Trade talk

It is said that the primary Tuesday in Wisconsin will depend in part on how the voters think about trade. Now, I don’t for one moment believe that Trump voters really care about trade; and if they did, no one is stupid enough to believe that Trump can make good on this claim to be able to bring jobs back. But it is possible that the Democratic voting will in some sense be about trade.

Let’s consider how trade across borders works in the real world, in 6 anecdotes:

1.   A friend of mine used to be in the strategic team at TRW, the big auto parts manufacturer. Once (I don’t know the exact year, but it was the ‘80s, which is important to this discussion), TRW decided to test a potential supplier in China. So it sent a sample part (not engineering drawings) to China to be copied.

The original part had an inconsequential bump on it that had not been ground down. The sample came back with the bump reproduced exactly.

That is one marker of the end of the American auto parts sector.

2.   In1985, Firestone Tire closed a plant in Iowa. I asked why, since the rapid growth of countries like Japan, South Korea etc. was elevating tens and hundreds of millions of customers from shank’s mare to motorbikes and autos.

I was told (by the head of North American operations) that there was no growth potential in tires because automakers were phasing out spare tires on their new cars.

3.   Sometime in the mid-1990s, Maui Pineapple Company requested bids to supply tinplate can tops with “100% Maui pineapple” printed on them.

The potential was for billions of lids.

At this time, the American steel sector was shrinking and complaining mightily about unfair competition from imports.

The president of Maui Pine told me he would have preferred an American supplier, but not one made a proposal.

4.   In 1958, American automakers had their best year. Their cars were outmoded junk: you could not get a four-speed transmission or independent suspension. It would be 20 years before you could get radial tires. Drum brakes were barely capable of slowing down two-ton cars. Reliability was so poor that when my family bought a 1959 Chevrolet, the transmission failed as it drove off the dealer lot.

By 1987, General Motors cars were unsalable at any price to customers; only GM’s captive rental companies, Hertz and Avis, would buy them.

5.   In 1985, I was writing editorials in the Des Moines Business Record about the collapse of the farm-implement manufacturing business in Iowa.

Production was moving to right-to-work states. Reaganomics fans were cheering. I wrote that the jobs were not going to stop in South Carolina; they were going to go to South Korea.

I was wrong, because I did not foresee in that China would open up as fast as it did. The jobs went to east Asia, as I expected, but more to China than to South Korea or Taiwan.

I could go on, but you get my drift. NAFTA didn’t go into effect until 1994.

Despite what Trump, Clinton or Sanders like to say, it was not the international trade treaty that caused the collapse/migration of US industrial jobs. It was the unbelievable stupidity and incompetence of American industrial management.

It wasn’t unions, either. It was the unbelievable stupidity and incompetence of American industrial management.

6.   American industrial jobs would have migrated overseas anyway but it is true that Republican policies in the ‘80s hurried them along. It is possible that with smarter management the process could have been slowed, and with smarter investment, the total of lost jobs could have been lessened.

However, Reaganomics was in large part about impoverishing American workers. The idea was to break unions by exporting jobs.

It worked, although not exactly as planned. In the id-‘80s, an international business consultant told me this story:

He was discussing the offshoring not only of jobs but also of industrial machinery. As an example he took a large lathe that was moved to Taiwan. A Reaganite assured him that once American workers came to their senses about pay, the lathe would be brought back and the jobs reopened.

The consultant told me, “He did not understand that once the Taiwanese manager saw that he could generate a million dollars a month, he would get his own lathe.”

And so it happened. The discontent being mined by the Republicans was created by them.