-and-chines...
The US has been pushing all its externalities onto 3rd world countries for decades so it can enjoy a high standard of living while pretending that it doesn't have an environmental cost. China & Africa have endured some very dodgy waterways and extremely questionable air so that America gets iPhones and other electronic gizmos.
Several American administrations and a couple of powerful political lobby groups have been everything short of openly hostile to the mining industry. Although the worst of the ire was directed at coal, the thumbscrew tightening approach to regulation affected everyone.
China's strategy is to get a lock on rare earth production. The US's strategy has been for someone else to have a lock on rare earth production. The States has not been a prime destination for mining investment in the last 30 years, and their market for consumption hasn't been growing all that much. The only thing in their favour is that with the rule of law the mine probably won't be nationalised.
China isn't acting unilaterally here. It is illegal in the US to do what China does to get ahead.
Not quite though. The US's strategy has been for someone else to do the mining. That strategy works pretty well when it's two dozen other countries in competition with one another, because then you're not reliant on any one of them and there is no single point of failure.
The failure is in failing to prevent it from all being consolidated into a single authoritarian country.
Notice that this is not a new thing. It's the classic strategy used by 19th century robber barons before there were antitrust laws. Have a large conglomerate, if anyone tries to compete with you in any industry, use profits from other markets to sell below cost until they go out of business and you have a monopoly again.
The question now is how to effectively enforce "antitrust laws" against a government.
I don’t see a solution in sight.
If it's important enough, then it's worth negotiating the pitfalls.
Imagine telling Huawei to stop selling a massively profitable product overseas for example.
I don't really see this strategy being carried out other than in the most general sense. Where are these supply chains popping up and getting swamped?
And remember, this is very costly to China as well - selling at a loss, so they can then sell 'very cheaply'?
The problem with the above thesis is that all of this is a 'secondary economy strategy' i.e. it's good for catching up, it's not very good for surpassing. You need domestic consumption, and the ability to export goods at the highest end of the value chain, both things China will struggle with.
Or you could ban all trade with China.
Trying to convince the US government to do something about this seems quite difficult. I feel like the easier tactic perhaps is trying to get international trade to be less dollar-oriented. Indirect doesn't necessarily mean harder.
China needs big intl businesses. The Chinese domestic market is not big enough to support their current pace of economic growth, and the government relies on that growth for social stability.
Though I know it is a bit more complicated with refineries etc...
[1] https://www.cfr.org/backgrounder/state-us-strategic-stockpil...
For the SmallCo vs Amazon example: either superior branding&marketing or protection via patents. If you try to differentiate through pricing, Amazon can sell at a loss for too long for you to survive.
But tbh in either case it is like a third world dictator asking "how can I win" when the US is already invading. You can't, the best option now is to cut losses and retreat so you at least stay alive.
Because, if it is on Amazon basic, there is no new intellectual property protecting it, so it should be a commodity that is completely optimized. Companies need to move on and make better things, protect them with IP, and then Amazon can’t just copy it and make it a basic object.
The opinions of free market capitalists aren't in the driver's seat of the US economy. Since the 70s the US has been transitioning to some sort of mixed model.
I feel like this is the manufacturing equivalent of the financial sector shenanigans back in 08.
A bunch of companies increasing profits by baking in risks into the chain, because the risks of your individual providers failing are independent probabilities, until a pandemic closes them all at the same time.
The obvious difference is that the financial sector was (and is) way bigger than manufacturing.
e.g. microcontrols don't require lots of processing power, and if embedded software wasn't complete shit it would be easy to keep portable so there is supply chain flexibility.
If you have a just-in-time manufacturing operation and your suppliers are more powerful than you are, you're very vulnerable.
They provide component-level part risk and sourcing information factoring everything from active litigation against sub-tier suppliers to geopolitical risk affecting associated manufacturing facilities and supply lines. I rarely encounter data as a service in my line of work. I usually think of that as typically market research, so it's been interesting getting a different angle on that.
[1] - https://www.z2data.com/
It's consolidation of manufacturers worldwide and centralization of production in select parts of Asia. Lack of competition, in other words.
Companies think they can save money by outsourcing engineering expertise. They think they can save cost by outsourcing everything to suppliers. So their financials look great, but that's absolutely misleading.
Then you have companies like SpaceX eating everybody's lunches, and to my surprise, still eating everybody's lunches.
The ridiculous part is that this has extended to the point that subcontractors have other subcontractors, that have yet another subcontractor...
If you're in the business and have to acquire components you know with high confidence that component scarcity did not start with the pandemic.
We are now feeling the problems that come with the limits of this kind of global supply chain (which is the outcome of a political-economic project which has been underway, outside the spotlight of mainstream media coverage, for about three decades). The problem and possible solutions are inevitably more political than technical (who gets to decide where things are made, how, and how much is not something the average citizen who has to bear the brunt of the effects has any control over--a political problem).
I also recently learned about how single-use production techniques exacerbated the supply chain fragility, esp. as regards the US covid response. Interesting stuff. Big, long-term problems.
