While the United States faces significant challenges, its situation is complex and it cannot be categorically stated that it is in decline. The country's ability to address its internal problems and adapt to changes in the global landscape will determine its future.
LET'S TALK ABOUT EMPIRES
Dear friends, let's talk about empires. Yes, empires. That word makes us think of togas, legions and, well, maybe the last season of "Game of Thrones." But what happens when those empires, built with so much sweat and, sometimes, blood, begin to falter?
Let's think of Rome. Giant, invincible, right? Until it wasn't. Too much territory, too many borders to defend, too many barbarians knocking at the door. And then, the Austro-Hungarian Empire, a mosaic of cultures that, in the end, broke into a thousand pieces. The lesson? Unbridled expansion and lack of internal cohesion are like a crack in a dam: small at first, but then... boom!
THE AMERICAN EMPIRE IS THE AMERICAN DREAM CRUMBLING?
Now, let's look at the United States. An empire? Some say yes, others say no. But what is undeniable is its power, its global influence. However, as my grandmother would say, "There is no evil that lasts a hundred years, nor a body that can resist it." And the United States is no exception.
I see signs, friends, signs that make me frown:
1️⃣Economic inequality, that gap that is growing ever larger, is like a silent earthquake.
2️⃣ Political polarization, where there is no longer dialogue but instead shouting, is like a virus that corrodes trust.
3️⃣ And the debt, that mountain of numbers that keeps growing, is like a snowball rolling downhill.
But all is not lost. America remains a land of innovation, of entrepreneurs, of people who don't give up. And that, my friends, is an invaluable asset. But will it be enough? Can this country reinvent itself, adapt to a world that is changing at breakneck speed?
History teaches us that empires do not fall overnight. It is a slow, gradual process, like the erosion of a rock. But it also teaches us that decline is not inevitable. Empires can recover, they can transform, they can find new ways to be relevant.
While the United States faces significant challenges, its situation is complex and it cannot be categorically stated that it is in decline. The country's ability to address its internal problems and adapt to changes in the global landscape will determine its future.
History does not repeat itself exactly. Every empire and every era has its own particularities. However, the study of imperial cycles allows us to identify patterns and better understand the challenges faced by great powers.
So the question Donald Trump must be asking himself is: What kind of country do we want to be? A declining empire, clinging to old glories? Or a resilient nation, capable of facing the challenges of the 21st century? The answer is up in the air.
THE COMPETITIVENESS OF A COUNTRY
In terms of strategic thinking, Michael Porter developed a valuable tool to analyze the competitiveness of nations, and it would be very interesting to know what it consists of and how it applies to the United States and Mexico.
Porter's Diamond: Decoding National Competitive Advantage
A nation's competitiveness does not emerge by chance; it is the product of a complex and dynamic system of interaction between key determinants. Porter's Diamond model captures this interaction, providing a framework for understanding how and why certain industries thrive in specific national contexts.
1. Factor Conditions: Beyond Basic Resources
It is not simply about the abundance of resources, but about the creation and sophistication of specialized factors.
This implies the accumulation of advanced human capital, cutting-edge infrastructure and scientific and technological knowledge.
The key lies in the efficiency with which these factors are deployed and enhanced, not just in their mere existence.
2. Demand Conditions: Driving Innovation
The nature of domestic demand exerts selective pressure on companies, driving innovation and quality.
Demanding domestic markets anticipate global trends, forcing companies to exceed international standards.
Sophistication and anticipation of domestic consumer needs are crucial to global success.
3. Related and Supporting Sectors: Competitive Ecosystems
The presence of competitive suppliers and related sectors not only reduces costs, but also encourages collaborative innovation.
Industrial clusters, characterized by dense interconnection networks, generate synergies and disseminate knowledge.
The proximity and specialization of these related and supporting sectors are catalysts for competitiveness.
4. Business Strategy, Structure and Rivalry: The Engine of Continuous Improvement
The intensity of domestic rivalry forces companies to seek efficiency, differentiation and constant innovation.
Business cultures that promote ambition, meritocracy and risk-taking are critical.
Regulatory conditions and management practices influence the ability of firms to adopt sophisticated competitive strategies.
It must also be taken into account that at this point globalization has created complex value chains, and therefore, rivalry is not only at a local level, but at a global level.
Systemic Interconnection: The Key to Sustainable Advantage
The Diamond does not operate in isolation; its components reinforce each other in a dynamic system.
Improvements in one determinant generate multiplier effects on the others, creating positive feedback loops.
In this sense, the role of government, and chance events, play an important role in how Porter's diamond behaves.
By understanding the interaction of these determinants, nations can identify their strengths and weaknesses, and design strategies to foster long-term industrial competitiveness.
COMPETITIVENESS IN THE 21ST CENTURY
A Comparative Analysis of the United States and China through Porter's Diamond
On the chessboard of the global economy, the United States and China stand out as the dominant pieces. But what are the determinants that shape their competitiveness? By applying Porter's Diamond framework , we can unravel the strengths and weaknesses that will define the economic landscape of the 21st century.
United States: The Diamond, Robust but with Fissures
The United States, an economic titan, possesses a diamond with edges of remarkable strength:
Factor Conditions:
Its vast human capital, forged in elite institutions, and its technologically advanced infrastructure are pillars of its power.
However, the deterioration of critical infrastructure and rising educational costs raise questions about the sustainability of their advantage.
Conditions of the Demand:
The US domestic market, with its hunger for innovation, acts as a crucible that tempers business competitiveness.
The capacity to absorb new technologies is enormous.
Related and Support Sectors:
Ecosystems such as Silicon Valley are paradigmatic examples of the synergy between business, research and capital.
Firm Strategy, Structure and Rivalry:
Entrepreneurial spirit and relentless internal competition are drivers of efficiency and innovation.
China: The Rising Diamond, with a Strategic Focus
China, for its part, is emerging with a rapidly evolving diamond:
Factor Conditions:
Massive state investment in infrastructure and a vast workforce are undeniable advantages.
Its manufacturing strength supports the development of other productive areas.
Conditions of the Demand:
China's expanding domestic market and government stimulus to key sectors create a robust demand environment.
Related and Support Sectors:
The vertical integration of supply chains and the creation of industrial clusters are the fruits of a deliberate strategy.
Firm Strategy, Structure and Rivalry:
The emergence of "national champions" and the focus on global expansion are signs of its ambition.
Key Considerations: 21st Century Competition
Competition is taking place in the field of technology and intellectual property, where innovation and adaptation are crucial.
The role of the Chinese government in strengthening the various sections of Porter's diamond is something the United States will have to watch.
Sustainability, equity and managing technological disruption are challenges that both countries must address.
The interaction between these two giants will largely define the course of the global economy.
Porter's Diamond reveals that both the United States and China possess distinctive strengths. The dynamics of their interaction will determine the future of the global economic order.
GRAPHING PORTER'S DIAMOND THE SITUATION BEFORE THE TRADE WAR THE SITUATION IS AS FOLLOWS
GRAPHING PORTER'S DIAMOND THE SITUATION AFTER THE TRADE WAR THE SITUATION WILL BE AS FOLLOWS
"When Trade Walls Go Up: Mexico and the U.S. at the Crossroads"
It is important to understand that a 25% increase in US tariffs on Mexico would have significant effects on both economies, albeit with differentiated impacts. Here I will break down the implications, using the Porter Diamond framework as a guide:
Repercussions for Mexico:
Decreased competitiveness
Tariffs would increase the costs of Mexican products, making them less competitive in the U.S. market.
This would be reflected in a decrease in Mexican exports, especially in key sectors such as automotive manufacturing and agriculture.
Impact on supply chains
The highly integrated supply chains between the two countries would be disrupted, generating inefficiencies and higher costs for Mexican companies.
Job losses and lower investment
Reduced exports and trade uncertainty could lead to job losses in Mexico, especially in export-oriented sectors.
Foreign direct investment in Mexico could also decline due to uncertainty and higher costs.
Pressure on the Mexican economy
The Mexican peso could depreciate, which would increase inflation and reduce the purchasing power of consumers.
Mexico's economic growth would slow, potentially triggering a recession.
Effects on Porter's Diamond
All of the Porter Diamond determinants for Mexico would be negatively affected. Factor conditions, demand, supporting sectors and business strategy would be weakened.
Repercussions for the United States
Rising inflation
Tariffs would increase the costs of goods imported from Mexico, which would translate into higher prices for American consumers.
Sectors dependent on imports from Mexico would be the most affected.
Disruption of supply chains
Although the United States has a more diversified economy, it would also suffer disruptions in supply chains, especially in sectors such as automotive and agriculture.
Possible loss of competitiveness in some sectors
Some U.S. companies that rely on Mexican inputs could face higher costs and difficulties competing in the global market.
Possible Mexican retaliation
The imposition of tariffs by the United States may provoke Mexico to retaliate by also imposing tariffs on products from the United States, causing American products to lose competitiveness.
Effects on Porter's Diamond:
Although the impact would be less than in Mexico, the United States would also see some negative effects on its Porter Diamond, especially in demand conditions and supporting sectors.
A Call to Reason
The high economic interdependence between Mexico and the United States means that both nations would suffer the consequences of a trade war, with Mexico being particularly vulnerable due to its greater dependence on the US market.
The possible consequences would generate a restructuring of the value chains in North America.
In this negative-sum game, there are no winners, only losers. The solution lies not in building walls, but in building bridges. Instead of punitive tariffs, we need smart trade agreements that foster fair competition and mutual growth. We need to recognize that in a globalized world, cooperation is the key to prosperity, because in the end, trade walls protect no one. They only isolate us in an increasingly interdependent world.
Could a common customs office be a solution to the tariff issue?
A common customs office could be a solution to mitigate the negative effects of tariffs between Mexico and the United States (and Canada, within the framework of the USMCA). Here we explore how it would work and its possible implications:
What is a common customs?
A common customs union means that member countries establish a common external tariff for imports from third countries. Within the customs union, goods circulate freely without tariffs or quotas and this requires harmonisation of trade and customs policies between member countries.
The benefits of a common customs system in the context of the USMCA include the elimination of trade frictions, simplifying customs procedures and reducing transaction costs for companies operating in the region.
It would facilitate the flow of goods and services, strengthening integrated supply chains.
By eliminating internal tariffs, a larger and more efficient market would be created, which would increase the region's competitiveness on the global stage, and the problems presented by free trade agreements would be reduced, where the origin of the products must be verified, which can lead to many costs in procedures.
A common customs system would deepen economic integration between Mexico, the United States and Canada, creating a more resilient and prosperous region, allowing the region to better face competition from other economic regions.
The downside of a Common Customs would be to give up some sovereignty over trade policy, which could raise political concerns.
Customs, sanitary, phytosanitary and other regulatory policies would need to be harmonized among member countries, which could be a complex process. A mechanism would need to be established to distribute tariff revenues generated by the common customs, which would require careful negotiations.
This implies that The United States, as the largest economy, would have a lot of weight in the decisions, which is why Mexico would have to develop defense mechanisms for its industries.
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