What if the premise for much of our trade dialog is outdated? What would be the implications to the debate about manufacturing employment?
A study recently published by the Wharton School of Finance suggests that most manufacturing investment is motivated by market access. In other words, the majority of investment in manufacturing in the US appears to be coming from Asian & European firms who are making those investments to gain access to the attractive US market.
Many assume that manufacturing location decisions are driven primarily by production costs. Certainly that was a huge factor in many outsourcing decisions, and is an element of analysis today. “But these days, we observe much more complexity in their decision-making, and in terms of the outcomes that we observed” commented one of the study’s authors.
So if reshoring is limited because US manufacturers “already have that access to the (US) market, and therefore the incremental benefit to them is not as great”, and the growth in US manufacturing investment is driven by foreign companies seeking market share here, then what does that mean to the trade debate? Is the goal to:
- increase US employment? In that case FDI should be encouraged, and bellicose language around trade discouraged
- restrict opportunities for subsidiaries of foreign companies which are incorporated in the US and employ American workers? Then there must be a recognition that reciprocity will mean US companies will face struggles as they seek to manufacture locally elsewhere in an effort to gain access to other attractive markets
Is there a downside, absent artificial barriers, to allowing consumers globally to select from a wide range of products according to their tastes , whether manufactured by US companies domestically and exported; manufactured locally by US owned subsidiaries; manufactured internationally and imported to the US; or manufactured here by domestic subsidiaries of foreign companies?
But not necessarily increased employment
What’s clear is that an increase in manufacturing doesn’t guarantee an increase in high wage employment….or any employment at all. Technology’s relentless march on labor continues. Recent news reports highlight vaporizing employment across the spectrum of jobs — from cerebral stock picking and investment decisions to high-paying blue collar longshoreman jobs (which would theoretically increase with both import and export trade.)
And that’s creating a nascent public health crisis
Joblessness is killing middle aged displaced workers — indirectly of course, but nevertheless there’s apparent correlation. And yet this topic doesn’t appear likely to make the public debate. Instead companies squeezed from one side by shareholder litigation face public pillory on the other. And public discourse turns to an absurd exploration of currency manipulation — absurd because every country manipulates to the extent they can in support of strategic goals.
Those who are hurting worst are teased with promises of policy reactions which will offer only ephemeral relief.
Change the discourse
In the interest of those without jobs, therefore, isn’t it reasonable to foster FDI by foreign companies that wish to manufacture here?
And shouldn’t we discuss the plight of our middle aged workers?
