• The Financial District


Prof. Prabhudev Konana of the McCombs School of Business at The University of Texas at Austin has called on the United States to end its “mindless reliance on China” that has enervated the US and mangled its self-reliant economy.

In his analysis for CNN Business late on June 5, 2020, Konana said “the Covid-19 pandemic has revealed a terrible truth: Our mindless over-reliance on China has led us to no longer have the capacity, the expertise or the manufacturing infrastructure to meet our own nation's needs. When unbridled capitalism helped shift millions of production jobs to low-wage countries like China decades ago, we unintentionally but systematically ceded control of our supply chains to them. Our chaotic response to the coronavirus situation shows how thoroughly unaware we were of how the systems we have created truly work. Take, for example, that 90% of antibiotics and 80% of active ingredients for other medicines come from India and China. That means we no longer have the ability to easily ramp up production of such items here.”

Konana argues that the US must ensure that essential items like food, medical equipment, drugs and other items essential for survival to always be sourced from within the US even if they cost more and this can be done through some combination of subsidies, tax incentives and tariffs on imports. “If we don't, future global emergencies could have even worse outcomes than what we are experiencing now,” he adds.

“Since bilateral trade was established in 1979, China's advantages have increased significantly. Now, China produces not only low-cost products, but also sophisticated high-margin growth products such as Huawei's 5G technology. China's total research and development spending is nearing that of the US, and it now files far more patents. These developments imply that China is now a formidable competitor for a large number of hi-tech US firms that traditionally dominate with innovations… the age-old trade argument that high knowledge-intensive and high-paying jobs will remain in the US while low-paying jobs will go to low-wage countries like China is not relevant anymore. While Chinese firms can effectively compete in advanced technologies, US firms cannot easily compete with labor-intensive industries due to costs,” Konana concludes.

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@2020 by The Financial District