Foreign Desk Report
CHICAGO: New York-based Delta Children, which makes cribs in China for retailers such as Walmart, briefly studied moving production to the United States as supply shortages caused by the COVID-19 pandemic added to its hefty bill from U.S. import tariffs.
Commerce Secretary Wilbur Ross predicted in January the pandemic would “help accelerate” this type of re-shoring of jobs to the United States, while some policymakers even spoke of a wider retreat of globalisation as companies retrenched to deal with severed supply chains. But Delta chief executive Joe Shamie finally ruled out the move due to higher labour costs and a lack of suppliers.
The company still plans to diversify its supply chain – but by moving some production to South East Asia.
“The Made-in-USA tag will work if the products are of the same quality and competitively priced, which is not case at the moment,” Shamie told Reuters.
“I would diversify, not totally leave China.”
While global trade volumes have inevitably fallen as the world plunged into recession and travel restrictions and social distancing curtailed the movement of people, the economic ties built up by successive waves of globalisation are proving more resilient than some thought. Trade in goods is set to decline by 9% this year, the World Trade Organization forecast on Tuesday, less severe than its April prediction of a 13-32% plunge.
China’s industrial sector is steadily recovering to pre-pandemic levels, with exports up 9.5% year-on-year in August, their sharpest rise in 18 months.
Optimism among German exporters hit a two-year high in September. From Washington to Wellington, politicians this year have preached self-sufficiency, urging firms to bring production home, particularly of “essential” products.
The pandemic has led to a record 235 export restrictions as countries hoarded protective equipment and medical supplies, according to monitoring service Global Trade Alert. The impact of trillions of dollars of subsidies is still unclear.
But despite the drum beat of protectionist rhetoric, there have been far fewer new import tariffs than in the past two peak years, and Pascal Lamy, who led the WTO from 2005 to 2013, believes re-shoring will be marginal.