Janet Yellen left Chinese soil on Tuesday April 9. For five days, from Guangzhou to Beijing, the United States Secretary of the Treasury tried to convince China not to destabilize the world economy with its industrial overcapacity, citing in particular the case of steel and electric vehicles.. She’s not wrong.
As the American economist Brad Setser, of the Council on Foreign Relations, a New York think tank, points out, Chinese steel exports alone, of 100 million tonnes per year, are greater than the entirety of American production ( 80 million tonnes). And China’s automotive battery production capacity is four times larger than the country’s domestic demand.
But, at the same time, the United States must recognize that they themselves are participating in this race towards overproduction, by massively subsidizing the installation of industrialists on their territory. On Monday April 8, the Taiwanese electronics manufacturer TSMC indicated that it was going to build a third factory on American soil, in return for a subsidy from Washington of 6.6 billion dollars (6.1 billion euros). An equivalent sum should be granted to Samsung, TSMC’s South Korean rival.
Alongside this considerable investment plan in electronics, the Biden administration has released another, even more important one, in the direction of “green” technologies, in order to increase the number of battery factories, solar panels or hydrogen.
“Globalization of rivalries”
Sandwiched between Chinese export fervor and American activism, Europe in turn sings the virtues of reindustrialization. The German, Italian and French economy ministers met in Paris on Monday to develop a common industrial policy with deliberately offensive overtones. “The time of happy globalization is over. It gives way to a globalization of rivalries”declared Bruno Le Maire, when his Italian counterpart, Adolfo Urso, assured that “the European economy, based on consumers”must now “become a producer-based economy”.
And as all these additional productions, whether European or American, will have difficulty being competitive with Chinese exports, we will have to resolve to slow down their unloading through protectionist measures.
All this smacks of the mercantilism of ancient times, when states supported industry and exports, and closed their borders. A 2.0 mercantilism in the age of artificial intelligence, which will create many losers. Starting with over-indebted States, which nevertheless have many other urgent challenges to face: energy, education, health, defense…