MAGA Objective to Bring Back Manufacturing Jobs to US an 'Illusion', Says Think Tank Director

The ‘Make America Great Again’ objective of bringing back manufacturing jobs to the US is an “illusion,” and foreign companies know that making in the US is not profitable, according to Kazuto Suzuki, Director of the think tank Institute of Geoeconomics and Professor at the University of Tokyo’s Graduate School of Public Policy, adding that Japan, South Korea, and others are not investing in manufacturing but in the energy sector. In an interview with The Indian Express on the sidelines of the Kautilya Economic Conclave earlier this month, Suzuki also said the tariff war is a result of free trade, not Chinese overcapacity and there will be a “perpetual confrontation” between economic efficiency and sovereignty. Edited excerpts: The root cause is free trade, which allows shifts and restructuring of industry to more efficient and optimum supply-chain mechanisms. This has led to some industry going away from the US and some have seen investment coming in. The MAGA idea is to bring back manufacturing to the US, but this is against the conviction of free trade. And it’s not just China – it can be Brazil, Japan, Southeast Asia, or India. Trump uses tariffs because that’s the only leverage the US has – it does not have indispensability. Yes, it has IT businesses and AI. But if you try to shut off the supply of the services of Google or Apple or Amazon (to others), they are the one who lose money. Because of state capitalism, China can harm their industry, whereas the US cannot harm the GAFA (Google, Apple, Facebook, Amazon) companies. The current (US trade) policy is not about China. Of course, it’s part of the question of bringing back the manufacturing from China to the US. But that failed because of the economic reality: the US is too short in terms of the workforce and too expensive, be it electricity, gas, or land. So, nobody wants to come back from China to the US. That’s why the US is forcing Japan, South Korea, and the European Union to invest more to achieve the MAGA objective. The problem is that everyone knows bringing back manufacturing does not make money; it’s not profitable. So, Japan, Korea, and the EU are not investing in the manufacturing sector, but the energy sector. Among six projects which are agreed between the US and Japan, four of them are about energy and only one is about manufacturing synthetic diamonds, which is for the next generation of semiconductors. So, the MAGA policy to bring manufacturing back is simply an illusion. But the US knows that its market is indispensable. So, it’s not about China, it’s about the US. I think this is a sort of perpetual confrontation of economic efficiency against sovereignty. There is always balance between these two. During the free trade era, efficiency was the number one objective. But that was based on WTO rules protecting the supply chain. If there is intimidation or political intervention, then immediately it is a violation of WTO rules and there is a punishment. But no longer – everything is up to the political sovereign and how much leverage can be exercised to change. So, you have to find the balance between sovereignty and efficiency. We can no longer go back to where we were. Each country now has to find the balance between efficiency and sovereignty. For example, India has chosen to shut off all China-based mobile apps. But at the same time, you are importing Chinese mobile phones – that’s efficiency. That’s a balance India has chosen to strike and I think that’s understandable. Of course, it is contradictory and doesn’t seem to make sense. But you have to find what is the best solution to balance the risk you are taking. The problem is that still, so many people are unknowingly taking those risks, which creates opportunities for others to exercise their leverage. Many of the Global South countries have no choice but to use efficiency because there’s no alternative for them. Countries like India and Japan, or middle powers, can choose to what extent we build up our sovereignty or depend on efficiency. The balance depends on your strategy. An outcome of the trade war is rising budget allocation for defence. These days, military equipment is not about aircraft carriers, fighter jets, or supersonic missiles. It is about drones and AI, which are dual-use technologies and have civilian implications too. It is a very complex situation where government defence spending is actually helping industrial capabilities and that will create more opportunities for the private sector to be dominant in the market and innovate. That will change the dynamics of geoeconomics. Deterrence, by definition, is very subjective; it is how adversaries think. Japan alone can’t deter China, but a Japan-US alliance can. The most important thing for the calculus of Xi Jinping is that we need to make him think an attack on Senkaku (Islands), Taiwan, or anywhere around Japan will have a consequence that will be painful for China. Even though the US is becoming distant from its allies, fortunately it still thinks China should be the subject of deterrence. The US no longer thinks Russia is, which is why it is moving away from Europe and letting it deal with Russia; it is moving away from South Korea because North Korea is no longer a threat. But China is a different story and the US has to intervene because Japan, Philippines, and Taiwan are not enough to deter China. But deterrence is also fragile. If it breaks down, we cannot win against China and march into Beijing. What we can do is not lose. So, Japan increasing its defence expenditure is basically aiming not to win against China or to deter China, but not to lose. We lived in a very simple world until recently. Unfortunately, the nature of the world has collapsed and we have to acknowledge that and deal with it. We have to think of all kinds of possibilities and make sure we are able to manage the situation. Not preparing is awful – more awful than losing. Eighty years ago, Japan over-evaluated its capabilities, started a war against China and the US, and then lost tremendously and painfully. So, we need to understand the current situation, no matter how complex it is, and then prepare for all the scenarios possible to make sure that we’ll be able to deal with that situation and manage it. From my point of view, India is not over-evaluating itself but punching above its weight. India’s problem is its infrastructure: electricity, roads, transportation. There’s room for improvement. But the investment is missing, including the high-speed train. I think there are a lot of opportunities for India, if the infrastructure is available, for the industry to play around. Second, there is too much red tape which is hindering India’s ambition to be more competitive. I think they are, but you need to have political will to resist the intimidation. Second, you cannot expect to nullify the influence of the US and China. So, diversification can happen, but you cannot move 100% away from them. It’s not a clear-cut, black-and-white solution. What you need is more buffers so that when the US and China exercise their influence, you always have an alternative. The US is only 13% of the world’s GDP. So, 87% of the rest of the world, including China, is still available. So, we need to find an alternative to supplement tariffs, export controls, or any other intimidating policies. At the same time, the size of China and the US is not negligible. So, we need to maintain business with them, but not depend on them.