Global Economic and Political Issues
In an article written and published by Ed Crooks on January 6, 2011 entitled “America: Riveting Prospects,” he writes about why companies in America are opposed to exporting.
To summarize his article, showcased is the Middle River Aircraft systems plant where the world famous Rosie the Riveter, during the second World War, represented the millions of women that joined the manufacturing workforce making the industry a power house, and compared it to today’s meager offerings. The plant that is now owned by GE, although still thriving has faced some tough times through the years. Although weathered by the storms, the president of GE’s aircraft parts division has hope for a brighter future.
Although some political leaders and some American businesses also have hope in rebuilding growth and employment based on manufacturing, production, exporting and earnings and less on construction, consumption, importing and debt, leaders of some of America’s largest manufacturing companies feel that it will be a long hard road to rebuild production in the U.S. GE’s chief executive Jeff Immelt, however, shares with Andrew Liveris of Dow Chemical the dream of restoring industrial America to greatness, especially with unemployment at 9.8 and rising. Liveris has even written a book on the topic of how to be competitive on a global basis, “Make It in America: The Case for Reinventing the Economy.”
Ed Crooks, however, claims that many U.S. companies, overall, has issues with exporting. Although the world offers many opportunities and America is seeing some of the benefits with emerging markets in China, India and Brazil and creating everything from a-z, Barry Botsworth of the think-tank, Brookings Institution, states that although the U.S. is similar to other developed countries in importing, we are very poor when it comes to exporting manufactured goods. Other industry executives agree that the problems with U.S. manufactures run deep. Ed Crooks has given five reasons to support his view and I summarize them as follows:
* American industries are not familiar with selling internationally. According to the chamber of commerce, only one percent of U.S. companies participate in exporting and 58 percent of those companies only export to one other company.
* The United States has been the most inactive entity at signing agreements to participate in international trade. With about 262 agreements around the world and about 100 in negotiations, the U.S. has only signed 17. In addition, the U.S. is severely affected by tariff barriers and ranks number 8 out of 121 ‘tariff-faced’ exporting countries.
* U.S. manufacturers have inefficiently skilled and inefficiently educated workforces which threaten the industry base to fall into disrepair, job opportunities to dwindle and closing of production lines. Furthermore, without a strong pipeline of industrial talent in the future, there will be no capacity for future opportunities, no chance of developing new market segments, or creating the next innovation in aerospace, which will further deteriorate the industrial base of the U.S.
* With the emerging economies furthering skills and facilities, there us the opportunity for them to replace production in the U.S. and other developed countries. An example is Lewis Chenevert of United Technologies that manufacture Otis Lifts and Pratt & Whitney Jet Lines who stated that by the year 2013 he planned to source 40 percent of his business to Poland, China and Mexico because of the low-cost economy.
* Large U.S. companies like to manufacture where they sell which means the American companies make more money in their foreign operations than they make by exporting goods to other countries. This means that U.S. owned foreign companies make about three times more than the U.S. domestic owned companies that export their goods.
I can totally see the trouble we are in and something must be done. As a business we are in the business to make money. However, it seems that in order to make money you may have to hurt some people along the way. Foreign owned business only seems to help the foreign land they are in and it would seem to me that the only winner is the company that manufactures from those countries. It does nothing to help the U.S. economy.
When it comes to which side of the story I reside between the economist and the industrialist, I believe I would have to side with economists. Everyone cannot be in the manufacturing industry and where we run short in that arena we have other tradable skills that we should sharpen. Although we should never give up on the industry or just give it away, we need to find some balance in order to make the industry strong again. I recently heard about a particular product that salons use on natural hair. The product was created by a woman in her kitchen in 1993 and contained no mineral oil or animal fats. She used the best ingredients but along the way operated in the red. Last year it was reported that the company was filing bankruptcy and people were losing their jobs after 5 stores closed. Yesterday it was announced that L’Oreal has acquired the company, Carol’s Daughter. It saves her from going bankrupt, it saves her leadership team, but her production people lost jobs. It will now be available internationally. It seems to me that she had no choice. She is now directing her attention to other services and is in partnership with other companies.
International trade is important, however, how we trade and if we should trade is still debated. In the example that I gave with Carol’s Daughter, she took the path that was best for her. However, we can see that unless we are more proficient at trading we will not be able to quantify any real gain for the masses. As usual, some benefit and others don’t. As Mr. Franklin Vargo of NAM, the nation’s largest industrial trade association stated in the article written by Ed Crooks, “The future is not yet written; it is not black. But it could be disappointing. (Vargas, 2011)”
Crooks, E. (2011). America: Riveting prospects. Financial Times, 1-4.
Vargas, F. (2011). Quote. Financial Times, 3.