The very concept of “trade” took a beating in the American presidential campaign from across the political and ideological spectrums. The Trans-Pacific Partnership (TPP), a trade deal among 12 nations in Asia and the Americas, is dead. In Europe, Britain is making its “Brexit” from the European Union, roiling trade relationships across the continent. Pundits are suggesting that after several decades of steady expansion, many nations and regions are seeking to roll back the tide of trade. They increasingly see it as a destructive force. This is seriously bad news for many American CEOs.
We therefore propose a modest agenda that, if embraced, might mitigate the rising anti-trade fervor. CEOs of small and medium-sized manufacturing companies (SMEs) have a particularly good story to tell because these companies comprise 97 percent of all U.S. identified exports and their share of export value is rising—a fact that is visible to the communities in which they function. CEOs of companies of more than $1 billion in sales typically locate some manufacturing abroad as part of their go-global strategies. According to a report by American Express and Dun & Bradstreet, 34 percent of firms with $1 billion or more in annual revenues are engaged in exporting products or services. This activity also has clear positive impact at home.
The largest companies, however, have the biggest communication challenge because the economic payoffs of their global strategies are the most subtle. That’s one reason why Apple, for example, is in the political crosshairs for making all its products in China and Ford Motor and the Carrier division of United Technologies have faced criticism for shifting jobs to Mexico. But, ultimately, all CEOs engaged in trade have common cause in defending it.
WHAT CEOS SHOULD BE SAYING AND HOW
America represents just 4.4 percent of the world’s 7.1 billion people. Take every opportunity to explain that for any company to be successful and to defend itself against foreign competitors, it must have an international strategy.
Help spread the message that exports are a vital wealth-creation tool, not just for the wealthy elites but also for average people working in factories or supplying those factories.
Explain a key piece of evidence supporting this argument: that wages in export-intensive industries were 16 percent higher than wages in industries that tended to stay at home in 2015, according to International Trade Administration (ITA) of the U.S. Department of Commerce.
Tell people that trade is not a one-way street. Yes, jobs in textiles, furniture, shoes and electronics have been lost, but millions of jobs have been created in niches where American companies play leading roles in their fields. The Commerce Department says that exports supported 11.5 million American jobs in 2015. Of that, the export of goods, as opposed to services, accounted for 6.7 million jobs.
Attack the myth that “Americans don’t make things.” Aside from jetliners from Boeing, turbines from General Electric and semiconductors from Intel, smaller companies often play leading roles in manufacturing niches such as scientific and medical instruments, fire-fighting and prevention equipment, heating and ventilation equipment, valves, and water-pollution control technologies, to name just a few. These products tend to be sold to foreign businesses, not consumers, which is one reason they are not as highly visible as, say, Starbucks or McDonald’s.
Don’t use the term “Free Trade.” Completely free trade is just a myth and, in today’s environment, that phrase is seen as the enemy. It’s much the same with the terms “globalization” and “globalism,” which have taken on sinister overtones. Instead, talk about creating winning international strategies for American companies and their communities.
Note that exports help create economic growth for all of America. In the third quarter of 2016, exports were cited as one factor that resulted in an annualized GNP growth rate of 2.9 percent. Altogether, 293,000 companies exported goods or services in 2015.
Explain that just because you have built or are building a factory in another country does not mean you are taking jobs away from Americans. It’s quite possible that you are defending their jobs if that factory helps your company achieve greater sales and compete better against foreign rivals.
Be very public about the gains you have achieved from trade. Many communities know that factories are hiring and offering great wages, but they may not understand why. Go talk to the Lions Club or the Kiwanis. Brag about it in your annual report.
Encourage your staffers and other executives also to talk about it. Invite reporters in to your factories to witness wealth creation. Job losses make headlines but the gains in new jobs don’t.
WHAT CEOS SHOULD BE DOING IN THEIR BUSINESSES
Offer more training and retraining to existing employees to prevent them from becoming “obsoleted.” Explain that if they don’t upgrade their skills, their jobs could be on the line. This discussion doesn’t happen candidly enough or often enough.
Create alliances with vocational schools and community colleges to identify young people who might be interested in working for your company. Help shape the curricula of those schools by sitting on advisory panels. Provide old equipment so that students can train on it. Send in executives occasionally to teach a class. Create apprenticeship programs such as the ones that exist in Germany.
Pay a percentage of the costs of retraining existing workers and training new
ones. That sends an incredibly positive message not only to employees but also to communities and states.
Take a hard look at the complete cost of going offshore. The Chicago-based Reshoring Initiative, a nonprofit that encourages companies to consider bringing jobs back to the U.S., has created a formula for evaluating the complete costs, including the hidden “coordination” costs, or moving factories offshore and sending engineers and executives to manage them. Fewer CEOs would move manufacturing offshore if they did rigorous analysis, the Reshoring Initiative argues.
If you are considering moving some manufacturing back to the United States, work with state and city governments, as well as community colleges, to see what incentives and training programs are available. Finding workers with the right skills sets is key.
If you build a plant abroad, try to help your U.S. suppliers “piggyback” on your efforts. Helping them to go global serves your long-term corporate interests and yields even more benefits to your home geography.
If you are one of the CEOs with large profits still held offshore, a figure that amounts to more than $2 trillion in all, take advantage of a long-awaited deal with the U.S. Treasury to bring the money home at a reduced rate of taxation. Average Americans would feel the effects of an infusion of that much capital.
This approach, if embraced, would have a positive impact on the American debate about trade, which appears certain to intensify as Donald Trump takes office. Revving up the success of American companies and their international strategies—and explaining why that is important—would be a far more effective way of generating jobs than imposing tariffs on goods made in China and Mexico. American tariffs could generate retaliation from other governments. It’s an important argument—and there’s no time to waste.