Destruction in Ukraine and the Conflict to Come

For two weeks now, the world has watched the Russian war machine move into Ukraine. We have witnessed the shelling of cities and towns; we have seen crowds of women and children fleeing the country to escape.

We have watched hospitals, business districts, and apartment buildings emptied of people, emptied of vehicles; their storefronts destroyed, their windows blown out.

It’s a war zone. That’s what war zones look like. And if our hearts bleed for these refugees, then that’s as it should be. Our hearts should care.

But that’s not where our minds should be.

Our minds should be half a planet away, on the coast of Mainland China, and the little economic powerhouse just off its shore: the island of Taiwan, Republic of China (R.O.C.).

If you were a betting man, on January 20, 2021, asked to bet whether a Russia-Ukraine war or a China-Taiwan war would come first, you would have been hard-pressed to decide. Now that one has occurred, the world is waiting for the other shoe to drop.

If and when that happens, no one expects it to be anything like the Russian invasion of Ukraine.  Although these things cannot be predicted with certainty, the odds are that a China-Taiwan war will be far more reciprocal; Taiwan won’t allow that war to be fought entirely on its own land.

Mainland China has been preparing for this attack for generations; and the Republic of China has been preparing to defend itself for just as long. On top of that, most analysts anticipate that Japan and other Pacific seaboard allies will rush to Taiwan’s aid immediately as well, not to mention the United States. Unlike the (so far) narrow Russia-Ukraine conflict, a rapidly expanding arena is likely.

If, Heaven forbid, this dark day comes, the bombed-out cities, factories, and cargo terminals on your television screen will be the ones that produced and shipped your television, the ones that produced the tires on your car, the ones that produced the appliances in your kitchen and the furniture in your living room.

Port and city of Kaohsiung, Taiwan

This war will therefore have a much greater effect on North America, and in particular, on our economy.

Over the past thirty to forty years, our business schools have produced graduates who believed the idea that “low-cost country sourcing” is the greatest service they could provide to an employer.  These brainwashed graduates have been hired as buyers, engineers, CFOs and CEOs.  And these new hires took that message to the purchasing department, the marketing department, and the executive boardroom.

As a result, the United States (and too many other Western nations as well) became incredibly dependent on China, Taiwan, and the many other “low-cost countries” of Asia, for everything from small parts to finished goods, from luxuries to necessities.

Not satisfied to buy “the low-end lines” from Asia while making “the high-end lines” here, we integrated our economies through “strategic vendor partnerships” (how often have you heard that phrase at company meetings?).

American businesses select a respected Chinese vendor and give him our tooling, our plans, our designs. From this partner, we buy not only the finished goods we resell, but also the custom components that we need to make our “USA-made” products too. 

That washing machine we make here depends on a motor and pump from Taiwan. That sump pump we make down the road depends on an impellor and casting from China. That SUV that we proudly make in a Midwest assembly line contains computer chips, printed circuit boards, water pumps, power locks and dashboard instrument clusters sourced from all over Asia.

What happens to the American manufacturing sector when war breaks out in Asia, and the factories we depend on are reduced to rubble?

Remember too that those strategic partnerships went further than just ordering products.  Americans – and other western nations – have spent the past three decades establishing their own subsidiaries in Asia, especially in China… building plants in Asia, especially in China… and moving staff to Asia, especially to China.

One of the reasons that China isn’t as afraid of American action if they attack Taiwan is that they have thousands of American-owned (well, to the extent you can own something in a communist country… but we think of them as American-owned, anyway) manufacturing plants and distribution centers, full of our machinery and assembly lines, our injection molds and stamping dies, all up and down the coast of China.

There are countless billions of parts and finished goods, from work-in-progress (WIP) to cargo already on the shelves, ready to truck to port, all over China and Taiwan at any given moment.  The value of all this property is incalculable. Tens of billions of dollars? Hundreds of billions?  There are no records, but whatever you’re guessing right now… you’re probably low.

And then there are the people.  American (and other Western) companies have sent countless plant managers, LEAN engineers, buyers and quality inspectors, line leads and customer service partners, to work in these Chinese properties, for a week, a month, a year, for three years, for ten… and some of these have moved their families there for the duration.  Counting their families too… among the billion-plus Chinese who populate that largest of the world’s nations, there are an awful lot of Americans there at any time, counting both the permanent expats and the businessmen who are there on business trips.

Dare we call them hostages?

The politburo in Beijing does nothing by mistake.  They have carefully made the most of this American (and other Western) cost-above-all-else focus over the years.  If we didn’t teach history in our schools - if our business school graduates didn’t know what China did to its own people in the Chinese Land Reform, the Great Leap Forward, the Cultural Revolution – then China certainly wasn’t going to tell them and risk scaring them off.

And if America’s business tax structures, regulatory policy, and labor union combativeness all combined to drive American manufacturing into their open arms, they weren’t going to say no.

These events – and these conscious choices – have put us where we are now, almost unimaginably dependent on a supply source in what may be the biggest powder keg in the world.

If you own a manufacturer or reseller, if you work in supply or engineering or finance for one, the drive to reduce or eliminate your business’s dependency on Asia should have been your single-minded focus for the past decade or more. 

But it’s never too late to start. Every part, every model, every product line that you move back to North America today is another positive step to insulate your business from the storm that is ever more likely, as every day goes by.

Those of us who have not yet been able to complete that move have one thought in mind, as we drive home from work each night: will my Taiwanese or Chinese vendor be in business tomorrow morning?  Will that last email be my last communication with my friend there?  Will our factory be one of the heart-wrenching images that flashes across a news screen tomorrow?

The Chinese have a famous saying: “May you live in interesting times.”  Some Americans may assume that it’s a “good luck” blessing.  They are mistaken.

Photo credit: Padai CC BY-SA 4.0 license

John F. Di Leo is a Chicagoland-based international transportation professional.  A onetime Milwaukee County Republican Party chairman, he has been writing a regular column in Illinois Review since 2009.  His book on vote fraud (The Tales of Little Pavel) and his brand new political satires on the current administration (Evening Soup with Basement Joe, Volumes I and II) are available on Amazon.

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