Friday, October 28, 2022

Shannon K. O'Neil's "The Globalization Myth"

Shannon K. O'Neil is the Vice President of Studies and Nelson and David Rockefeller senior fellow for Latin America Studies at the Council on Foreign Relations. She is an expert on Latin America, global trade, U.S.-Mexico relations, corruption, democracy, and immigration.

O'Neil applied the Page 99 Test to her new book, The Globalization Myth: Why Regions Matter, and reported the following:
Page 99 of The Globalization Myth: Why Regions Matter lays out how the North American Free Trade Agreement, or NAFTA, deepened economic ties between the United States, Canada, and Mexico by promoting investment, leveling the legal playing field between domestic and international companies, and setting up new legal pathways to navigate commercial disputes. The page also details NAFTA’s limits, and how it failed to strip away regulations, rules, licenses, and other barriers that hold back North American regional supply chains.

This gets at the crux of the book’s argument, that while North America’s economies have integrated with each other during this latest round of globalization, they have not done so as deeply and significantly as Asia and Europe. This has given Asia- and Europe-based companies and nations an economic edge over the United States and North America.

So why do regional ties matter? Because regional supply chains both enable businesses to create high-quality and affordable products that can compete globally, and they are more likely to protect and create jobs at home.

By divvying up production across countries with different skill sets, wage rates, and access to money within North America, companies are better able to win customers at home and abroad. And when orders rise, so do jobs along the supply chain.

And while we call them global supply chains, manufacturing is far more likely to be done regionally. When factories open in China, Vietnam, Poland, or Romania, they turn to parts makers nearer by. U.S. suppliers don’t get any extra orders. When plants open in Mexico and Canada, they buy more inputs from the United States to feed into their assembly lines than from anywhere else in the world. Indeed, for every Mexican import to the United States, on average 40 percent of the value of that product was made in the U.S. For Canadian products, that number is 25 percent. For goods coming in from China, just 4 percent of the inputs are U.S.-made.

U.S.-based companies and their workers are facing a regionalized global marketplace where their competitors are taking advantage of the economies of scale, product specialization, and market access that regional manufacturing provides. To thrive, the United States needs to emulate this strategy and economically embrace its neighbors too.
Visit Shannon K. O'Neil's website.

--Marshal Zeringue