William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.

Two articles by writers long familiar with business practices around the world have raised the danger of a world dependent on Chinese production. The June issue of Harper's features the essay "Unmade in America: The true cost of a global assembly line" by Barry Lynn, the former executive editor of Global Business magazine. Lynn notes how 'disintegrated' the manufacturing process has become.

Gone are vast industrial complexes like Ford's River Rouge complex in Michigan, where everything needed to manufacture an automobile was in one place. Henry Ford wanted to oversee production of all the parts and components that went into one of his cars. The result was an integrated operation: ships unloaded iron ore at one end of the complex while employees drove finished automobiles onto railroad cars at the other.

Now, a Dell computer is assembled in Austin, Texas, but from 4,500 parts sourced from  hundreds of suppliers scattered around the world, from Malaysia to Korea but clustered especially in Taiwan and China. Nor is Dell atypical. Most of the largest firms whose names are associated in the public mind with rock-solid wealth are but empty shells. They are 'virtual corporations' with little more than headquarter staffs who coordinate the flow of components and funds with a bevy of  'outsourced' entities who could be located anywhere on the planet.

Just in time production methods have cut inventories to only a few days, meaning that the international system of trade and transport cannot be disturbed in even the smallest way as when the U.S.-Mexican border was closed after September 11. Ford, among others, had to close many of its U.S. assembly plants because it could not get parts from its Mexican suppliers.

On a typical day, the U.S. Customs Service clears more than 50,000 trucks and containers, and more than 500 oceangoing ships into the United States. Business groups are expressing concern that President Bush's plan to move the Customs Service into the proposed Department of Homeland Security will remind the agency that its first duty is to guard America's borders. Lobbyists have been trying for years to 'reform' Customs out of existence.

Such a system of disintegrated business could only be built in a world assumed to be safe and stable. Terrorism is only the tip of the geopolitical iceberg that threatens this titanic misconception. Asia, after decades of the world's most rapid economic growth, is fraught with possible conflicts. Chinese threats against Taiwan. The divided Korean peninsula. The India-Pakistan arms race and confrontation over Kashmir. The Middle East remains on the brink of war. Drugs, insolvency and radicalism threaten the stability of Latin America, while Africa's vast problems defy concise description.

In such a divided and dangerous world, Lynn wonders why "almost no one asks what would happen if just one of the still very sovereign nations that underlie this web were to grab hold of a few of the strands and start yanking."

It is against this background that one should read Jeffrey E. Garten's column in the June 17 Business Week. Garten is dean of the Yale School of Management, but was the U.S. Commerce Department official who fostered the 'big emerging market' trade strategy in the Clinton Administration. Garten notes that Intel Corp. has announced a $100 million investment in Shanghai to assemble Pentium 4 microprocessors, Dell Computer Corp. has moved its giant PC-making facility from Kuala Lumpur to Xiamen, and the provincial government of Shenzhen has pledged $5 billion to boost its integrated-circuit industry.

Garten's examples only scratched the surface. On June 6, Motorola Inc. outlined its new strategy in Beijing, announcing plans to spend an additional $1 billion on R&D, hire 4,000 more engineers and increase annual Chinese production to $10 billion by 2006.

From Singapore to Tokyo, voices have been warning that China will become "the production center of the world" if trends continue. In other words, after going through a period of global disintegration, manufacturing may be reintegrating in China. With wage rates one-third those of Mexico, Garten writes "The critical mass of factories, subcontractors, and specialized vendors has created a manufacturing environment with which few can compete."

Garten then asks "The big question is whether the world economy is becoming so dependent on China as an industrial lifeline that it will soon be dangerously vulnerable to a major supply disruption caused by war, terrorism, social unrest, or a natural disaster. In other words, will China's importance to global manufacturing soon resemble Saudi Arabia's position in world
oil markets?"

Garten confines his concerns to secure supply chains for business firms (even asking whether China ought not to improve defenses around its industrial parks), but the real issue is whether world politics, and American security, will suffer as a result of China's rise?

Beijing never adopted the post-Cold War view of a harmonious world upon which corporate globalism was based. A People's Republic of China White Paper published in November, 2000 argued "in today's world, factors that may cause instability and uncertainty have markedly increased. The world is far from peaceful....Hegemonism and power politics still exist and are developing further in the international political, economic and security spheres.....As modern science and technology and economic globalization continue to develop, competition among countries has become fiercer than ever before. Financial and economic risks are increasing, and economic security has become a concern for all countries."

Though Beijing seems vulnerable because it depends so much on exports to the American market, Chinese strategists still draw on communist theory in their analysis. They do not see the United States as a democracy, but as a plutocracy run by and for major corporations. They do not believe the Big Capitalists will allow the U.S. government to interfere with anything Beijing does out of fear of losing their investments in China and their supply of Chinese-made products.

Therefore, as more strands of the global economy come into Beijing's hands, the situation in Asia can only become more dangerous for the United States.

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