The end of free trade
Published: 12 Nov. 2024, 19:49
Cho Min-geun
The author is the business and industry news director of the JoongAng Ilbo.
“Free trade of semiconductors, particularly the most advanced semiconductors, has died,” proclaimed Morris Chang, the iconic founder of dominant consigned chipmaker TSMC. The prescience deserves attention as it comes from his experience of founding the concept of foundry with TSMC and raising it to be the world’s largest pure-play manufacturer for top-tier technology brands like Apple.
On Oct. 26, just ten days before the U.S. presidential election, the 93-year-old engineer who devoted his life to microchips warned of challenges to the company and the industry from the breakup of the global chip order. TSMC has risen high on the AI wave and cemented its leadership in contract manufacturing of advanced chips. Its stocks and profits have been making a record-breaking streak, earning the company a new name, “the Sacred Mountain” protecting the island of Taiwan from hostile forces like the Chinese mainland.
But in the eyes of the chip guru who has sailed through the tumultuous chip journey since the invention of the transistor, the looming dark clouds over the industry were evident. He warned of serious challenges for further growth from the death of the global chip order which enriched and empowered the Taiwanese company.
Economists and scholars all have been warning of seismic changes in the global trade order and their dismal impact. In an opinion piece published in the Financial Times following Donald Trump’s re-election, Francis Fukuyama deemed it “a decisive rejection by American voters of liberalism,” opening a “new era in U.S. politics and perhaps for the world as a whole.” It was Fukuyama who declared that the 1989 collapse of the Berlin Wall and the subsequent end of the Cold War heralded the ultimate victory of liberal democracy and market economy in his acclaimed book “The End of History and the Last Man.” But he says that 2024 is different from 2016, when “Trumpism” was deemed an “aberration.” Things seemed to return to normalcy when Joe Biden won the race four years later. But this time, Trump won not just a majority of votes but also every swing state, not to mention the Republican Party winning both the Senate and the House.
Having learned lessons from his first term, Trump 2.0 is set to be a united team behind the egocentric boss. The naysayers and moderates who could contain Trump in the past will be banished and only the staunch loyalists will remain. One of the returnees from the first term could be U.S. Trade Representative Robert Lighthizer, the architect of the America-First mandate who would happily execute Trump’s promise to increase tariffs on imports in his second term. In his book “No Trade is Free” published last year, Lighthizer forewarned of “complete decoupling” from the Chinese economy and hardball trade tactics even with close allies and trade partners “who treat American producers unfairly” under Trump’s second presidency.
Unlike the Biden administration which used incentives as “carrots” to lure U.S. and foreign manufacturers to America, the next Trump administration will likely stick to sticks. Lighthizer outright disagrees with the argument that higher tariffs translate into higher burdens for American consumers. He refutes the comparative advantages and efficiency — the two pillars of free trade. He believes that economic efficiency cannot be more important than the economic wellbeing of families and communities, as manufacturing jobs are the ticket to move onto the middle class and crucial to national security. Comparative advantages, he claims, can be created through industrial policies, subsidies and trade regulations as seen in the cases of Korea’s strength in steelmaking and Taiwan’s might in chipmaking. Lighthizer comes from Ohio, one of the Rust Belt states representing the industrial decline in America.
We must not underestimate Trump’s commitment to universal tariffs just as a bluff or a negotiating card in future trade talks. The enlightened trade campaign may pan out with speed based on Trump’s support base expanding from the white population to Black and Hispanic workers.
Governments and multinational enterprises are moving fast to respond to the change. TSMC immediately cut off Chinese clients upon receiving an order from the U.S. Commerce Department to stop its shipments of advanced chips to Chinese companies like Huawei. TSMC is working to invite outgoing President Biden as well as incoming president Trump to the opening ceremony of its $6.6 billion chip factory in Arizona in December.
But our government and legislature appear to be too laidback against the perilous climate on the trade front as if it expects an extension of the first Trump presidency. The government has merely launched council meetings by sector and offered to increase energy imports from the United States. Our government and the People Power Party are rushing to draw up guidelines for incentives for chipmakers and flex working hours for research and development (R&D) workers, but whether their move can be backed by the majority Democratic Party is uncertain.
We even hear wishful thinking that Trump’s plans can benefit Korea. But Trump will be displeased with Korea’s record-high trade surplus with the United States when he returns to the White House on Jan. 20 with stronger conviction and power. We can’t afford to pin our hopes on fancy and goodwill. We must thoroughly review what we can yield and what we can’t and devise an effective strategy to survive the stormy de-globalization era.
Translation by the Korea JoongAng Daily staff.
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)