Rumbles From Asia

The disruptions from the Fukushima nuclear should have been all the warning needed for American companies to review their overseas supply chains for vulnerabilities. If that wasn't enough though, rising tensions in Eastern Asia once again strongly make the case for doing so. I don't think much of Jon Huntsman as a phony Republican, but he does have a great deal of experience in the area and he deserves to be heard on this topic:

“The tensions are real,” he said, citing the two nations’ maneuvering over islands in the East China Sea. Risks also are being raised by expanding activities such as surveillance flights in the region by other nations, including South Korea and Russia, he said.

“I worry about the military maneuvers in crowded airspaces and sea lanes” where an incident can escalate into something“beyond anyone’s ability to then de-escalate it,” Huntsman said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend. 

A blowup between China and Japan could quickly draw us in as well, as the current Cope North exercises show.  

There are many other strong and rational reasons for all parties to avoid a military conflict, but history is filled with examples where those weren't enough. I don't see any reason to think a conflict is imminent, but any American executive whose company is highly dependant on buying from or selling to the region should be paying attention.

This is another reason why, besides dubious economic numbers, I think the political and media elite's trust in the current regime in China is misplaced. The Chinese people now see much greater economic freedom than ever, but the Communist Party leadership has also used that to become rich and even more powerful. They are a totalitarian regime quite brutally willing and able to do whatever it takes to stay in power, and it's not hard to imagine a miscalculation at the highest level leading to serious conflict, either internally or with other nations.  

Lots of people have made lots of money by jumping on the Asia trade bandwagon and consumers have benefited too. I'm not saying people should abandon Eastern Asia, but it is, as Walter Russel Mead concludes, "Another argument for on shoring and pointing to the increased attractiveness of North America as an investment destination in an unsettled world."