Articles appear in every major business and economics periodical opining on the loss of free trade being heralded by Trump’s criticism of US trade contracts; China’s requirement to source a minimum percentage of domestic raw goods; and Brexit (Britain’s exit from the European Union). While experts far knowledgeable about the subject than yours truly opine that any loss of free trade is a bad thing, I myself abide by two tenets:
Don’t Shoot Yourself In The Foot, and Use Common Sense.
While my first principle doesn’t apply here, the second one does. Specifically, we’ve witnessed the manufacture of US goods get outsourced to the extent that, as Donald Trump stated, paraphrased “When I bought TVs for my hotels I was forced to buy Samsung because the US doesn’t make TV sets anymore.” Or, pick up any good and ask yourself where was it made. Or, witness that there are websites, albeit few of them, which sell only US made goods.
And so, I ask, “What is the result from having absolutely everything produced overseas?” The result is not good, since without plants and factories we lose the bedrock of the country, and more generally the bedrock of any company. As Harvard Business Review in its December issue showed, a company without assets, i.e. a technology company, doesn’t remain a leader for very long.
And so Common Sense suggests that we need companies here producing things. To what extent? Rarely are things black and white and I feel that we need sufficient companies to regain competitiveness globally and to increase manufacturing employment to a level which economists agree is fundamental to the long term.
Michael Emerald, CFA
Consultant, Wall Street Securities Analyst.