What Is the Supply Chain We Hear About with Regard to China?
June 1, 2020
Larry Kudlow is the Chief economic advisor to the Trump Administration. Right after Memorial Day 2020, he made the following statement: “We welcome any American Companies in Hong Kong or China mainland, we will do what we can for full expensing and pay the cost of moving if they return their supply chains and their production to the United States.”
A supply chain is a system of organization, people, activities, information and resources involved in supplying a product or service to the consumer. Take a forest for instance. Companies cut down the trees, transport them by big rigs to a lumber yard. At this location they are cut to various sizes. Then construction companies buy the finished product and transform the lumber into apartment complexes, home residences, store fronts, etc.
Many people, many hands, many banks, construction companies, trucking companies, all are involved in bringing the raw materials to our neighborhoods to build new homes and stores. This is a supply chain.
It is very encouraging to hear the top economic advisor giving our President the big picture advice and at the same time putting subtle and maybe not so subtle pressure on our businesses who abandoned our country years ago to set up manufacturing in China at a lower labor cost.
The same timber is available in the USA, all around our country. We plant many more trees than we cut down. Twenty years ago every stick of furniture I purchased for my home and office came from North Carolina. The Clinton-Bush era has seen the complete devastating of manufacturing of any furniture in North Carolina and the establishment of new and modern production and manufacturing plants created in China with the assistance of the Chinese Communist government. So now we don't use our trees, we don't transport the trees to lumber companies, we don't sell to wholesalers who sell to retailers who sell to you and me. Think of all the money that could transfer hands, how much prosperity that could bring back to not only North Carolina, but to many regions of the USA.
If the US Government can create tax incentives for these “Chinese” businesses to move back to the USA, the supply chain would also prosper many workers in America. This can be done. Decisions have to be made. Government and businesses need to find ways to cooperate so we can prosper.
There is good news on many fronts in spite of the Chinese Communist inspired Covid 19 virus: President Trump can do many things at one time. He is actively pushing back on the Chinese government, insisting they adhere to the newest trade agreement, pushing back on the Chinese as they attempt to use predatory lending practices to poor third world countries. We, as a government are not paralyzed or totally preoccupied with defending the Wuhan Virus.
But we must all realize we need to retain our workers, young and old, able bodied and partially disabled, men and women, to work in new manufacturing plants that are going to come home. It took lots of effort to move to China and it probably will take much effort to bring manufacturing back home. We can do it.
When England was the most dominant country in the world in the 1500's and 1600's, a simpler vision of the supply chain existed. English wooden ships would dock in India and collect spices and silks of all kinds. They would travel to the Middle East delivering the spices in exchange for gold and silver. Then move on to England where these items would be traded for iron which would allow for the building of the early manufacturing plants, fueling a fledgling industrial revolution.
What seems to be different today about the Chinese Communist government is that their goal is not peace and prosperity for all but world dominance in trade, in military and in all aspects of life. Of this we must be aware.