This book, due to go on sale on Oct. 15 on Amazon, has been written by a veteran lawyer and is intended primarily for business and legal audiences. But it contains some very important messages for everyone who follows U.S.-Chinese relations, reshoring, the economic impact of Covid-19, cyber attacks, the global economy and similarly huge subjects.
Mr. Unkovic, who has been involved in international trade for decades and traveled to most countries that are important to the global trading system, argues persuasively that the world will not go back to the degree of globalization and sprawling supply chains that existed before Covid-19. “I am certain,” he writes, “that the global supply chain will never reconstitute itself as it once was. We will never return to the world before 2020.”
It seems that governments and CEOs are reacting to different sets of related questions. President Biden is emphasizing “Buy American” policies, urging companies to stabilize supply chains for such important items as semiconductors (and that may include building more semiconductor facilities on U.S. soil), imposing more restrictions on high-tech goods that American companies export to China, and strengthening the machinery of the interagency Committee on Foreign Investment in the United States (CFIUS), which reviews proposed foreign acquisitions of sensitive assets, particularly ones with advanced technology. His government is also seeking to curb massive cyber intrusions by China and Russia and seeking huge new funds to revive American technological efforts in such fields as 5G wireless communications, where China has a commanding lead.
CEOs, for their part, are recognizing that Chinese labor costs have increased dramatically over the years, while transportation across the Pacific has been disrupted in part by Covid, resulting in much higher shipping costs. “I predict that over the next five years, economic, political and technological forces will combine to pressure American companies to manufacture more of what they produce at home,” Unkovic writes. “The old rationale of ‘cheap overseas labor’ alone is no longer enough to justify outsourcing.”
The beauty of global just-in-time supply chains has faded, in his view. “When even a single link in the global supply chain breaks, everything can quickly fall apart, making dependence on just-in-time deliveries a critical risk for companies,” he writes.
One particularly cogent line of reasoning is that technological advances are helping change the whole equation of manufacturing. Three-D or additive manufacturing is moving from the prototype phase to being able to make finished products such as hearing aids. Robotics are advancing rapidly, as is Artificial Intelligence. All these trends will change the economics of manufacturing, Unkovic argues.
Of course, mounting distrust between the United States and China is one of the root causes of the threat to pre-2020 global supply chains. This is beyond the scope of his book but Xi Jinping’s recent moves in China to crack down on his country’s private sector and in effect, nationalize it, (and further to secure control of all data) suggests that China also is seeking to limit its vulnerabilities to the United States. “What is still unclear is whether the world is inexorably edging toward two new technology bases—the United States in the West and China in the East–each seeking domination,” he writes.
These all are cutting-edge observations about the very structure of the global economy. It’s a book that any serious thinker on these issues has to read and comprehend.
