Markets (Page 156)

The transition to electric vehicles (EVs) promises massive dislocation. Conventional cars have twice as many parts as electric vehicles, translating into far fewer assembly hours. 

Striking for wages and security against Detroit’s “Big Three” car manufacturers, the United Auto Workers trade union claims that the transition endangers 35,000 jobs among its 150,000 members.

Meanwhile, upstart firms, exemplified by Tesla, Rivian and SK On, are hiring non-union workers from outside the established industry, while Ford and its counterparts are building EV and battery plants in right-to-work states outside the United Auto Workers’ purview. On top of these disruptions comes the threat of new competition from Chinese automakers.

The US government wants two-thirds of new cars sold in 2032 to be electric. The European Union is even more ambitious, wanting all new cars sold to be electric from 2035. But neither wants to import EVs from China. 

Yet with generous subsidies, abundant engineering talent, a flair for innovation, a huge domestic market and public support for decarbonization, China has become the dominant producer of low-cost EVs.

In 2022, China produced almost 60% of the world’s EVs — both battery-electric vehicles and plug-in hybrid vehicles. In 2023, production is expected to reach 8 million units, or 25% of all cars sold in China compared with 22% in the European Union, just 6% in the United States, and a measly 3% in Japan. 

Chinese firms also offer 90 different EV brands at prices ranging from US$5,000–90,000. The average EV in China cost around $53,800 in 2022, compared to an average of $94,100 in Europe.

While imports from China accounted for only 3% of Europe’s EV sales in 2022, UBS expects this figure to reach 20% by 2030. The European Union objects to generous Chinese subsidies for its EV firms and EU Trade Commissioner Valdis Dombrovskis is actively encouraging China to produce EVs for domestic consumption, not exports. 

In response, China has assailed the protectionist EU policy direction. Whether Dombrovskis would welcome a Chinese EV factory in Europe is unknown, but if so that would contrast with the probable US reaction.

If other countries had no auto industries and if China did not pose a military threat, everyone would welcome cheap Chinese EVs. 

But in the world as we know it, Chinese EVs are more of a burden than a blessing. This is because large-scale exports put millions of jobs at risk and other countries fear China hovering over the geopolitical landscape.

Globally, the auto industry employs some 14 million workers who manufacture $3 trillion worth of vehicles annually. The European Union’s industry employs about 2.5 million workers, while the United States, Mexico and Japan each employ about 1 million workers. Jobs outside China are evidently under threat, though China’s own 4 million auto workers are also at risk of losing their jobs.

In 2022, global car exports were worth $780 billion, more than a quarter of world production. The European Union led the export parade with $407 billion, followed by Japan with $87 billion, the United States at $58 billion, South Korea at $52 billion and Mexico with $47 billion. 

China was ranked in 6th place with $45 billion worth of exports — roughly 40% of which were Teslas. Still, Chinese exports grew more than 80% in 2022, and that’s just the beginning.

Looking back in time, Western auto firms fear that China could repeat the process by which it became the dominant force in the world steel industry. During Mao Zedong’s regime, small backyard furnaces were a bad joke. 

But Deng Xiaoping’s embrace of market economics, coupled with heavy subsidies, enabled China’s great leap forward in steel production. In 2021, China crushed all its rivals in steel production with 1.03 billion tons of output — a substantial 60% of the world total 1.82 billion tons. 

The European Union was a distant second with 153 million tons, followed by India with 118 million tons, Japan with 96 million tons and the United States with 86 million tons.

Currently, US auto tariffs are only 2.5% (with the exception of a longstanding 25% tariff on pickup trucks). But former president Donald Trump imposed an additional 25% punitive tariff on all Chinese cars, which has been extended by Joe Biden. 

EU car tariffs are 10% and Japan’s are 0%. Idiosyncratic regulatory standards and vehicle taxes that vary with engine displacement are additional barriers to trade.

Since China’s own tariffs on auto imports range between 15% and 25%, Carlos Tavares, the CEO of Euro-American automaker Stellantis, called for Europe to impose reciprocal tariffs on auto imports from China.

Many countries in the Global South will welcome less expensive Chinese EV brands. But to slow Chinese EV dominance, advanced countries are almost certain to raise existing barriers or impose quotas that limit the Chinese share of the market.

EVs could well exemplify the fragmentation of world trade.

Gary Clyde Hufbauer is Senior Fellow at the Peterson Institute for International Economics.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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The US is closer to deploying long-range land-based missiles to deter a potential Chinese invasion of Taiwan, a provocative move that could spark a destabilizing conventional missile arms race in the Pacific. 

General Charles Flynn, Commander of US Army Forces Pacific, stated at the Halifax International Security Forum in Nova Scotia, that the US will deploy new intermediate-range missiles including Tomahawks and SM-6s to the Pacific region in 2024, Defense One reported.

The deployment was made possible by the US’s withdrawal from the Intermediate-Range Nuclear Forces (INF) Treaty in 2019 due to Russia’s alleged non-compliance. The Defense One report says the US Army’s Precision Strike Missile (PrSM), which can hit targets over 500 kilometers away, may also be deployed to the region.

In his address, Flynn emphasized the rapid advancement of China’s military capabilities, which he said was endangering regional and global stability. While the general avoided speculation about a Chinese invasion of Taiwan, he outlined several factors believed to be influencing Chinese leader Xi Jinping’s strategic decisions.

Those include the impact of economic sanctions, efforts to weaken US alliances in the region, assessing the readiness of China’s military for a potential invasion and the effectiveness of China’s information and influence operations.

Defense One notes that the US Army’s deployment of new missiles signifies a strategic shift in the Pacific, reflecting growing concerns over China’s military expansion and assertive behavior in the region. It also indicates a broader geopolitical strategy to maintain stability and deter potential conflicts in the Indo-Pacific region.

US long-range missile projects in the Pacific are part of a strategy to create a “missile wall” in the First Island Chain, spanning Japan, Taiwan, and the Philippines, to deter China.

In July 2023, Asia Times reported that the US Marine Corps (USMC) had unveiled its Long-Range Fires Launcher, an uncrewed 4×4 launch vehicle based on the Remotely Operated Ground Unit for Expeditionary-Fires (ROGUE-Fires) vehicle for the land-based Tomahawk cruise missile.

The Long-Range Fires Launcher may address a mobility gap associated with the truck-towed OpFires and Typhon, which cannot fit in a C-130 cargo plane.

In December 2022, Asia Times reported on the US Army’s acquisition of the first Typhon land-based missile launcher, which is designed to fill a gap between the US Army’s PrSM and the Long-Range Hypersonic Weapon (LRHW) by firing Standard SM-6 or Tomahawk missiles between 500 and 1,800 kilometers.

Furthermore, Asia Times reported in July 2022 that the USMC is acquiring land-based Tomahawk missiles as part of its Long-Range Fires program, which aims to provide integrated ground-based anti-ship and land-attack weapon systems. The acquisition is part of the USMC’s dispersed operations doctrine, which employs small, dispersed land and sea detachments to threaten adversary forces’ concentration.

However, Asia Times has previously noted that US allies such as Thailand, the Philippines, South Korea, Australia and Japan may be reluctant to participate in America’s “missile wall” strategy.

Thailand’s political elites are trying to establish stronger ties with China and are famously reluctant to strategically peeve Beijing. The Philippines is vulnerable to a Chinese naval blockade cutting off US resupply and reinforcement from Guam and has minimal air and missile defense capabilities.

South Korea is susceptible to Chinese pressure, as it needs China’s markets and influence at the negotiating table with North Korea. Australia’s distance from China and reluctance to get involved in a US-China conflict over Taiwan may preclude it as a basing option for US land-based missiles.

That makes Japan the most viable partner for hosting US land-based missiles, as it lacks the vulnerabilities and weaknesses of other US partners, apart from a longstanding reluctance to host offensive weapons systems as part of its pacifist post-World War II policy.

But that policy is changing as Japan slowly builds an arsenal of long-range missiles for counterstrike capabilities to deter China and North Korea.

Despite accelerated efforts to establish such capabilities, Japan faces significant challenges such as limited long-range targeting capabilities, high production costs, aging technology and a poor record of storing munitions. Japan may thus seek to address these capability gaps with US-supplied land-based missiles while it gets its indigenous arsenal up to speed.

At the same time, China is building its conventional missile arsenal to counter perceived US containment. China Power notes that since 2000 the People’s Liberation Army (PLA) has transformed its missile forces from short-range, modestly accurate systems to the world’s most extensive and diverse array of ground-launched ballistic and cruise missiles.

China Power says that this arsenal includes intermediate-range ballistic missiles (IRBMs) like the Dong Feng-26 (DF-26) with ranges of up to 4,000 kilometers, capable of striking crucial US military bases in Guam and ships at sea, and medium-range ballistic missiles (MRBMs) like the DF-21D, known as the “carrier killer” with a range of 1,550 kilometers.

The China Power report notes that China’s strategy has shifted toward using these missiles for deterrence and warfighting with a focus on precision strikes and anti-access/area denial (A2/AD) capabilities along its maritime periphery.

It mentions that these deployments include anti-ship missiles to prevent US military interventions and conventional missiles for targeting key enemy installations.

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The Commonwealth of Nations is one of the oldest political organizations in the world. Founded in 1926 as part of the Balfour Declaration, it predates the United Nations and North Atlantic Treaty Organizati0n.

About 2.5 billion individuals, constituting nearly one-third of the global population, reside within the 56 member countries of the Commonwealth. A significant portion, accounting for one-third, of young people aged 15 to 29 find their home in Commonwealth nations.

As the most populous member, India contributes ahout half of the Commonwealth population. Following closely in terms of population size are Pakistan, Nigeria and Bangladesh, with the United Kingdom ranking fifth.

In an era marked by unprecedented global challenges marked by natural disasters, and geopolitical conflicts, the imperative for nations to cultivate socioeconomic resilience has become paramount.

Throughout the Commonwealth, unstable employment and living conditions result from extreme poverty and widespread unemployment. Additionally, risks from climate change and international and intra-national migration create situations of increasing complexity and vulnerability.

Thirty-two member states fall under the definition of a “small state”; these states are on the front lines of the effects of climate change, and they have insufficient human and financial resources to adapt.

Uneven development

Countries such as the United Kingdom, Canada and Australia show significant progress in overall socioeconomic development. However, within the Commonwealth, one-third of its population, around 2 billion people, live on less than US$1 per day, and 64% live on less than $2 per day. This number was worsened by the Covid-19 pandemic.

Additionally, the Commonwealth accounts for more than 60% of global HIV infections, and four of the 10 most affected countries are Commonwealth members.

On the public health and sanitation front, about 60% of the Commonwealth needs access to essential medications or appropriate sanitation. Social inequality is dismally prevalent, where women account for more than 70% of people living in poverty in the Commonwealth and face discrimination in many parts of the organization, ranging from unequal pay to abusive treatment.

The Commonwealth has a dedicated agenda that considers poverty alleviation and improving health-care outcomes as part of its development agendas. Despite these developmental caveats, the organization has shown significant progress in pulling 19% of all people out of extreme poverty in the previous two decades.

However, several countries only reduced relative poverty, indicating that population growth exceeds the rise of those living in extreme poverty.

The Covid pandemic, the turbulent geopolitical scenario, and domestic disputes in the Northeast African countries have decelerated societal and economic progress in the Commonwealth. These states are also more likely to suffer the brunt of social injustices, including discrimination and poverty among marginalized communities and violence against women and girls, all of which have been exacerbated by the pandemic.

According to the latest GDP numbers from the International Monetary Fund, the UK is no longer the biggest economy in the Commonwealth, with India overtaking it for the first time in 2022.

Among the 54 member countries, divergences in GDP, as well as population vulnerabilities, are noticed. For instance, according to figures, 42 autonomous developing countries have less than 1.5 million population. Twenty-nine of these nations are members of the Commonwealth of Nations.

Similarly, GDP growth rates range slightly across large and small nations. However, several features make small nations’ growth rates more variable: more reliance on a single industry, lower trade diversification, heavy dependence on foreign aid, and a high level of import dependency.

The GDP variability of small states is substantially higher than large nations. This higher variability often implies more severe macroeconomic crises in the face of exogenous shocks such as the pandemic or volatility in the energy markets.

In conclusion, the Commonwealth faces numerous challenges in its quest to build resilient societies. Extreme poverty, inequality, climate change, and the impact of the Covid-19 pandemic are formidable obstacles.

However, member states can work together to overcome these challenges through collaboration among governments, civil societies, and communities, which is essential for mobilizing resources, knowledge and technologies toward achieving universal health care, economic prosperity, environmental sustainability, and social resilience.

The Commonwealth has the potential to leverage the strengths of its diverse member states and become a powerful force for positive change in the world. By prioritizing the needs of small nations and promoting inclusive and sustainable development, the Commonwealth can lead the way toward a more equitable and advanced global order.

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