[UNCTAD] No More Made in China?

Written by The Economist

With the US-China trade war still ongoing, world turns to new countries to supply their goods. 

The US-China trade war is a catalyst to supply chain changes around the world. China accounts for 28.7% of global manufacturing output which is the largest in the world. China owes this large share of output to its staggering 1.39 billion population as well as permissive working conditions. This is a stark contrast to America’s population which is ⅓ of China's and its more liberal regulations. The trade war has brought about changes in supply chains away from the US and China in terms of technology, life sciences and healthcare as well as automobiles and mobility.


While trying to address the US-China fallout in the United Nations Conference on  Trade and Development (UNCTAD), several developed countries including the United Kingdom, New Zealand and Singapore have agreed to offer a helping hand to lesser economically developed countries(LEDCs) to build their production lines and to get their factories running. This includes funding for this infrastructure as well as education on new technology. What do developed nations get in return? A free trade agreement, which was suggested by the delegate of Thailand. However, the delegate of America was a bit hesitant at first due to subsidies that may end up benefiting certain sectors more than others. She instead suggested “free trade with fair trade practices” which all delegates seemed amiable to. 


The primary motive of shifting production to these (LEDCs) is to diversify supply chains as well as to reduce reliance on China as the sole embodiment of manufactured goods. MNCs will be greatly benefitted as they have other alternatives to carry out their operations with cheap labour  apart from China. This allows LEDCs to grow their economies and empower themselves. With the funds and resources provided by developed nations, LEDCs hope to grow their industries and increase aggregate supply. 



These LEDCs in question are Thailand, Malaysia,Vietnam and other ASEAN countries which are nowhere to be seen among the countries who pride themselves in manufacturing.  Boosting exports can make them recognised on a global platform and help with economic growth, improving the lives of its citizens. The countries have a large population and many mouths to feed so they cannot live off their agricultural dominated sectors alone. The presence of manufacturing industries can help to increase the income of its citizens and their material standard of living.  


While this paradigm may seem rosy for the various stakeholders, let’s not forget about the large income inequality present in China. China has a GINI coefficient of 46.3 and  horrid working conditions in factories. There is a fear that these LEDCs may suffer the same fate and workers may need to work under unfavourable conditions.  Worst case scenario is that this move by LEDCs will result in a ‘rich becomes richer, poor become poorer situation’. 


With regards to the trade war itself, America looks at the possibility of easing tariffs but is cautious in doing so. After the dramatic withdrawal from the UNHCR and UNESCO by former president Donald Trump, America hopes to repair multilateral ties with other nations. It also seeks to generate more jobs to support its workforce which has been greatly affected by the trade war. On the other hand, China’s aggregate demand has been sustained thanks to its large population, its greatest weapon against America in this war. However it also has its setbacks. China faced a whopping $35 billion export loss from US tariffs. They also faced a slump in economic growth. Nevertheless, they responded smartly by letting the value of yuan fall and make exports cheaper and more competitive. 


These changes are certainly exciting and look promising. Tensions between the economic superpowers do not seem to be settling down anytime soon but other countries are looking for ways to work around it. The Delegate of Ireland believes that “other countries can work towards [China’s output] levels and these countries such as Thailand, Vietnam and India can collectively surpass China’s manufacturing levels and offer a strong alternative to China.”

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