Boeing has had a bad year. After the blowout of a door on a Boeing 737 Max earlier this year, the company has been under intense public scrutiny. Now the aeroplane giant is facing a new problem: an inability to meet its production target on its 787 Dreamliner due to a lack of critical parts from Russia.
The company appears to have relied on Russian production for
a part called a “heat exchanger”. After sanctions were put in place following
the Russian invasion of Ukraine, Boeing turned toward British and American
suppliers, but they could not produce enough of the component to meet Boeing’s
demands. This latest act in the sanctions saga highlights once again just how
interdependent the globalised world economy is.
The reason there’s been so much scrutiny on Boeing is
because it is part of a key strategic industry. Maintaining an edge in
aerospace technology is essential to America’s geopolitical strategy, which has
both a military and commercial component. By maintaining an edge in the
production of military aircraft, the United States can provide this technology
to allies and in doing so lock in global alliances. Meanwhile, the civilian
aerospace industry is considered prestigious and captures the imagination of
global jet-setters. If America were to fall seriously behind in this sphere, it
would be embarrassing to the country.
The fact that the sanctions on Russia are causing such
severe problems for a core strategic industry in the United States speaks to a
contradiction in American geopolitical and economic strategy: sanctions
programmes are designed to hobble foreign economies, but the Russian sanctions
increasingly appear to be hobbling Western economies. American policymakers may
have been able to tolerate the destruction of European industry under the high
energy prices caused by the Russian sanctions, but now they are seeing their
own critical industries under threat.
The fact that Russian sanctions can create such severe
problems for a core strategic industry also shows how dangerous strategies such
as “de-risking” and “decoupling” from China are. Russia is a large economy, but
it is not enormous. Measured properly, on a PPP-adjusted GDP basis, it is an
economy roughly as large as Germany. It has important sectors — such as energy
and aerospace manufacture — but it is not generally seen as one of the big
players.
If sanctions on the Russian economy can cause such problems,
it is hard to even imagine what similar sanctions on the Chinese economy might
do. Consider the situation with capital goods: recent studies show that the
European Union now imports more of its capital goods from the rival Brics
economies than China imports from the Western countries; the United States
imports roughly the same.
Last year, in response to American sanctions on advanced
semiconductors to China, the Chinese government put the export of two elements
— germanium and gallium — on a restricted export list. China produces 60% of
the world’s germanium and 80% of its gallium, which are crucial to the
production of many electronic products, especially microchips.
Reports from earlier this year show exports of germanium and
gallium from China to the West collapsing. Gallium exports were down by as much
as two-thirds. It Is still unclear what impact this is having on Western
industry, but it is worth noting that recently China has ramped up its
production of lower-end chips. While these products may not have the same
cachet of their higher-end equivalent, they are nevertheless used in a wide
array of technology.
After promoting globalisation for the better part of three
decades, western governments seem to think that they can withdraw from global
supply chains at the click of a finger. To call this a fantasy would be too
charitable; rather it is a dangerous delusion that risks denting Western
economic prosperity and even social stability.
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