In addition to nearly $600 billion in trade deficits that have resulted from free trade policies, the counterfeit electronics entering the United States supply chain from China has become a national security threat.
Initially, the US manufactured all defense-related products at home, while building consumer electronics in China to capitalize on low labor costs. The progression to advanced transistor technology, however, required increasingly large investments on the part of defense contractors that manufactured semiconductor wafers in the US.
Hence, several independent and for-profit defense contractors based in China started making use of Chinese-built ICs for military weapons such as missiles, machine guns, and drones. The state-of-the-art infrastructure and technical know-how to make advanced technology products‚ have also been transferred to China.
China is now‚ flooding the US defense supply chain‚ with counterfeit ICs. The Government Accountability Office (GAO)‚ claims‚ that 40 percent of the US Department of Defense’s supply chain is undermined by fake or defective parts. It has become very expensive to mitigate introduction of counterfeits into the US supply chain, and it is cutting into the profits of US defense contractors.
There is no solution for the twin budget and trade deficits under the exploitative free trade scenario. The US cannot afford to run year-over-year budget deficits. To protect its sovereignty, it needs to reexamine its internal economic policy, as well as its foreign policy.
We need to restore the US manufacturing supply chain to ensure a sustainable economy, eliminate budget and trade deficits, balance consumer demand with supply, and have the 99 percent own 99 percent of the wealth through mass capitalism.
This would ensure that wages of hard-working Americans catch up with their productivity. This would establish a free market economy ensuring that supply and demand rise and fall with minimal government intervention. Additionally, such a system would establish a balanced economy without running any trade deficits and budget deficits.
This EBN article is based on my thoughts on‚ restoring the US manufacturing supply chain. Share your thoughts below.