Etel Solingen, Geopolitics, Supply Chains, And International Relations In East Asia (Cambridge: Cambridge University Press, 2021)
The supply chain is a crucial process ensuring everyday demands are met. This chain is affected by numerous geopolitical and international ties. The trade war between the United States and China has a significant impact on the supply chain. It affects many countries and businesses. These largest countries depend on one another to produce goods and commodities, making them more than just trading partners (p. 319).
Etel Solingen has compiled multiple articles and published them in Cambridge University Press in 2021. Each author contributes a unique viewpoint on the variables that disrupt the global supply chain from economic and political angles. It discusses the international and domestic consequences of the trade war in East Asia countries and the disturbance in the East Asian-American global supply chain. Despite being new, this book has already been widely referenced.1 This book review evaluates an edited book, which consists of three chapters, starting with the international impact of a trade war on the global supply chain. The second chapter focuses on the three domestic dimensions of that chain. The last chapter focuses on the effects of Covid-19 and the trade war on the global supply chain. The major case study used in the book is the smartphone industry between China and the US.2 This case study shows how East Asian companies coordinate with each other while they have different business models and bases.3 This collaboration creates a dominant position for East Asian firms in the global supply chain regarding assemblers, production networks, and branding.4 The cooperation-inducing power of Chinese high-tech casts a long shadow over the international supply chain.5 Additionally, it presents the impact of geopolitical disputes that disturb the global supply chain.6 It explains the causes of the U.S.-China trade war. Covid-19 worsened the problem. The book helps legal academics criticize and build on the data, so legal scholars can analyze the supply chain agreements in terms of the fact states. One of the criticisms of this book is that it does not address the mechanism of mitigating the legal risks arising from the disruption of the supply chain.
This book is a significant contribution to understanding the causes of the restructuring of the US–China supply chain. Additionally, it demonstrates the threats, difficulties, and challenges that restrict East Asian states’ ability to sustain their economies. At the same time, it shows how COVID-19 affects the MNC and confirms the importance of the Trump administration’s decisions for US economics. The central argument here is that the trade war has altered the global supply chain, particularly concerning the economies of the United States and East Asian nations.
The authors use qualitative and quantitative methodologies, such as survey data from the Japanese Ministry of Economy and empirical data, to highlight the domestic impact of global supply chains, as shown in section 8.7
This book review begins with the introduction. Then, a summary and analysis of the author’s main points will be provided, and links will be made to recent and current facts that the authors expect and end with the conclusion, showing the area to develop the book.
Political decisions affect the global value chain.8 It leads multinational companies to reorganize their business initiatives to follow those decisions, which overall affect the supply chain.9 Imposing punitive tariffs on China’s exports to the United States has a negative impact on the supply chain. China exporters have become part of the global value chain since multinational companies operate and manage it.10 The Biden administration is studying the idea of reevaluating this punitive tariff, whether dropping or minimizing it.11 According to Section 301 of the US Trade Act of 1974, The Biden administration has the right to reassess the punitive tariff and issue the appropriate decisions.12 This book analyzes the impact of punitive tariffs, which lead to the delinking of the supply chain between China and the US.13 It offers an economic and political analysis of the Trump administration’s impact on the supply chain.
Most multinational corporations focus on their brands, marketing strategies, and technological innovation while outsourcing their manufacturing and assembly operations to foreign firms.14 Therefore, they plan to rearrange their global value chain to avoid punitive tariffs on Chinese exporters.15 The governance systems of MNCs are not illustrated in the book, nor how they deal with worldwide political decisions. The governance process protects firm sustainability by regulating MNC strategic choices. The international governance standard organizes shareholders’ decisions.16 The board of directors makes strategic choices that determine the company’s future. If a multinational firm plans to move its factories, a risk assessment and other processes must be conducted first. There is a link between corporate governance, ethics, and international political matters.17 The operating governance system regulates the mechanisms of discipline and market matters which enhance a multinational corporation’s vision, missions, and plans.18 The political decisions related to tariffs on Chinese exports affect the plans and strategic decisions of the MNC board of directors. Hence, the corporate governance system has a vital role in facing such political decisions, which need to be clarified in this book. There is a need for international rules to regulate international trade and stop the effects of politics.
Most high-tech components are sourced from Japan.19 Thus, the US–China trade war and Covid-19 negatively affect Japanese affiliates and foreign companies operating in China.20 Zhang finds that decoupling the US and China economies and rising geopolitical risks could force Japan and other countries to choose between the US and China supply chains.21 This may alter the structure and layout of the supply chains in East Asia.22 This confirms the need for international law to regulate and protect the sustainability of international trade. Supply chain transaction needs legislation that separates them from politics and national security. National security concerns should not restrict international trade, investment, or supply chains.23 European Parliament passes a regulation24 defending human rights and the environment.25 In addition, they mention the mechanism to ensure the enforcement of this statute and state the sanctions for the violators.26 However, it did not expand to protect the supply chain transactions from political issues.
Recently, Apple announced that it was producing the iPhone 14 in its new manufacturing facility in India, which means it is shifting its production from China.27 They declare that they move 5% of their production to India by late 2022 and plan to make 25% of their production by 2025.28 Today, it is evident that Apple -one of the largest multinational technology corporations in the world- has implemented this plan to avoid the high tariff on China products.
In September 2022, President Biden signed an executive order to block Chinese investment in technology and limit its access to U.S. private citizen data.29 There is an expectation of technology wars between the United States and China.30
There is a hidden cost, directly or indirectly, due to the geopolitical conflicts between East Asia and the US, which is disturbing the supply lines, according to Aanstoons.31 The US-China trade war had a negative impact on Japan and other countries. Particularly in the smartphone industry (geopolitical value chain) because China comes with a new similar industry when they establish Huawei. The supply value chain becomes more substantial and less costly in the East Asia counties if they collaborate in developing Huawei. It will create a new strong competitor for Apple in the future. China’s success in establishing and developing Huawei which is a positive turning point in China’s industrial future. I believe that Huawei will improve the collaboration and supply chains of neighboring nations. China started its business achievement by announcing the establishment of Huawei, which has its consumers and successful technology. Therefore, the brand name is not classified as a big concern to China manufacturers to continue their production and profits. An initiative known as “MIC 2025” has the goal of establishing China as a worldwide powerhouse in industries associated with high technology.32 Its aim is to lessen China’s dependency on imported technologies from other countries.33
The U.S. government has banned Huawei users from using American networks, limiting Huawei’s ability to export.34 Also, they stopped giving Huawei the crucial components needed to develop and grow internationally.35 Congress can evaluate the long-term effects of Huawei restrictions on American networks and supply chains.36 They have the right to keep or modify Huawei restrictions to secure foreign policy interests.37 Additionally, they invest in American companies and industries to boost economic interests and competitive ability.38
Furthermore, China and US supply chains have a mixed political impact on Southern African Development Community (SADC) states.39 SADC states are classified as (forward linkages) because they export intermediate goods to the US more than China.40 On the other hand, they are (backward linkages) since they are importing more intermediate inputs from China.41 Due to the US and China competition, SADC states have become more attractive economically than before.42 Many US companies start amending their business plan and thinking about shifting their factories to Africa. However, it is very hard to say that multinational companies will stop their factories in China and shift to Africa. The African continent counts China as its most important trading partner and source of direct foreign investment.43 Its investment has contributed to the acceleration of the economy’s growth and the nation’s infrastructure.44 The need for oil and other resources and a market to sell China’s manufactured goods has been the driving force behind China’s investment in Africa. Additionally, China’s business interests in Africa have steadily diversified over the past few years.45 China has taken part in energy production, telecommunications, and mining industries.46 It has financed the building of infrastructures such as roads, airports, ports, railways, and schools.47 Therefore, it is unlikely that Africa would compete with China and hurt its economy due to international companies’ plans to move factories to Africa. China and Africa are strategic allies whose strategic relationship is difficult to sever; although African leaders are looking to strengthen their relations with America, the African-Chinese relationship is strong.48
The book focuses on domestic aspects of the international supply chain, which include local politics, economics, and social aspects. The global industrial supply chain is integral to the relationship between China and the U.S.49 China’s supply chain participation impacts its economic growth, technical progress, and employment creation.50 The effect occurs through transferring knowledge -know-how- to local people. In addition, it provides new employment vacancies and encourages exporting and producing nations to strengthen their factories and ports. Hence, those factors improve the producing states, allowing them to achieve self-sufficiency and granting them a strong economic position.
Some producers have benefited from the trade war.51 The Trump administration enacted a tariff on imported solar panels, washing machines, and steel from China.52 This tariff opens the door for China’s competitors to start producing and exporting to the US.53 The main reason for the steel tariff is that Trump wants to revive the steel industry in America and link it to the national security of the U.S.54 The authors find that neither ad hoc nor permanent trade coalitions have backed the China tariffs.55 Trump’s personal beliefs and the economic populists and nationalists in his administration started the trade war.56 I believe that Trump aims to encourage the US industry to reopen American factories and revive the local industry movement to achieve self-sufficiency.57 Also, Trump intends to benefit the local industry by providing jobs and reducing product prices.58 Additionally, the business diversification plans to have different suppliers minimize the risk of disturbing the global supply chain for the US population.59 Covid-19 confirms the need for self-sufficiency according to Trump’s strategy in the US, especially for medical and PPE supplies.60 Many countries realize the importance of having medical commodities producers internally after the Covid-19 crisis.61 Lockwood comments on the Trump administration when they exempt the medical and PPE commodities from the tariff on Chinses exports during the Covid-19 pandemic.62 There was a real need for these goods in the US during that period due to the shortage of these commodities.63 Both the Trump administration and Covid-19 consequences raise the red flag for multinational companies. It drives them to rethink the importance of having an alternative plan for their factories and the sustainability of their business.
Nationalism affects the international supply chain. However, the capacity for imports decreases if the industry is nationalized through the encouragement of local industry. Nationalism destroys international supply chains, it changes how people perceive conflict.64
Conversely, it is challenging to think of a one nation capable of fulfilling all its domestic needs. No single nation can independently provide all the necessary raw materials for its manufacturers to operate effectively. Therefore, nationalism is never destroying the global supply chains but reducing its activities.65 The current global supply chain has been reshaped since the trade war.66 Both the trade war and Covid-19 reflect the sustainability of the supply chain contracts, which is not discussed in this book. Furthermore, the producing countries facing the impact of the trade war by issuing new regulations and adopting procedures are not covered in the book as well. However, legal scholars can build on the facts stated in the book to support their arguments. After Covid-19, many countries, such as India, declared their economic self-reliance.67 Other states have announced their business diversifications, which will affect the global supply chain.68 All these changes impact manpower.69 For example, after the trade war, China starts building its domestic market and decreasing its reliance on exporting transactions to protect its national labor.70
The decision of where to locate a company’s production facilities is influenced by a variety of national policies as well as labor market conditions.71 Establishing the labor market movement associated with labor rights and human rights, these aspects are not addressed from legal perspectives. However, it opens the door for new research to discuss the effect of a trade war on human and labor rights. Therefore, the restructuring of the global supply chain between China and the US has a crucial role in the manpower market.
When the supply chain is interrupted, this affects contracts between multinational companies and factories operating in East Asia. Asian corporations have import contracts with other companies and local employment, insurance, and other commitments. Multinational companies have sales and distribution contracts. Therefore, it is clear that cutting the supply chain has a significant impact on the legal obligations of all parties to the supply chain, whether producing companies or multinational companies. The problem of addressing these legal obligations and the mechanism of mitigating the legal risks resulting from the reasons for cutting the supply is not addressed in this book. However, legal scholars can use this book to support their argument for the importance of the agreements that regulate the obligations of the supply chain. The U.S.–China trade war shows the importance of a strong agreement in this field.72 When the MNC decides to terminate the agreement due to changes in cost due to a punitive tariff, the problem arises. Such an increase in prices can be classified as a major force or hardship depending on the effect of the punitive tariff on the execution of the obligation of the claimant party. In case the MNC succeeds in closing the agreement, there is a risk of copying the trademark and the illegal use of the trade secret and know-how of the MNC. These matters are not discussed in the book, however, it has opened the door for the legal scholar to rely on the fact illustrated in the book and build on them from a legal perspective in terms of intellectual property law. Also, the book does not cover the history of the relationship between China and the US. Both counties concluded a bilateral trade deal in 1979.73 This sparked a significant increase in trade between the two countries, from $4 billion in 2010 to nearly $600 billion in 2017.74
The trade war is one of the biggest situations in the international trade market, which disturbs the smooth trade between countries. However, none of the authors discuss the positive or negative role of the World Trade Organization in the trade war.
The supply chain of East Asia counties is restructured due to the trade war. The U.S.–China trade war diversifies the supply chain from China to Taiwan and countries in Southeast Asia.75 The book discusses the supply chain disruption between the US and East Asia, mainly China, from economic and political perspectives. However, it does not cover the environmental and legal effects of the trade war. The book shows by figures that the export, sales, and employment of Japanese companies in China declines after the trade war.76 The authors conclude that East Asia countries face a complicated threat stage in their geo-political and geo-economics.77 This threat is not only the trade and technology war, but it is the bad relationship with other neighboring countries such as the South China Sea and North East Asia counties.78 Overall, there should be an international law regulating commercial transactions and human rights in the global supply chain. The law’s purpose is to secure the chain and protect the stakeholders who are affected directly or indirectly. The book shows a real need to have such a law with full enforcement to protect the parties of global supply chain rights. European Parliament insists on the need to identify human rights in the activities of the companies to have a sustainable economy in the global value chain.79
A way to improve the book is to focus on the legal consequences of the US–China trade war. Since the US administration enacted the tariff and there have been several legal conferences for changing the bilateral agreement. Furthermore, MNCs deal with China through contracts and agreements, so mentioning the legal arrangements for facing unexpected events such as Covid-19 and the Trump administration is very important.
Such as R. Kumar, ‘Introduction: India — East Asia Relations in the Post-COVID-19 Era’, Journal of Indian and Asian Studies 2 (2021): 2103001; T. Inoguchi, ‘Globalization and the political economy of Asia’, Asian Journal of Comparative Politics 6 (2021): 175–180, at 175. Rajiv Kumar, ‘The Supply Chain Diversification and India — South Korea Cooperation in a Contested East Asia in the Post-COVID-19 Era’ Journal of Indian and Asian Studies 2 (2021): 2140007.
M. Kawakami, ‘Competition And Collaboration Among East Asian Firms In The Smartphone Supply Chains’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 77–95.
Ibid., 94.
Ibid.
Ibid., 95.
K. Aanstoos, ‘Hidden Economic Costs Of Geopolitical Disputes For Supply Chains In East Asia’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 96–114.
N. Demir & E. Solingen, ‘Are Supply Chain Vital to China’s Leaders?’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 135–152.
Y. Xing, ‘Global Value Chains And The US-China Trade War’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 23–40.
Ibid., 23.
Ibid.
A. Durante, ‘U.S.-China Trade War Hurt American Industries and Workers’, Tax Foundation (2022), available online at https://taxfoundation.org/us-china-tariffs-trade-war/ (accessed 26 September 2022).
Section 301 grants the United State Trade Representative Office the right to take action and issue the appropriate decision on the trade agreements with foreign trade practices that enforces their right in that matter. This right is granted under “Relief from Unfair Trade Practices.” Additionally, sections 306 and 307 from the US trade act of 1974 clearly stated the requirement of modifying any action that has been taken under section 301. For more information, Section 301 Of The Trade Act Of 1974, Congressional research services, available online at https://crsreports.congress.gov/product/pdf/IF/IF11346#:~:text=Section%20301%20of%20the%20Trade%20Act%20of%201974%20grants%20the,to%20certain%20foreign%20trade%20practices (accessed 26 September 2022).
Xing, supra note 9, 23.
Ibid., 35.
Ibid.
C. Clark & J.A. Brown, ‘Multinational Corporations and Governance Effectiveness: Toward a More Integrative Board’, Journal of Business Ethics 132(3) (2015) 565–577.
Ibid., 565.
Ibid., 566.
H. Zhang, ‘The US-China Trade War: Implications For Japan’s Global Value Chains’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 41–59.
Ibid., 58.
Ibid., 58.
Ibid., 58.
Ibid., 58.
The Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937.
One of the targets of this law is to ensure that “supply chains of EU companies are free of child labor” For more information about the law, please visit the European Commission website, https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52022PC0071 (accessed 29 September 2022).
Ibid., 1, under the “Employers’ Sanctions Directive.”
At the launch of the iPhone 14, Apple is producing the newest model in its line-up in India. For more information, please see A. Kharpal, ‘Apple begins making the iPhone 14 in India, marking a big shift in its manufacturing strategy’, CNBC (2022), available online at https://www.cnbc.com/amp/2022/09/26/apple-starts-manufacturing-the-iphone-14-in-india.html (accessed 27 September 2022).
Ibid., 1.
D.E. Sanger, ‘Biden Issues New Order to Block Chinese Investment in Technology in the U.S.’, New York Times (2022), available online at https://www.nytimes.com/2022/09/15/us/politics/biden-china-tech-executive-order.html (accessed 29 September 2022).
Ibid., 1.
Aanstoos, supra note 7, 111.
Institute for Security & Development Policy, available online at https://isdp.eu/content/uploads/2018/06/Made-in-China-Backgrounder.pdf (accessed 8 October 2022). The Made in China plan was announced by China’s Prime Minister, Mr. Li Keqiang in 2015.
Ibid., 1. This step adopted by China aims to make significant investments in its own technological advancements. This will allow China to develop businesses that are competitive on both the domestic and international levels. China views “MIC 2025” as an opportunity to more effectively collaborate with industrialized economies and achieve its goal of complete integration into the global manufacturing system.
J.C. Gallagher, U.S. Restrictions on Huawei Technologies: National Security, Foreign Policy, and Economic Interests (Washington, DC: Cong. Research Service, 2022).
Ibid., 41.
Ibid.
Ibid.
Ibid.
P. Paa & K. Heto,’Global Supply Chains and Great Power Competition in Africa’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 115–132.
Ibid., 131.
Ibid.
Ibid.
E. Albert, ‘China in Africa’, (New York, NY: Council on Foreign Relations, 2017), available online at https://www.cfr.org/backgrounder/china-africa (accessed 29 September 2022).
Ibid., 1.
Ibid.
Ibid.
Ibid.
Paa & Heto, supra note 45, 132. It is valuable to mention that some African states are not familiar with this relationship because they are not accepting the quality of Chinese goods.
Demir & E. Solingen, supra note 8, 152. When the U.S. raises tariffs, all multinational corporations collaborating with Chinese businesses are harmed and lose money
Ibid.
J. Lee & I. Osgood, ‘Firms Fight Back: Production Networks and Corporate Opposition to the China Trade Wa’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 153–172.
S. Parasrampuria, ‘The Global Trade War Triggered by the United States’, GNLU Journal of Law, Development and Politics 9 (2019).
Ibid., 9. Previously, the US was willing to purchase from China since their price is so attractive compared to other producers’ prices.
Ibid. Trump has promised to reopen the factories and bring jobs back to the U.S.
Lee & Osgood, supra note 51, 169. Some producers have benefited from these sanctions, such as steel producers, solar panels, and washing machine producers.
Ibid., 171.
D.J. Lynch & D. Paletta, ‘Trump announces steel and aluminum tariffs Thursday over objections from advisers and Republicans’, Washington Post (2018), available online at https://www.washingtonpost.com/news/business/wp/2018/03/01/white-house-planning-major-announcement-thursday-on-steel-and-aluminum-imports/ (accessed 28 September 2022).
Ibid., 1. Trump declared at the White House in March 2018, “… You will have protection for the first time in a long while, and you’re going to regrow your industries.
T. Meyer, ‘Trade Law and Supply Chain Regulation in a Post-COVID-19 World’, American Journal of International Law 114 (2020): 637–646.
Ibid., 637.
Ibid., 638.
E. Lockwood, ‘Understanding and Contesting Global Supply Chains in an Era of Inequality’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 173–188.
Ibid., 188.
P.W. Moon, ‘Why Escalate? Cognitive Theory and Global Supply Chains in Northeast Asia’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia 189–210 (Cambridge: Cambridge University Press, 2021) 189–210, 209 The author thinks that nationalist sentiments and the resulting economic costs will be more significant than they were previously for politicians and business people.
This confirms the justification of nationalism where the shortage that occurred during the Covid-19 pandemic on medical supplies shows the need to start encouraging domestic producers of these kinds of commodities.
M. Brookes, ‘The Role of Chinese Workers in Supply Chain Campaigns’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 211–226.
Ibid., 224.
Ibid.
Ibid., 225.
Ibid., 224.
Meyer, supra note 59, 640.
There are many crucial contract clauses that must be stipulated in the supply chain’s bilateral agreement, such as dispute resolution clause, jurisdiction, termination clause, and confidentiality clause.
Library of Congress, U.S. Trade with China, available online at https://guides.loc.gov/us-trade-with-china#:~:text=The%20U.S.%20trade%20with%20China,over%20%24600 %20billion%20in%202017 (accessed 22 October 2022).
Ibid., 1.
Aanstoos, supra note 7, 113.
E. Solingen, ‘On Covid-19, Global Supply Chain, and Geopolitics’, in E. Solingen (ed.), Geopolitics, Supply Chains, and International Relations in East Asia (Cambridge: Cambridge University Press, 2021) 229–249.
Ibid., 231.
Ibid 231.
European Commission, Just, and sustainable economy: Commission lays down rules for companies to respect human rights and environment in global value chains, available online at https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1145 (accessed 29 September 2022.