In this four part series – which looks at the impact of Made In Policies and the wider political picture – we catch-up with Prof. John Manners-Bell about global Made in Policies, the shift away from China and the language of supply chain diplomacy. In this first interview – part one – we explore the reasons behind the new supply chain vocabulary which politicians are developing.
Kirsty Adams (KA): Why are politicians changing the language they use?
Prof. John Manners-Bell (JMB): There’s been a lot of talk over the last year by politicians using words like de-risking (not de-coupling) precautionism (not protectionism). Politicians are using these terms to help define new relationships with countries in Europe, the US, but particularly with China.
And these have come about due to political pressures, not just with China, but obviously with Russia, countries in the Middle East too. We’re seeing a systemic change in the trading paradigm. And politicians are developing a new vocabulary to talk about it.
For some countries in Europe, the relationship which they have with China is fundamental to their own economic growth, particularly to countries like Germany.
Government’s don’t want to fall out with China, but at the same time, they understand the world is changing. Consequently they really need to find a way of framing the discussion in a way which doesn’t upset their partners.
KA: And why is the risk so high in Germany?
JMB: Over the last 20 to 30 years, not only have they off-shored production to China, but they have actually invested hugely in the Chinese market. So if you look at the German automotive sector or the German chemical sector, they have vast factories in China to take advantage of the Chinese domestic market.
And a large proportion of these companies revenues are now derived from China. And that’s not quite the same with other countries. If you look at the USA, for example, yes, a lot of production has been offshored to China, but these companies have not invested in factories and plants to the same extent.
Listen to the full interview here or on your podcast platform of choice.
KA: So, which countries in Europe have a bit more flexibility?
JMB: It’s really only Germany that has this huge investment in the Chinese economy. And that’s because of the power and the strength of the German manufacturing industry.
They have gambled big on the Chinese economy. And they’re not in a position where they’re going to be able to unravel that anytime soon. So there’s a huge amount at stake for Germany. And this is why German politicians like Olaf Scholz have been driving the new vocabulary.
KA: Do you have any examples of other politicians using this new language in recent months?
JMB: Yes, often related to the environment. It’s not just a geopolitical issue. It’s also an environmental issue, which is where we’re seeing words such as precautionism being used instead of protectionism.
The European Union is due to introduce the Carbon Board and a border adjustment mechanism, in the next few months, and that’s going to be phased in over the coming years. And what that does is place a levy on goods which are being manufactured elsewhere in the world which have lower environmental standards than the EU. The EU is worried that manufacturers will offshore to emerging markets where they can manufacture more cheaply, then import those products back into the EU at a lower price point.
It’s creating the Carbon Board to protect the EU market because their own exporters would be disadvantaged by this, and it would have a big impact on EU economies. So, to come back to the point about the vocabulary, we see that politicians prefer to use the word precautionism, which relates to the protection of societies and the environment rather than protectionism, which is off the agenda in terms of words, and relates to the protection of companies.
KA: And John, obviously you’ve heard politicians use this language. Are you hearing it more within the industry, within the supply chain sector?
JMB: It’s very much still a political issue at the moment. Obviously businesses are being driven as well by the commercial imperative to diversify their supply chains.
I hear wording like supply chain diversification and supply diversification, China plus strategies, rather than de-coupling or deglobalization. But I think the words used by politicians will filter down because supply chains are being driven as much if not more by politics and ideology than by economic imperatives, so consequently it does have impacts on business…
Listen to the full interview here or on your podcast platform of choice.
