Trade Friction and Pandemics: The Impact on Global Supply Chains
Chief Investment Officer and Portfolio Manager Scott Klimo and special guest Edward Alden, Bernard L. Schwartz Senior Fellow at the Council of Foreign Relations and is also the Distinguished Ross Visiting Professor at the School of Business and Economics at Western Washington University, engage in lively discussion on selected investment topics covering global trade tensions, pandemics, supply chains, automation, and many others.
Trade Friction and Pandemics: The Impact on Global Supply Chains
Scott Klimo: Good morning and welcome to the third session of our webinar series, Trade Friction and Pandemics – The Impact on Global Supply Chains. My name is Scott Klimo and I am the Chief Investment Officer at Saturna Capital and we are very pleased and honored to have with us today Ted Alden, who is the Bernard L. Schwartz Senior Fellow at the Council of Foreign Relations and is also the Distinguished Ross Visiting Professor at the School of Business and Economics at Western Washington University in Bellingham, Washington, and is also the author of a book called... among several books, actually, but one that I recently finished reading, “Failure to Adjust: How Americans Got Left Behind in the Global Economy,” which touches on a number of the subjects we’re going to be discussing today. So, Ted, thank you very much for being with us today.
Edward Alden: It’s great to be here with you, Scott. Thank you.
Scott Klimo: I think that we’re just gonna dive right into it and the first thing that I’d like to ask Ted is that... you know, the title of our talk is the impact of trade friction and pandemics, but would it be accurate to say that there were changes coming to supply chains, specifically concerning China, even before the 2016 election and the arrival of the Coronavirus. And what were the drivers of that, if so?
Edward Alden: Yeah, I think there’s no question about that, Scott. Some of what we’re seeing with the trade frictions and the pandemic is an acceleration of trends that were in place. I’d really point to three things that had started to create pressure on supply chains in relation to China even before Trump’s election and before the pandemic. The first one was just growing difficulties of doing business in China. If you look over the years, particularly at the American Chamber of Commerce over in China, where they survey their US business members doing business in China, the list of complaints began to grow steadily year after year. Forced technology transfer, intellectual property theft, difficulty getting business licenses, rising labor costs. So, all of these things have very much been on the agenda well before Trump was elected. Interesting though, we can talk about this. The latest American Chamber survey, which came out in March, does suggest some improvement in those areas, particularly IP protection and access for foreign investors. So, we can talk about that if we want to. Secondly, and this is pretty much an enduring issue, concern over technology competition with China. The seminal document there was probably China’s 2015 release of what it called its “Made in China 2025” initiative, which set out a series of targets for China to become a global leader in sectors such as aerospace, semiconductors, and robotics, biopharmacy, artificial intelligence, etc. And within each of those sectors, to have Chinese companies playing a dominant role, so that somewhere between 40 and 70 and even higher percentages of content in those sectors would come from Chinese companies. So, that set off alarm bells in the corporate sector, in government here in the United States, both about the potentially discriminatory aspects, that US tech companies would be cut out in different ways, and also about the security aspects, which we can talk about more, obviously. These are industries that matter commercially but they also matter very much in national defense. And then, I think, the final change that we were seeing, again, kind of predating the election and the pandemic, was just a shift in China’s economic and political direction. I covered, as a reporter, when I worked at the Financial Times, the debate over China’s succession to the WTO and the Congress granting China permanent normal trade relations with the United States, and the hope at the time, very much, was China’s economy would continue to reform and move more in a private sector-led direction and that this would also have political consequences in terms of creating a large civil society in China, moving China in a somewhat more democratic direction... That has all shifted quite sharply in the last five or six years. I mean, if you look at Nick Lardy’s work on China’s economy... his book, “The State Strikes Back,” he’s at Peterson and was a University of Washington grad from out here. Chinese government is funneling an ever-higher percentage of resources through the banks and other entities into the state-owned sector. The role for the private sector in China has been shrinking. And then, politically, of course, Xi Jinping become President and the party Congress declaring an end to term limits in 2018 and the consensus now in Washington, certainly, is that China is moving back in a much more hardline, autocratic direction, politically. So, all of those things were in play, even before Trump, even before the pandemic.
Scott Klimo: Well I think that’s certainly true, in regard to the autocratic direction, if you look at the recent law... the security law... that was put in place in Hong Kong, and of course I’m sure everyone is aware of the treatment of the Uyghurs in Urumqi for some time now, in China. So, that was already happening and then we had... Trump was elected, and tariffs and trade friction arose and now we’ve had the pandemic. And there’s been a lot of talk about the pandemic accelerating a number of trends, whether it’s online buying or perhaps a shift to rural versus urban or remote work for that matter. So, do you think that now that these events have come through and, in particular I guess, and more topically the current topic, that the pandemic is accelerating those effects on the supply chain with China?
Edward Alden: I think the answer is yes, but this is clearly a very complicated question. So, I mean if we’re looking at things like remote work and online shopping, a lot of that is probably more of a domestic effect than an international effect, though it obviously has international implications. I mean, we’ve all experienced changes in the way we are working as a result of COVID. I think a lot of those are going to be sustained and I think there are potentially significant savings for companies in terms of their physical capital and other things. This is gonna be... I mean, economists love this kind of stuff. This is gonna be a great natural experiment in how productive people are working offsite, you know. The arguments for having people together in an office has been A) they’re more productive, and B) They’re more innovative because of collaboration. We’re running kind of a real-time test on that. So, I think some of that will be enduring, even—fingers crossed—we get a successful vaccine at some point. I mean, internationally in terms of supply chain... again, supply chains still involve the physical movement of goods across borders. So, technologies allow you to coordinate that work more successfully. You know, you look at Richard Baldwin’s book, “The Great Convergence,” which I teach in my classes at Western, you know, the rise of the internet and modern information communication technology really made it possible for companies to coordinate their operations on a global basis, to break up their supply chains in little chunks... the way that’s been done. As the technology accelerates, I think the coordination problems will I think in some ways even get easier, but you still have to move stuff. I mean there will be places I think that will change. 3D printing is going to allow for some more specialized production closer to our own markets, but you’re still gonna have to move stuff across borders. I don’t think the technology has fundamentally changed the supply chain challenge. As for where we are now, the trade war clearly has had an effect. We’re still, in all these things, fairly early, because business location decisions are long-term decisions, but we’re looking at a situation where the average tariff on an import from China has gone up six-fold in the last few years. On average that’s about 20% and US goods are facing similar kind of tariffs in China. There’s a big expense for companies now in the sectors that are covered by tariffs. That looks to be fairly permanent. I mean, the Phase 1 trade deal that was announced earlier this year had a bunch of purchasing targets but didn’t significantly lift the tariff burden, so I think we are seeing it and it varies a lot by sector. Some companies say okay, if I’m gonna face a 20% on top of the other costs, I’m better off to look at options in Vietnam or look at options in Mexico or Malaysia or other places. And we are seeing, from the data, this movement of US imports away from China to other parts of the Pacific Rim. Again, you probably don’t want to overstate it. I mean, the most recent American Chamber of Commerce surveys have referred back to that. About 80% of their members said that they were not currently considering moving production away from China. And I think a lot of that is because that production is aimed at the Chinese market, which is the world’s biggest and fastest growing, so... For companies that their models are largely... their model is largely exporting to the United States, I think relocating makes a lot of sense. If your main goal is expansion in the Chinese market, clearly it doesn’t. You need to be there.
Scott Klimo: So, speaking of that... that latter group of companies. Those that are exporting to the US. In addition, from a global perspective, yes... supply chains cross borders but, China has also developed a pretty remarkable domestic ecosystem of supply chains that support any number of industries and activities. So, are there other countries that can replicate that? And actually offer the opportunity for some of these US-oriented export activities to relocate?
Edward Alden: I don’t think there’s any other single country that has the scale and other criteria that’s needed to replicate China. There was a good piece, I think, this last week in the New York Times by Keith Bradsher, who’s been covering China out of Hong Kong for some time now. He and I actually covered trade at the same time back in the early 90s when the negotiations that created the WTO were underway. He was working for the Times. I was working for a much smaller publication in Washington. But this piece that he wrote this week is looking at the medical equipment supply chain, the protective equipment, where China has a dominant role and basically what the data suggests is that despite a whole bunch of efforts here in the United States and elsewhere to diversify that supply chain, it’s gonna be really hard to crack China’s dominance. That’s in so many industries, the upfront costs were heavily subsidized by the Chinese government. You have these highly competitive companies operating at a China... I mean, in fact, after some of the initial glitches, exports of protective equipment out of China surged to the rest of the world. It’s become the primary supplier to the world of facemasks and other equipment during the pandemic. So, there’s no other country that can, kind of, fit that. If you want to change that pattern, it’s gonna require some kind of multi-year commitment from governments to try to shift those supply chains. It’s interesting—if people want to take a look—Joe Biden just came out today with his supply chain strategy. And basically, he is committing, if he gets elected, to a pretty determined effort in medical equipment, pharmaceuticals, and technologies that raise security concerns to building up a US supply chain using the Defense Production Act and other tools to try to reshore as much of that as possible. That’s a big lift. But one place I think we’re actually... that the Republicans and the Democrats are in pretty similar places, if you listen to what Marco Rubio and others are saying these days. I think there’s a real consensus around trying to bring more of that back to the US. I’ll be interested to watch... I think there are good test cases out here. I mean you guys know the markets better than I do, but watching a company like Apple... I mean, Apple has been hugely dependent on Chinese contract manufacturing. You know, no other place has got that combination of skilled labor and low cost and the ability to ramp up production really rapidly when they do new product launches. But, Foxconn, I think it’s called Han Hai now, has been moving some production to Taiwan, some to India, some to Vietnam, some to Mexico. It’s clearly diversifying. So, I think companies will try to hedge their bets where they can. But to answer the question no, there’s no other single place that can stand in for China. A bunch of different countries together might be able to make a stab at it.
Scott Klimo: Wow, so there’s about a dozen questions that come out of that.
Edward Alden: That was a lot, yeah.
Scott Klimo: No, no. It’s fantastic. I actually had a meeting with Foxconn in Taiwan. Foxconn Han Hai in Taiwan a couple of years ago and discussed this topic of automation, number one, and returning to... or perhaps relocation production to Taiwan. And it was interesting, one of his responses was, “Well, in Taiwan we really can’t hire and fire half a million people a couple times a year, which we can do in the mainland.”
Edward Alden: There is a bigger point there, Scott, which is that these things are doable but at a cost.
Scott Klimo: Right.
Edward Alden: So, the question is, “What’s it worth to companies?” You know, when you’re looking at profit and loss forecasts and things, what’s that gonna mean for the bottom line if companies have to take more expensive options in order to try to build some greater diversity and resilience for their supply chines and rely less on China. That’s a costly exercise.
Scott Klimo: Well, I think you’re right, though, in terms of the agreement between the Democratic and Republican party. I mean, you see that Marco Rubio, who you mentioned, and Elizabeth Warren, are co-sponsoring a bill to track medical supply chains and where product—particularly supporting the pharmaceutical industry—are coming from. That certainly a unique pair of bedfellows.
Edward Alden: Yeah. I think there’s a real consensus on this stuff. And there are not many areas where you can say that about Democrats and Republicans these days.
Scott Klimo: So, I guess there’s... I mean there’s two questions. There’s countries that can companies can relocate to. And Vietnam is one that has benefitted pretty significantly at the lower end. And then there’s the question of returning to the United States, rather than finding another source of production overseas. And there must be some, I guess, apparel and textiles, footwear, that sort of thing, can potentially move to places like Indonesia or Vietnam. And then there’s perhaps a different category of companies that can relocate to the United States and then, I guess, there’s some who might just be stuck. I mean, how do you kind of parse that out?
Edward Alden: Yeah, I mean... again, complicated. Because it varies a lot from sector to sector. And you know, my previous point that a lot of companies don’t feel stuck in China. They want to be in China producing for the Chinese market. I mean I was reading a piece this morning about financial services companies in China. I mean, because of the easing of foreign investment restrictions in China, we’re seeing, you know, JP Morgan and Goldman and others get much deeper into China. So, there’s a lot of companies that want to be there. Tesla is expanding in China dramatically, doing very well there. But let’s say, you know, you’re in the situation where you’re negatively affected by the trade far. You rely a lot on exports back to the United States. You’re now facing maybe a 25% tariff on your product: what do you do? I mean, one kind of interesting example, I mean of sort of an everyday product, is Weber grills. A company that makes gas grills and charcoal grills. Their charcoal grills, I understand, are assembled in the United States but all from imported steel. Well, imported steel now for most countries faces a 25% tariff, so they’re kind of screwed on their domestic production. Their gas grills are basically all made, I was told, at a single industrial park in China. And trying to figure out how relocate that supply chain somewhere else is an incredibly costly exercise that companies are very reluctant to undertake. Weber is a private company, so we don’t know all of what’s going on behind the scenes, but it is interesting that they are one of the companies that succeeded in getting a tariff exemption on the tariffs, on some of their grills. So, if you’re really stuck in China and you need to export to the United States, you don’t see an alternative, well what do you do? You hire a bunch of high-priced trade lawyers in Washington to go petition the US trade representatives office or the Department of Commerce, depending on the product, to give you an exemption from the tariffs. So, we’re seeing this enormous politicization of the trade process, far beyond where we were before. But, I think, you know, again, if you broaden it out, relocation is expensive and the conversations I’ve had with corporate folks, or listened in on, you know China has some benefits. I mean look, after all of their recovery from the pandemic. You know, they had zero cases yesterday. Production in China is getting back to normal more quickly than anywhere else in the world. And so, if you look at the totality of factors, you’re not necessarily gonna say, “Well, because of the trade war I’m gonna look for relocation options.” There’s a lot of factors to throw in. The one final piece that absolutely does bear a lot of attention is the tech sector because you know, the administration is using what are called “export controls”—restriction on the sales of sensitive US goods overseas—to really turn the screws on China, particularly Huawei. We can talk about Huawei if we want. But this administration has been in an all-out war to persuade all of its allies to cut of purchases from Huawei to stamp even the slightest presence of Huawei out of the United States. And now, using US export control rules as actually trying to crush the company’s capacity to make semiconductors for its range of products. The US is now saying that any semiconductors that are made with US manufacturing equipment, which is basically every semiconductor made in the world, cannot be sold to Huawei. And so, I think we’re gonna see the emergence, really, of two very separate technology supply chains where there are any security concerns at all. Huawei is gonna need to find some way to go forward without Western technology, and you know, the United States, and I would guess that at the end of the day, Canada, Europe, and others are gonna have to develop their own technology supply chain. So, that’s one place where we really are seeing this decoupling. We’re not seeing it across the board, but I think we’re seeing it in the high technology areas.
Scott Klimo: Well, that really anticipates the next question that I had prepared. You know, if we think back to prior to the fall of the Berlin Wall, we had this bipolar world divided between the US and the USSR, between democracy and communism, and a lot of people are talking about the reemergence of a bipolar world split between the US and China, and of course the political differences continue to exist. But we also have those issues such as the technology supply chain, the internet, the flow of information. So, do you have any views on how that shapes up? And how does... I mean the United States perhaps hasn’t advantages its position over the last couple of years in attracting certain allies to its side. But on the other hand, when you look at the alternative, it would seem that the Western democracies are gonna pretty much have to line up on the US side.
Edward Alden: Yeah, I think that’s actually a very good summary. The answer to the big question: are we moving into a new sort of cold war? I think the answer is yes. I think at some level that was inevitable. I mean, many years ago at Berkley I studied with Ken Waltz who was what they called a “Realist International Political Theorist” and you know the basic framework that he taught us was that great nations always end up becoming rivals with each other. It’s just the way international politics works. And so, the rise of China as an economic power was inevitably going to create greater military security rivalry with the United States. And I think we’re seeing that play out. I don’t see it... And there’s some good stuff being written in many places these days on this topic. I don’t think, from an economic perspective... it’s not gonna be like the cold war with Russia. We had, basically, comprehensive economic sanctions against Russia from very early after the Second World War that stayed in place... export controls for what they call COCOM and a whole bunch of various ways in which the west was trying to squeeze Russia economically, and certainly prevent it from acquiring sophisticated western technology. That’s gonna be pretty hard to do with China. The genie is already out of the bottle. Too many western companies are there. They’ve had access to too much western technology. So, I don’t really think you can put that genie back in the bottle. So, it’ll be, I think, this complicated playing out of some sectors where we’ll see this decoupling. Others where there will continue to be pretty deep integration between China and the west. Big picture: your point about the rest of the world. The rest of the world doesn’t want to make this decision. I mean, the Europeans, Canadians, and others... they wanna get along with China. They want to get along with the United States. I think you’re right. I don’t think that’s possible. I mean, the Chinese... You know, we’re always so critical of our own country. And I could lay out a litany of criticisms of the Trump administration for the way its treated allies, but to me the more interesting thing is how much the Chinese have bungled this opportunity. Rather than taking it as an opportunity to say to the Europeans, to the Canadians, and others, you know, “We’re good, responsible members of the global order. You don’t need to rely on the United States so much. You can strengthen your relationship with China.” China has done a series of incredibly heavy-handed things... jailing the two Canadians in the case involving Meng Wangzhou, the CFO of Huawei, who’s facing extradition... you know, cutting off imports from Australia because Australia had the temerity to ask for an investigation into the origins of the Coronavirus... going after Sweden over the Nobel Prize... I think, you know, and then the Hong Kong security law, which you mentioned, which is perhaps the most egregious of the lot and a violation of the terms of the handover with the UK. I think that the Chinese are pushing the rest of the world back into the American camp and that’s obviously one where the outcome of the election is gonna make a big difference. It’s a very clear message from the Biden camp. If Biden is elected President, job #1 in foreign policy is gonna be to repair the tattered alliances with Europe and other places. I really think there will be open arms to try to rebuild the western alliance in some form. If Trump is reelected, it’s gonna be a lot more complicated because he’s so suspicious of you know, NATO and these other alliances, so that’s one where November is really, I think, gonna make a big difference.
Scott Klimo: Well that’s a great segue way into the final question that I had prepared. At the beginning, in the introduction, I had referenced your book “Failure to Adjust: How Americans Got Left Behind in the Global Economy” ... and one of the things you discuss in there is Peter Peterson who had presented, for lack of a better phrase “industrial policy” during the Nixon administration that never was adopted by administrations of either party. And so, can you tell us a little bit about that, and do you think that, let’s make an assumption that there is a change in administration in November, that there is an opportunity to right past mistakes in that regard and an appetite, a political appetite.
Edward Alden: You’re asking me a lot of tough questions and that’s another one. I mean... the whole process of writing that book was very interesting for me because I’ve been watching these trade debates first as a reporter, and then in my analytical work at the Council of Foreign Relations for about 25 years and had seen this sort of crumbling of public support for trade liberalization and was trying to sort of piece through why that had happened. I mean, the timing turned out to be pretty good. The book came out just before the 2016 election and the trade issue was a big one for Donald Trump. You can make an argument—I would—that trade was the reason he won Michigan. It was the reason he won Pennsylvania. It was the reason he won Wisconsin and Ohio. Places that had been hit really hard by international competition. Basically, I stumbled onto this memo that Pete Peterson who had been the first the first National Economic Advisor to Richard Nixon... later became his Commerce Secretary. He’d written to Nixon right on the eve of the breakup of the Bretton Woods System and it basically said look, we’re moving from this post-WW2 world in which we the United States have the most competitive economy across the board, into a world that’s gonna be very different. The Japanese are coming back. The Germans are coming back. He actually foresaw the rise of what he called the East Asian Rim and said we’re gonna be moving into a much more competitive world and to succeed for Americans in that world, we’re gonna have to do a lot of things that we’re not accustomed to doing. You know, investing much more heavily in education and retraining. We’re gonna have to, you know, focus on infrastructure and research and development and making sure that we are the most competitive economy in the world. And some of that was done, but a lot of it was not done. Clearly, we’ve lost a lot of ground in recent years. And I do think that in a new administration, these issues are gonna be top of mind... the Biden campaign has been pretty clear that a stronger safety net, better health care, universal broadband, investigate infrastructure, are all gonna be on the agenda. That would be a positive outcome. My concern, and you certainly see signs of this, is that we’ll end up moving instead toward this sort of desperation industrial policy in which we’re gonna throw billions of tax dollars at certain sectors we’ve decided, you know, government has decided are important. A lot of that will be in manufacturing even though... the economy is much more of a service economy, and that the digital transformation is real, you know, throwing a lot of money into old line manufacturing is probably not the way you wanna go. So, we could I think, unfortunately, end up with a kind of messed up industrial policy and I hope we don’t go down that road. But all that stuff is on the table right now. I mean, you know I think the US has done unfortunately... partly because, you know, we’re a fundamentally strong economy and the corporate sector has done quite well and in the aggregate we’re very wealthy, we’ve allowed these problems to fester for a long time and I think we’re seeing a lot of that sort of laid bare with the very inept response to the pandemic.
Scott Klimo: Well I guess that’s the kind of trap you can fall in, similar to what Japan has done since 1989 in not dealing with their challenges because, “Eh, we’re all doing fine. It’s good.” So... we have a couple of questions coming up and Ted made me promise that if there were any investing questions, that I would handle those. So, the first one is: when investing in China, do we separate China from Chinese companies? So, I think the answer to that question is to some extent, depending on the type of investment vehicle you’re talking about, if you look at ESG, for example, you probably do want to take into account the overall governance of the country as a whole. Earlier I mentioned the issue of how China is treating the Uyghurs in Urumqi in the far western province, which is a Muslim minority in China, and of course as we both discussed the new security law in Hong Kong. And these are things that may simply dissuade people from wanting to participate in the companies that are listed there. On the other hand, if you’re not an ESG vehicle, if you’re simply looking straight for returns, there are some fantastic opportunities. There are some really great Chinese companies. One of the areas that I think has been most interesting for the last several years has been to look at the companies that replicate what American social media, ecommerce platforms, dominant platforms, have done since obviously Google and Facebook and for all intents and purposes Amazon can’t participate in China. And so, domestic champions of those activities whether it’s Baidu or Alibaba or Tencent have arisen and they’ve been absolutely fantastic investments over the past several years. So, really it kinda depends on your individual biases in that regard... whether or not the governmental activity is enough to cause you to want to avoid the country, or whether you just care to look for the best possible investments.
Edward Alden: Scott, can I actually... can I sort of ask a question out of that? As well.
Scott Klimo: Sure.
Edward Alden: How do you sort of think about political risk in that context? Take an example like TikTok. I have no idea... I know very little about the company other than that my son and everybody in his generation likes it, but suddenly, you know, they’ve got blocked out of India because of the India/China border disputes. They’re pulling out of Hong Kong because of concerns about the security law. Secretary Pompeo saying this week that the US should block TikTok from access to the United States. So, at what point do you have to kinda think about that political stuff? Even in relation to these sorts of dynamic social media and other companies?
Scott Klimo: I think the answer to that is... to what extent are they exposed to that risk? I mean TikTok because it is quite popular here in the US, and in other areas that it certainly carries that risk. If you look at a company like Tencent, I mean sure, I can download WeChat on my phone and I’m actually currently sheltering during the pandemic in Vancouver, Canada, and WeChat is pretty popular here, not surprisingly, among the Chinese population. And so, they do have some exposure, but in terms of its business they’re 99.5% China. So, they don’t really have that sort of exposure. And I guess Alibaba is somewhat similar. You can purchase items through Taobao which is their ecommerce site, but it’s primarily a domestic place. TikTok really is the first time we’ve seen that kind of Chinese internet social media type company springs across the globe and has created that risk for it.
Edward Alden: Scott, can I actually throw in a follow up on that as well. You know, I’ve been watching a bit of what’s coming out of Washington in terms of potentially restricting the ability of Chinese companies to list on US stock exchanges. The ostensible reason being their refusal to abide fully by American disclosure requirements. Does that matter much? I mean, if some of the big Chinese companies effectively get kicked off of the New York Stock Exchange or other US stock exchanges? Does that have a negative effect or are there plenty of other places in the world for them to raise capital?
Scott Klimo: There, historically there’s always been the Hong Kong option. And Hong Kong has been somewhat less willing to overlook certain reporting and regulatory requirements for whatever reason, than the United States has been. And of course, we just this year had the cautionary tale of Luckin coffee which had fictitiously created a large portion of their sales and was listed here in the US. But, as China puts the security law into effect, you have to question, “Well, what is the longer-term future of Hong Kong as a source?” And so, it could potentially be an issue for them over the longer term. I don’t think it’s a huge issue today. Chinese markets, of course, are generally closed. Many, many Chinese companies are listed in Hong Kong. There is a mechanism for investing back and forth between Hong Kong and China, but the security law really potentially throws a monkey wrench in that. And so it could have an impact, but it’s not as if we’ve seen a tremendous number of Chinese companies that have taken that route. Alibaba, initially, listed here but they can list anywhere. It’s a fantastic company. People will pay attention. Baidu, similarly. And so it doesn’t strike me as something that’s a significant obstacle. And so I would like to thank everyone who’s joined us today for the webinar and would especially like to thank Ted for a fantastic presentation and insights into supply chains in China and what’s happening and we all get to observe the developments in November and see how this pans out. Thank you very much.
Edward Alden: Great to be with you, Scott. Thank you and thanks everybody on the call.
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