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Bill Owens: Made In India - And Where Else?

Surprise—India has a “Made in India” program! This program was highlighted during the process of Boeing entering into contracts to build fighter aircraft for India’s military. As you may have surmised, the “Made in India” requirement is very similar to “Made in America” provisions that exist at the federal, state and local levels in the US.

Programs such as Made in America, and the proposed tariff increases that are trumpeted by the president-elect in response to companies moving jobs overseas, clearly pose substantial risk to our economy. The United States exports goods and services worth $2.2 trillion per year—exports that provide employment for 9.8 million US workers. As the US increases the application of the Made in America program, so will other countries. You can look to history to see the effects of such actions.

In 1930, in the early stages of the Great Depression, the Smoot-Hawley Tariff Act was enacted, effectively raising duties to an average of 50 percent. This generated a world-wide increase in tariffs that resulted in a dramatic decline in international trade and increased costs to consumers in most nations. Many believe it exacerbated and lengthened the Great Depression. There is some likelihood we are beginning to travel down that road again, and without careful analysis and understanding, this could have dramatically negative outcomes.

This is not to say that work does not need to be done on trade agreements. There is no doubt that China has manipulated its currency for the sole purpose of increasing the volume of its exports, but at the same time, one has to recognize that there is a distinct difference in how currency exchange rates are set in the Western world versus in countries such as China, Russia and other Asian economies. The contrast between government manipulation of currency exchange rates for the purpose of enhancing a particular country’s economic output, and the Western world where the market controls currency exchange rates, must be noted and analyzed.

Those of us who live along the Canadian border are well aware of the softening of the Canadian dollar over the last several years, and if one simply applied an uninformed methodology, it might result in a conclusion that would place Canada and China in the same bucket. It is clear that Canada’s weakening currency versus the US dollar has directly resulted in the decline in the price of oil, which has had a dramatic negative impact on the Canadian economy and its GDP—in other words, a legitimate economic outcome.

The structure of the Trump cabinet is decidedly anti-trade, which may very well result in knee-jerk reactions to international market activity. One of the great difficulties with trade agreements is the relative inflexibility as circumstances change. If we look at NAFTA, which was negotiated and signed into law over 20 years ago, the NAFTA countries’ economies have changed dramatically. Many would say, and I would certainly be one of them, that there has been a significant benefit to all three economies from NAFTA. However, one should also recognize that certain sectors of the US economy have been adversely impacted. The issue is whether or not those negative impacts would have come to pass even without NAFTA.

How much impact has technology had in manufacturing? Are we currently manufacturing the wrong products? Have we provided the appropriate training for our workforce? A recent 60 Minutes segment focused on a small community in Georgia that, through the efforts of an innovative and aggressive economic developer, has, in fact, brought jobs back to a community suffering tremendous economic pain. If one looked at the jobs displayed during the report, you saw heavily automated manufacturing facilities.

We have also failed to create any policies which encourage skilled workers to move to areas where those skills are in demand. Such a move is difficult emotionally and economically, but it is the new reality. The world is not only globalized, but it has been, in effect, mobilized, and one cannot assume that work will be provided in one’s home town indefinitely.

The question for programs like Made in India is whether the gains will exceed the losses. Not an easy analysis—nonetheless, we need to understand the consequences. The worst outcome is a viscerally appealing message that will lead to greater job loss.

Mr. Owens is a former member of Congress representing the New York 21st and a Senior Advisor to Dentons.

The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.

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