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An American company? A German corporation? Think again

  • Published at 05:04 pm November 24th, 2017
  • Last updated at 01:25 am November 25th, 2017
An American company? A German corporation? Think again
Donald Trump was the first Republican presidential candidate I did not support; having worked for the campaigns of both Bob Dole in 1996 and George W Bush in 2000, my backing of a Republican nominee for president of the United States has been a given. Until now, that is. Of the several key reasons the 2016 Republican nominee failed to elicit my support was his intellectually naïve conception of international trade, an issue which has significant resonance with yours truly, who double majored in economics as an undergrad, got an MBA, and then a doctorate in business, and now works as a business effectiveness professional. Unfortunately, President Trump’s haphazard pronouncements during his Asia Pacific tour only confirm my fear that he deliberately projects a misunderstanding of the role of trade in the economic health of the US and almost every other developed country. I purposely use the phrase “deliberately projects a misunderstanding” because I believe Mr Trump to be a smart man with an astute sense of business, and he probably understands well the foundational aspect of trade for the US economy, but exudes a veneer of naïve populism to keep his political base happy. The stark truth of the matter today is that when it comes to major businesses in the big economies, there is no such thing as an “American” or “German” or “French” company. It is not just a philosophical perspective, but a lived one for most people on either side of the Atlantic -- and increasingly the world over. My car is a Jeep, an iconic brand of American yore; it is manufactured in the US by Chrysler Motors which is owned by Italy’s Fiat Conglomerate; a third of the parts for that manufacturing process comes from Canada and Mexico; 40% of the raw material metals going into the parts are extracted from mines in China, Africa, and Russia, with the mining operations themselves underwritten by banks whose stocks trade on the FTSE exchange in London among several other bourses. Most of the “Japanese” and “German” cars sold in the US are built in America by an American workforce. What about the people who own these companies, you say? Check out who owns the stocks and which bourses it is traded; sitting smack dab in the middle of the US, I have shareholding -- directly or through mutual and pension funds -- in automobile companies that are “American,” “Japanese,” and “German.”
The pace of globalisation is almost on auto-pilot and can at best be slowed down rather than stopped
Now, extrapolate that sense of deep integration of value production from cars to almost any durable household product or tangible service like banking and film-making, and it becomes rather painstakingly clear how the supply chain of just about any finished product or service anywhere in the developed world has long broken through any concept of “nationality.” It is no surprise to anyone -- except perhaps Mr Trump’s most zealous cheerleaders -- that one in four full-time jobs in the US are directly dependent on international trade, and the numbers go up even higher when indirectly supported jobs are counted. Chances are very high that a similar dependence on trade is the cornerstone of the modern economies in Western Europe, Canada, Japan, and Australasia. The zero-sum paradigm in which international trade was discussed until the 1990s is simply untenable as a reflection of reality, no matter how ardently President Trump, his fans at home, and his “mini me” clones in Poland, Austria, Hungary, or India wish it were otherwise. The integration of the supply chains, the diffusion of ownership, and the cross-border movement of capital with ease has created a dynamic which has accelerated the pace of globalisation, a pace which is almost on auto-pilot and can at best be slowed down rather than stopped with public policy moves; unless, that is, policy-makers are willing to risk a worldwide economic meltdown that would make the Great Depression look like child’s play in comparison. Overall, consumers have been big winners in the process of globalisation. Nonetheless, there has been pain when such integration of economies has been coupled with advancing automation technology: Those who have refused to become spectacularly agile in response to continuously evolving geographic, educational, and career dynamics, are being left behind; it’s the angst of this rather large -- and heretofore sheltered by economic borders -- group that is propelling the dubious protectionist agenda of President Trump, his populist allies in congress, and their myriad of copycat admirers in Europe and parts of Asia. This “left behind” group, when allied to nativist tendencies, is an immense potential risk to the international economic order. Greater efforts to integrate it through a combination of greater investments in training, relocation help, and indeed, temporary public work schemes may become an absolute necessity to keep the trajectory of growth and prosperity going upwards. The block of those whose erstwhile -- albeit subsidised by protectionism – middle-class lifestyles have been upended by trade and automation is minority big enough to cause massive disruptions to economic growth; ignoring them is a peril free-traders should not risk, or else there will be a whole plethora of mini-Trumps in Europe, even beyond the current Hungarian and Polish strongmen. Esam Sohail is a college administrator and social sciences lecturer in Kansas, USA.