"Ring Time Depth" The United States selfishly accelerates the "flight" of manufacturing from Europe

Source: Global Times

Editor's note: "'Deindustrialization': European factories shut down. "Who is the winner of Europe's energy crisis – just look at how the United States 'sucks' out European companies." European public opinion seems to have woken up lately to the fact that manufacturing is already in a haze, and that everyone from steel giants to fertilizers, from the automotive industry to glass production, and even sugar mills to toilet paper manufacturers cannot avoid the impact of energy shortages. Without cheap Russian gas, Europe's industry would face a dilemma of survival, and many companies would have to stop, limit or relocate. However, after the United States intensified the escalation of the Russian-Ukrainian conflict and single-handedly created the European energy crisis, it not only made "energy wealth", but also allowed European companies to "outflow" to the United States. Europe, which lacks "strategic autonomy" and encounters an energy "supply cut" crisis, is also increasingly constrained by the United States in the field of industrial development, as reflected in the German Handelsblatt, the "wishful thinking" of the United States is leading to "Europe's competitive disadvantage".

"Industry is fleeing Germany!"

"U.S. President Joe Biden, wearing aviator sunglasses, shouted to the guests at the groundbreaking ceremony for the chipmaker Intel's new factory - America is back!" The Handelsblatt article described Biden's September 9 event in Ohio: American flags hung on excavators and banners reading "The Future Made in America." "It's time to bury the 'Rust Belt' label, where 'Made in Ohio' and 'Made in America' are no longer just slogans," Biden said. Handelsblatt also commented that although inflation, high interest rates and the danger of high national debt put pressure on the US economy, it is still in a favorable position in global competition, and a favorable economic environment, government subsidies, low energy prices and security of supply are attracting more and more production into the United States. According to German economic expert Benholz, "more and more German companies rely on the United States because of security issues."

"Industry is fleeing Germany!" The German newspaper Bild reported on October 29 that "due to the skyrocketing energy prices, many companies are making less and less profit from production, and the painful consequence is that energy policy is threatening industrialization!" The German economic news network titled "Deindustrialization": European factory shutdown" reported that European industry has been accustomed to Russia supplying reliable and cheap natural gas for decades, "even during the Cold War period at the height of the confrontation between the United States and the Soviet Union", but in the current conflict, the negative impact of high energy prices caused by Western sanctions against Russia is putting Europe on the brink of recession and potentially causing permanent damage to some industries.

German media also gave examples that a new "deindustrialization era" in Europe has begun. Low energy costs are a real advantage for the United States. In March this year, Germany's Volkswagen announced a capital injection of 7.1 billion US dollars to set up a production base and battery laboratory in Tennessee, USA, to develop the US electric vehicle market. Mercedes-Benz is also opening a new battery factory in Alabama. In addition, Luxembourg-based steel manufacturing giant ArcelorMittal will close two German plants. Yara International, a Norwegian fertilizer giant that uses natural gas as a key feeding, has closed some plants and plans to cut ammonia production by 65 percent. Dutch fertilizer company OCI is importing more ammonia through Rotterdam and expanding its facilities in Beaumont, Texas, USA. Referring to energy costs, the company's head said: "It really tilts the scales in favor of the United States." ”

Since the escalation of the Russia-Ukraine conflict and the deep energy crisis in Europe, more and more European companies have chosen to invest in US states, including many industry giants. BMW announced a USD 1.7 billion investment to produce electric vehicles at the world's largest BMW plant in Spartanburg, South Carolina. The state of Virginia also announced that six German companies will set up or expand offices in the future. Choose more from Oklahoma – more than 60 German companies, including Lufthansa, Siemens, etc.

Kress, a professor of economics at the Allen University of Applied Sciences in Germany, recently wrote an article on the German Economic News Network that the United States is interested in aggravating the Russian-Ukrainian crisis and expanding hostilities against Russia because it is in its economic interests - weakening Europe's industrial potential, solving internal problems such as the return of American manufacturing, and the United States intends to prevent cooperation between Germany and Russia, which will lead to a negative impact on the German economy and face the problem of "deindustrialization".

The deception of "transatlantic harmony"

The United States "sucked away" the European manufacturing industry, in addition to taking advantage of the European energy shortage caused by the Russian-Ukrainian crisis, it is also inseparable from the comprehensive reform of the manufacturing industry carried out by the United States over the years. Currently, U.S. manufacturing accounts for about 11 percent of GDP. Manufacturing participation is 12 million people, or about 8 percent of total U.S. employment. 20% of U.S. social investment goes to manufacturing, 60% of exports come from manufacturing, and 70% of corporate R&D spending also goes to manufacturing. This shows the importance of manufacturing to the United States. More importantly, the Biden administration attaches great importance to the "middle class" in the country as an important "ticket bank", and manufacturing is undoubtedly one of the sources of the middle class.

In fact, since Obama took office, recent U.S. administrations have spared no effort to promote "Made in America" and with increasing intensity. For example, during Obama's presidency, the "Advanced Manufacturing Partnership" program was launched, focusing on the development of hybrid materials, biomaterials, industrial advanced sensors, and digital manufacturing through investment. The National Science Foundation has also established a "Center of Excellence" for basic research and manufacturing to help translate technology into productivity. The Obama administration also first introduced the "Buy American" slogan, including a "Buy American" clause in the stimulus package after the 2008 financial crisis, which drew resistance from European allies at the time. In contrast, the Trump administration's actions are more "simple and crude." During his term of office, the United States has successively launched a "trade war" against China, Japan and Europe, imposing high tariffs on most Chinese commodities and Japanese and European automobiles, and engaging in trade barriers, while reducing US corporate income tax, and providing tax relief and cash subsidies to American and Western enterprises that return or invest in the United States.

In terms of supporting the manufacturing industry, the Biden administration is more attentive in terms of capital investment and policy support. In November 2021, Biden signed a $1.2 trillion Infrastructure Investment Act, of which $215 billion and $138 billion were used to improve transportation and power grids and broadband upgrades, respectively, benefiting undoubtedly the US manufacturing industry. In August this year, the United States first introduced the Chip and Science Act, which provides $52 billion in subsidies and tariff preferences to the local semiconductor industry. Then came the Inflation Reduction Act, which decided to invest $370 billion in subsidies for climate and clean energy, but added new conditions, such as only electric vehicles produced in North America to receive subsidies from the US government.

Another report in Handelsblatt said that "Europe must reduce its dependence on the United States" and that the so-called "transatlantic harmony" is deceptive. People also remember the actions of the United States against key European manufacturing companies: for example, the book "The American Trap" describes the use of "long-arm jurisdiction" by the United States to suppress companies such as Alstom in France; the imposition of European steel and aluminum tariffs on anti-dumping; Tariffs on intellectual property rights and other aspects to weaken the competitiveness of European manufacturing.

The U.S. wants to invest heavily in environmental protection — but huge subsidies for electric vehicles and other technologies are fueling EU fears and fears, with "Brussels criticizing Washington's plan for distorting competition," Der Spiegel said Oct. 26. To that end, U.S. and EU officials are negotiating to formally set up a working group to discuss "new U.S. laws that Europeans fear would discriminate against foreign EV makers" to address the EU's "specific issues" related to the U.S. Inflation Reduction Act.

Relevant policies have led Europe to criticize the Biden administration for "economic terrorism" against Europe, but in the context of the energy crisis and global inflation, many European companies still made the choice to set up factories in the United States this year. Moreover, some American companies investing overseas have also begun to "return". The latest report released by the U.S. research firm Shore Back Initiative says at least 1,800 U.S. companies intend to transfer some of their overseas operations back to the U.S., involving up to 261,000 jobs. Affected by the Inflation Reduction Act, in September this year, Tesla began to stop the plan to produce batteries at the Berlin factory and returned to the United States to seek subsidies.

Why did the Obama and Trump administrations in the United States continue to introduce tax, fiscal and financial policies conducive to the return of manufacturing, but the effect of manufacturing return was not obvious during their tenure, but they made a breakthrough from Europe during the Biden administration? In addition to the background of the European energy crisis, the inertia of policy cannot be ignored. Song Guoyou, deputy director of the Center for American Studies at Fudan University, told the Global Times reporter that from the policy of the last three administrations, the United States is "quite determined" for the return of manufacturing: First, almost all important bills have more or less provisions that help the return of manufacturing, so that the relevant domestic manufacturing industry can obtain more favorable conditions, such as including tax cuts, reducing manufacturing costs, and promoting government investment; Second, crack down on competitors and impose restrictions on China and other countries through tariffs, sanctions, export controls, etc.; Third, through strategic competition, force manufacturing investment from allies such as Europe, Japan, and South Korea to flow back to the United States.

"America's Wishful Abacus"

Russian Foreign Minister Sergei Lavrov recently said that the goal of the United States is to weaken the European Union militarily and economically. Talking about whether the United States is "taking advantage of the fire" and wants to overhead the manufacturing industry of European countries such as Germany, Song Guoyou said that the layout, readjustment and decision-making of enterprises take time, to be precise, the energy crisis in Europe will dampen the competitiveness of European industrial development and help the United States accept more European manufacturing investment under high cost pressure. This will undoubtedly lead to greater pressure on the European manufacturing industry.

Since the 70s of the last century, affected by the oil crisis and other factors, France and other major European industrialized countries have begun to launch industrial relocation measures, will the current European energy crisis further accelerate the process of industrial relocation and "deindustrialization" in European countries? Wang Shuo, a professor at the School of International Relations at Beijing Foreign Chinese University, told the Global Times: "That's for sure. In fact, since the beginning of globalization, many enterprises have moved their factories because of the national welfare system, labor costs, industrial protection and other issues. Europe's 'hollowing out of industry' and industrial outflow have aggravated its own financial and welfare burdens, and have become a relatively stubborn problem. Therefore, after the 2008 financial crisis, European countries realized that it was not possible to 'dematerialize and be virtual', and countries without manufacturing were very poorly resilient in the face of the financial crisis, and they still had to return to the real economy and achieve 'walking on two legs'. He believes that this energy crisis is indeed not good news for Europe, it is equivalent to the fact that the industry is recovering and is getting worse, and this crisis is an exotic, imported crisis, which is not within Europe's own control. If the energy crisis continues, the relocation of energy-dependent metallurgical and automotive industries will inevitably be greater. Therefore, the failed economic plans of Germany, France and, not long ago, the failed British Truss government also mention subsidies for enterprises. As some European analyses and reflections have said, the United States has single-handedly created Europe's energy crisis, but it has made "energy wealth" and allowed European companies to "outflow" to the United States.

Wang Shuo believes that at the upcoming US-EU Trade and Technology Committee (TTC) meeting, I am afraid that the coordination between the two sides will not be easy. In addition, once there is a real trade conflict between Europe and the United States in the field of electric vehicles, Germany will definitely side with France, and the deepening differences between France and Germany will be bridged, and Europe will form a stronger position on the United States. In particular, these seem to be just problems between the United States and Europe, and at the same time, they will also add variables to the current increasingly complex relationship between major powers.

Some European analysts believe that although Biden's new industrial policy is beginning to show its effect, historical experience has proved that the United States is not an ideal destination for global manufacturing, and even if the US government artificially supports, the long-term effect is uncertain, especially during the epidemic, a large number of US factories are closed. The Wall Street Journal and other American media also analyzed that whether it is a European or American company, "returning to the United States" has both realistic temptations and unfavorable factors. Companies in the electric vehicle, vaccine, semiconductor, and renewable energy industries will receive government tax and financial support, but higher labor costs, lack of new infrastructure, and future "resourcing" costs may outweigh the "benefits gained."

Many German media revealed that representatives of more than 10 German companies, including Volkswagen, Siemens and chemical company BASF, will accompany Chancellor Scholz on his visit to China, while the German government has received about 100 applications. According to Zhao Yongsheng, a researcher at the National Institute of Opening Up and the Institute of Global Innovation and Governance of the University of International Business and Economics, more and more European companies are also eyeing China while moving to the United States, and will increase their investment in China in the coming period. Because China's manufacturing industry is large-scale and the industrial chain covers a wide range, it has great potential in the field of new energy and high technology. China and the EU can carry out new cooperation in the fields of automobile manufacturing, chemicals, energy and so on. He believes that Europe is in a difficult period, and the Chinese media should not sing about Europe, but should emphasize the importance of China-EU cooperation. Chemical giant BASF reportedly lost 130 million euros in Germany in the third quarter and therefore decided to "flee" Europe. Zhao Yongsheng believes that although the cross-border migration of the industrial chain is a normal phenomenon, when European countries face competition and cooperation with the United States, they still need to introduce major measures and reforms in terms of legislation and scientific and technological support, reduce the interference of geopolitical factors, retain Europe and foreign-funded enterprises that set up factories in Europe, and ensure that Europe does not have "industrial hollowing". The head of the German Metals Association also recently said: "We need urgent assistance, otherwise Germany will be threatened by 'deindustrialisation'." ”

epilogue

Some people say that from the implementation of the "Marshall Plan", post-war Europe was like a big broken vase, which could not remain perfect after being reglued by the United States ... On the other hand, Europe's decades of integration efforts have enhanced its international status and influenced the development of the world political landscape. All in all, Europe has a long way to go to get rid of the US containment and weaken US hegemony.