Coronavirus a catalyst for deciding on a new global manufacturing hub
PRETORIA – The book ‘In the Eyes of Darkness’ (1981) by Dean Koontz details about the global rat race to see who has better weapons among the superpowers, China, Russia and the United States. It has always been known that biological warfare is real but very people understand what it entails. There are claims that that the coronavirus (or Covid-19) is part of biological warfare but it is unclear who is attacking whom as the crisis grows. No formal sources have commented on this except for Russia after it was accused of spreading ‘fake news’.
As the mystery surrounding the outbreak continues, South China Morning Post reports that “the Shanghai laboratory where researchers published the world’s first genome sequence of the deadly coronavirus that causes Covid-19 has been shut down.” As of Sunday, 1 March 2020 as many as 87000 people had been infected by the coronavirus, that is 7000 more cases reported outside China in countries like Italy, Iran, Switzerland and the United States. The number of countries that have confirmed that people within their borders affected by the disease now stands at more than sixty, and counting.
However, the question that lingers in many people’s minds is whether there is a bigger story behind the Covid-19 virus or not? If indeed the virus is a biological weapon, it will be hard to answer this question since matters of this nature rarely make way to the public domain. On the other hand, there is nothing that stops anyone from writing about the impacts of the virus as it continues to affect lives and disrupt the world. This opinion piece, therefore, seeks to contribute to the existing and future body of knowledge on the possible impacts of the coronavirus.
Coronavirus – a catalyst for a new economic order
As such, the argument is that the virus could be catalyzing the present economic power relations and could. China could soon be replaced as the world’s manufacturing hub. To support this assertion, the evidence is drawn from fiction (see ‘In the Eyes of Darkness’) and developments in global politics involving primarily the US and China as well as a sequence of what may appear as unrelated events. Nonetheless, Koontz’s book is spooky and intriguing at the same time as it takes the reader into the future that the world experiences at the moment. Where this fiction becomes concerning is that it is quite specific on the deadly coronavirus which causes havoc in the different parts of the world. It is imagined that had one quoted the book a few years ago, it would have been dismissed as a ‘conspiracy’ or outright rubbish.
In what reads like an action-packed movie, the book gives chilling information on biological warfare and the exact origins of a deadly virus. It talks about a Chinese scientist named Li Chen defected to the United States. Li Chen carried a diskette record of China's most important and dangerous: new biological weapon in a decade called the 'Wuhan-400'. This weapon was apparently developed at their RDNA labs outside of the city of Wuhan. It is quite important to note that when the virus emerged, it was reported in the same city of Wuhan where thousands of people are either sick or dead. It is believed that the virus may “have originated late last year in a food market in Wuhan that was illegally selling wildlife.”
Another book ‘End of Days: Predictions and Prophecies about the End of the World’ (2008) another writer Sylvia Browne wrote of a pneumonia outbreak ravaging the world. Browne predicts, “In around 2020 a severe pneumonia-like illness will spread throughout the globe, attacking the lungs and the bronchial tubes and resisting all known treatments. Almost more baffling than the illness itself will be the fact that it will suddenly vanish as quickly as it arrived, attack again ten years later, and then disappear completely.” Social media has made a false claim that this excerpt comes from Koontz’s book. Admittedly both books predict a dangerous scourge that will end the world. Reuters also indicates that the illness in Kroontz’s doesn’t share more traits with COVID-19 and also that there is no proof that the new coronavirus was created in a lab.
When the first case and the contagious nature of the disease were reported, unknown sources, allegedly from Russia, blamed the US for the virus. Among others, US billionaire and Microsoft co-founder Bill Gates was accused of involvement in the outbreak. However, the Russian foreign ministry has denied that it is responsible for the rumour. Other unconfirmed information pointed to China. It is suggested that something went awfully wrong in a state-owned virology lab in Wuhan, where the first case of Covid-19 was identified. Judging from this, any inquisitive mind would run at a speed of light to seek answers and also to attempt to deal with the problem head-on.
From the onset, the author’s point of departure is that powerful countries always work to maximize economic and political gains in everything they do. They have all the power and resources, e.g. capital, information, personnel, etc. to pursue their national interests. My view is that global bullies such as those in the UN security council never engage in direct confrontation but tend to give each other space. They also work jointly in matters that they consider beneficial to them. The rise of China as a global economic power came as a result of conscious effort rather than from what is always said.
Of course, the Wuhan-400 might not be the same as the Covid-19 but the prediction is still telling, and that the prediction that virus will appear in 2020 causes uneasiness. It is therefore for the reader to decide whether he or she accepts the predictions by the authors or not. However, the basis of the argument is that as one US leader Franklin D. Roosevelt argued, “in politics, nothing happens by accident. If it happens, you can bet it was planned that way." The intention is not to add to existing conspiracies but to postulate what is likely to happen to the global economy from this point on. It is from this premise that it is predicted that the coronavirus, irrespective of its origins, will recreate the world economy. If this proves unsuccessful, it will a springboard for change that will take place in the future as the world moves from saying ‘nǐ hǎo’ to ‘buenas tardes’.
China playing our game
In his book ‘Playing Our Game: Why China’s rise doesn’t threaten the West’ (2011), American author Edward S. Steinfield gives a glimpse of how China's meteoric rise at the global stage has always been viewed particularly in the US in that it was never seen as a threat to U.S. influence and Western institutions. In this regard, Steinfeld shows that the social, economic and political change did not occur in isolation but it was driven by forces of globalization. In that way, he adds, basically China “is playing our game - the game of modern capitalism effectively defined by the United States since WW2...” China is a creation of the West, and time has come now for the West to pull the plug. In the eyes of the West, China grew too big for its shoes by challenging its dominance.
The author also believes that many theories such as climate change and fourth industrial revolution do not exist in a vacuum but they are advanced to continuously shape the global agenda in the same as globalization and the capitalist system. The end goal is still to create advantages for the developed world. Thus, the coronavirus appears to fit into the global agenda on pollution and climate change. Latest Nasa satellite images, for example, show a sharp decline in pollution levels in China from slowed industrial activity and limited human movement stemming from the Chinese government’s effort to limit coronavirus. This will come as good news to greenies and climate change fundamentalists all over the world.
It is interesting that China’s hyper industrial activity had to been slowed in this manner. Developed countries are addicted to cheap products and goods produced in China. And their companies are closely tied to large global manufacturing plant, China. That is at least how the Asian economic giant has been positioned in the past two decades. China is now the second-largest economy, not because of the smartness of its people and or policies. But the vicious West understands how to control the game, perhaps much more better than ever imagined.
Economist Joseph Stiglitz points out that the West - acting through the International Monetary Fund (IMF) and the World Trade Organization (WTO) - has managed all transitions of different countries, including those of China and Russia, to be integrated into the global economic system. His book ‘Globalization and its Discontents’ (2002) highlights the devastations of globalization (the removal of barriers to free trade and the closer integration of national economies), a process that literally made China. Of all countries in the world, one will argue that China benefited more than anyone from the globalization of capital and markets. But it is time for the Dragon to be contained. Donald Trump’s unconventional approach was injected to reorganize international economics by removing China as the centre.
Taming the Dragon
As global production moved around the world at rapid speeds, it appears consensus was reached to set up shop in China. For the longest time, China provided many advantages including a large population for local consumption and slave work, weak labour rights, low wages, lack of democracy, etc. Beijing has been the engine fueling the global economy for many years, and no one has been complaining. It was only in 2017 when Trump became the president of the US that China has been rattled. The US understands that the only way to reset the system has to include China. The China - USA war has been raging for years and has been a concoction of tariffs and the trade war; espionage and Huawei; and Hong Kong, Taiwan and the South China Sea. Steven Lee Myers and Edward Wong wrote in the New York Times that the spiralling epidemic has presented for fiercest critics of China in Washington like Mike Pompeo and Peter Navarro “to denounce the rule of the Chinese Communist Party.”
All along it has been clear that the so-called trade war was aimed at forcing China to understand its place and also also to share the economic benefits with the US in particular, which was in any case behind the globalization of capital that transformed China from a peripheral player to one of the most recognizable figures in the global system. Starting from Trump’s annulation of the Trans-Pacific Partnership which he saw as a way of giving China “fast track authority on trade” since the agreement would squeeze the US fast evaporating manufacturing sector and also create unemployment. Vociferous Trump then became direct and confronted China as a ‘non-market economy’. Throughout Trump’s tenure, the topic has been about taming the Dragon.
China on its part has criticized the US for creating unnecessary panic when Washington “withdrew diplomats from a consulate in Wuhan and evacuated its citizens.” China could not be wrong after all. Of late, Secretary of State Pompeo has been brutal in his attacks on China. For example, he told the Munich Security Conference that “the West is winning.” On trips in February 2020 to countries in Europe, Central Asia and Africa, he told governments “to beware of China.” Also, the Washington foreign policy on Africa and Latin America is informed by the US intent to contain or keep out China in these regions. The revised trade agreement between the US, Canada and Mexico (USCMA) was also based on limiting the Chinese influence in one way or other. The US used strong-handed tactics to get the agreement across the line. At practical levels, the war deteriorated to involve technology companies Google and Huawei. It was only a few months ago that Beijing relented to US demands.
Mexico – a new global manufacturing hub
Vladimir Signorelli, head of Bretton Woods Research, thinks that the coronavirus could signal the end of China as a global manufacturing hub. The known impact of the coronavirus on China and the world is that it has led to massive and potentially long-lasting disruption to global supply chains. While the world believes that scientists are looking for a cure for the Corvid-19, planners are busy redesigning the world economy away from China. In any manner, many companies had moved out of China and relocated to Vietnam, Bangladesh and throughout southeast Asia as the uncertainty of tariffs due to the trade war continued to rise. But in the end, America would prefer a country that it can manipulate and control. The Chinese experience means that decision-makers in Washington will not repeat the same mistake.
Forbes’ Kenneth Rapoza reasons that picking a new manufacturing hub will not be easy since not many large countries say India, Mexico or Brazil, offer the same tax rates and logistics set as China. The change of regime in Brazil in 2019 could be aimed at positioning the large South American country as ‘next China’. The president of Brazil Jair Bolsonaro has placed himself and his country as “the new darling of the American right,” argues the Vanity Fair Magazine. Trump’s visit to India last week speaks volumes as Narendra Modi rushes to impress Washington. However, Rapoza has his money on Mexico succeeding the US. After jumping in to offer ousted Bolivian president Evo Morales, Mexico bowed to US pressure and let him go Argentina. Left-wing Mexican President Andrés Manuel López Obrador is cautious not to upset the US.
Mexico City is already a partner of Washington in the revised NAFTA-deal and offers much more than what China does to the US economy. It is not only in the US backyard but the relations between go much deeper than it is often reported. In terms of the new line, Mexico is a new place to be. Its manufacturing is growing at a faster pace. Many sources suggest the costs of production in Mexico have fallen considerably compared to China. Other added advantages include lower energy costs, competitive labour costs and proximity to the US. According to 160 executives who participated in Foley & Lardner LLP’s 2020 International Trade and Trends in Mexico survey, released on 25 February 2020, the respondents drawn from the manufacturing, automotive and technology sectors indicated that they “intended to move business to Mexico from other countries – and they plan on doing so within the next one to five years.”
This is information doesn’t come as a surprise at all. Mark Early, president of Tecma Group of Companies, asserts, “while much of the political rhetoric paints the issue in very heated and divisive terms, the plain reality in manufacturing is that, for decades, US companies have often eyed geographically far-flung countries like China for their low-cost manufacturing needs.” What Trump has been doing all this time was to wind the clock forward and to persuade other countries to move their production to Mexico. Already European and Asian companies like BMW, Nissan, Hisense and others are invested in Mexico. This is about the pendulum changing the direction of the global economy, essentially that is what the US advocates for. It looks like Trump’s forceful global campaign is bearing fruit. The USCMA is changing the face of the earth far more than analysts have predicted. The winner is Mexico.
Whether the coronavirus succeeds to reconfigure the global economy or not it is yet to be seen. But on its part, China is already battered and will take time to recover. The nomadic markets may well be ready to relocate to the Americas, and Africa isn’t even in the picture. Mexico is well within the US sphere of influence and economic control. So, it makes sense for Washington to minimize its losses relocate production to its southern neighbour, which is already intricately linked to the American economy. All that remains is re-modelling the maquiladoras and to move factories to already vibrant production hubs in Baja California, San Luis Potosí, Guanajuato, Puebla, Monterrey, etc.
In conclusion, instead of panicking about the virus countries such as South Africa and their companies should be ‘looking at south-west’ as opposed to ‘looking east’ as Mexico is favoured to succeed China in the foreseeable future. The biggest concern though is that Mexico has not been on the radar of diplomats in Rietondale. Trade and other economic exchanges are generally low and insignificant. This is notwithstanding the fact that the two countries could be complementary in a number of areas including manufacturing, tourism, social affairs and other endeavours. The command of the Spanish language is almost non-existent in South Africa which means a transition to embracing mariachis could be more painful if not properly managed.
To put everything to perspective, the present crisis is about moving from coronavirus to Corona beer.
Siya yi banga le economy.
Based in Pretoria, Siyabonga Hadebe is an independent commentator on socio-economics, politics and global matters.