The real reason manufacturing jobs are disappearing | Augie Picado
Summary
TLDRThis script addresses the misconceptions surrounding protectionism and its impact on global trade. It uses Cuba and North Korea as examples of restrictive trade policies and argues that protectionism, often touted by politicians, is not a solution to domestic economic issues. The speaker, a supply chain professional, explains that automation, not offshoring, is the primary cause of job losses in the U.S. manufacturing sector. The script highlights the interconnectedness of global supply chains, emphasizing the benefits of shared production for efficiency and cost-effectiveness, and warns against the high costs of protectionist measures.
Takeaways
- đ The script begins with a comparison of Cuba and North Korea to highlight the negative effects of protectionist trade policies on economies and citizens.
- đ It mentions that North Korea is often associated with missile tests and leadership rather than an open economy, contrasting with the common perception of countries with protectionist policies.
- đą The speaker aims to use Cuba and North Korea as examples to discuss the broader issue of protectionism and its impact on global trade and domestic industries.
- đłïž Protectionism has been a significant topic in recent political discussions, including the 2016 U.S. presidential election, Brexit, and the French elections.
- đ The script argues that while some believe protectionism can protect domestic industries, it often leads to a loss of jobs and economic stagnation.
- đ ïž Automation, not offshoring, is identified as the primary cause of job losses in the U.S. manufacturing sector, accounting for 87% of the losses.
- đ The speaker, a supply chain professional, emphasizes the interconnectedness of global manufacturing and the complexity of modern trade networks.
- âïž An example of an aerospace company's manufacturing process illustrates the global nature of production, involving multiple countries and components.
- đ The script encourages the audience to look at the labels on their products, which often reveal a blend of domestic and foreign parts, indicating shared production.
- đ Economist Michael Porter's concept of focusing on efficient production and trading for the rest is highlighted as a beneficial approach for countries.
- đĄ The script uses the analogy of a general contractor coordinating different experts to explain the importance of specialization and efficiency in production.
- đ The potential economic consequences of imposing tariffs, such as increased costs for consumers, are discussed, emphasizing the interconnectedness of the U.S. and Mexico trade.
- đ The script concludes by questioning the logic of driving up prices through protectionist measures to save jobs that are likely to be lost to automation anyway.
Q & A
What are some common perceptions about Cuba and North Korea?
-Common perceptions about Cuba include classic cars and good cigars, while North Korea is often associated with missile tests, their notorious leader, and the unusual friendship with Dennis Rodman.
What is protectionism and why has it been a topic of discussion in recent years?
-Protectionism is a trade policy that restricts imports and protects local industries. It has been discussed in recent years during events like the 2016 U.S. presidential election, Brexit debates, and the French elections, with political leaders advocating for it as a beneficial strategy.
Why do some people blame trade for the loss of high-paying U.S. manufacturing jobs?
-Some people believe that trade agreements like NAFTA and the Trans-Pacific Partnership allow companies to move operations offshore to countries with lower-cost labor, leading to a decline in U.S. manufacturing jobs.
What is the actual cause of job loss in the U.S. manufacturing sector?
-The majority of job losses in the U.S. manufacturing sector, about 87 percent, have been due to improvements in productivity through automation, not offshoring.
How does the speaker describe the global supply chain and its impact on manufacturing?
-The speaker, a supply chain professional, describes the global supply chain as a highly connected network of manufacturers from around the world collaborating to produce products. This interconnectedness makes it nearly impossible to produce products in just one country.
Can you provide an example of shared production from the script?
-An example given is the manufacturing of airplane tail assemblies in Mexico, using panels made in France and components from the U.S., which are then assembled in Canada with other parts to form a complete airplane.
What does the speaker mean by 'shared production' and why is efficiency important in this context?
-Shared production refers to the collaborative manufacturing process where different parts of a product are made in different countries. Efficiency is crucial as it allows countries to focus on producing what they can produce most effectively, trading for the rest.
How does the speaker compare shared production to the process of building or renovating a house?
-The speaker compares shared production to the process of building or renovating a house, where a general contractor coordinates the efforts of various specialized contractors, emphasizing the importance of using experts for efficiency and quality.
What is the economic impact of imposing a 20% border tax on imports from Mexico, according to the script?
-Imposing a 20% border tax on imports from Mexico could lead to a tit-for-tat situation where Mexico imposes a similar tax on U.S. imports, potentially increasing duties by more than 40% and adding an extra 80 billion dollars in costs.
How would increased duties due to protectionist policies affect the prices of consumer products?
-Increased duties could lead to significant price increases for consumer products. For example, a Lincoln MKZ car could increase in price from $37,000 to $48,000, and a Sharp 60-inch HDTV could go from $898 to $1,167.
What is the speaker's final argument against protectionism?
-The speaker argues that protectionism drives up prices to the point where many people can't afford basic goods, and for the purpose of saving jobs that might be eliminated due to automation in a few years anyway, which is not a sensible trade-off.
Outlines
đ Impact of Protectionism on Global Trade
This paragraph discusses the common perceptions of countries like Cuba and North Korea and contrasts them with the idea of an open economy. It highlights the negative effects of protectionist trade policies that restrict imports to protect local industries. The speaker uses recent political discussions to emphasize the prevalence of protectionism and challenges the notion that it is beneficial, citing the loss of US manufacturing jobs not to offshoring but to automation. The paragraph also introduces the concept of shared production in the global economy.
đ The Reality of Global Supply Chains
The speaker, a supply chain professional, provides an example of the complex nature of global manufacturing by describing the production process of an airplane tail assembly. The components are sourced and assembled across multiple countries, illustrating the interconnectedness of global trade. The paragraph emphasizes the inefficiency of trying to produce goods in a single country and the importance of focusing on efficient production and trading for the rest. It also discusses the potential economic repercussions of imposing tariffs, using the US-Mexico trade relationship as an example.
đ° The Consequences of Protectionist Policies
This paragraph delves into the potential costs of protectionist measures, such as a hypothetical 20% border tax between the US and Mexico, and the retaliatory actions that could follow. It explains how these additional costs could significantly increase the prices of various consumer goods, affecting everyday life. The speaker argues that even if all manufacturing were to return to one country, it would not save the majority of lost jobs, which were due to automation. The paragraph concludes by advocating for the benefits of shared production and efficient cross-border trade.
Mindmap
Keywords
đĄProtectionism
đĄTrade Policy
đĄManufacturing Jobs
đĄAutomation
đĄShared Production
đĄSupply Chain
đĄEconomic Interdependence
đĄNAFTA and TPP
đĄProductivity
đĄConsumer Goods
đĄEconomist Michael Porter
Highlights
Cuba and North Korea are used as examples of countries negatively affected by trade policies that restrict imports and protect local industries.
The speaker challenges the notion of protectionism, a topic prevalent in recent political discussions such as the 2016 U.S. presidential election and Brexit debates.
The perception that trade is unfair and contributes to job losses in the U.S. is discussed, particularly in the manufacturing sector.
Contrary to popular belief, most U.S. manufacturing job losses are due to automation rather than offshoring, with 87% of jobs lost to productivity improvements.
The global impact of automation on manufacturing jobs is highlighted, showing it's not a phenomenon unique to the U.S.
The speaker, a supply chain professional in Mexico, describes the interconnectedness of global manufacturing networks.
An example of a multinational aerospace company's manufacturing process illustrates the complexity and global nature of product assembly.
Economist Michael Porter's concept of shared production for efficiency is introduced, emphasizing the importance of focusing on what a country can produce most efficiently.
The analogy of a general contractor coordinating different experts for a construction project is used to explain the benefits of shared production in the corporate world.
The interconnected and interdependent global manufacturing network makes it nearly impossible to produce products in isolation.
Shared production between the U.S. and Mexico represents 40% of the half a trillion dollars in trade between the two countries.
The potential economic impact of imposing a 20% border tax on imports from Mexico and the retaliatory measures is discussed.
The cost implications of increased duties on consumer products, such as cars and electronics, are highlighted, showing significant price increases.
The impracticality of dismantling the global production network and the limited job preservation from protectionist measures is emphasized.
The benefits of shared production, including higher quality products at lower costs and efficient use of resources, are underscored.
The importance of efficient cross-border movement for the effectiveness of shared production is stressed.
The speaker concludes by urging the audience to reconsider the idea of protectionism as a good deal, arguing against its merits.
Transcripts
When someone mentions Cuba,
what do you think about?
Classic, classic cars?
Perhaps good cigars?
Maybe you think of a famous baseball player.
What about when somebody mentions North Korea?
You think about those missile tests,
maybe their notorious leader
or his good friend, Dennis Rodman.
(Laughter)
One thing that likely doesn't come to mind
is a vision of a country,
an open economy,
whose citizens have access to a wide range of affordable consumer products.
I'm not here to argue how these countries got to where they are today.
I simply want to use them as an example of countries and citizens
who have been affected, negatively affected,
by a trade policy that restricts imports
and protects local industries.
Recently we've heard a number of countries
talk about restricting imports
and protecting their local, domestic industries.
Now, this may sound fine in a sound bite,
but what it really is is protectionism.
We heard a lot about this during the 2016 presidential election.
We heard about it during the Brexit debates
and most recently during the French elections.
In fact, it's been a really important topic
being talked about around the world,
and many aspiring political leaders
are running on platforms positioning protectionism as a good thing.
Now, I could see why they think protectionism is good,
because sometimes it seems like trade is unfair.
Some have blamed trade
for some of the problems we've been having here at home in the US.
For years we've been hearing
about the loss of high-paying US manufacturing jobs.
Many think that manufacturing is declining in the US
because companies are moving their operations offshore
to markets with lower-cost labor
like China, Mexico and Vietnam.
They also think trade agreements sometimes are unfair,
like NAFTA
and the Trans-Pacific Partnership,
because these trade agreements allow companies
to reimport those cheaply produced goods back into the US
and other countries from where the jobs were taken.
So it kind of feels like the exporters win
and the importers lose.
Now, the reality is
output in the manufacturing sector in the US
is actually growing,
but we are losing jobs.
We're losing lots of them.
In fact, from 2000 to 2010,
5.7 million manufacturing jobs were lost.
But they're not being lost for the reasons you might think.
Mike Johnson in Toledo, Ohio
didn't lose his jobs at the factory
to Miguel Sanchez in Monterrey, Mexico.
No.
Mike lost his job to a machine.
87 percent of lost manufacturing jobs
have been eliminated because we've made improvements
in our own productivity through automation.
So that means that one out of 10 lost manufacturing jobs
was due to offshoring.
Now, this is not just a US phenomenon.
No.
In fact, automation is spreading to every production line
in every country around the world.
But look, I get it:
if you just lost your job
and then you read in the newspaper
that your old company just struck up a deal with China,
it's easy to think you were just replaced
in a one-for-one deal.
When I hear stories like this, I think that what people picture
is that trade happens between only two countries.
Manufacturers in one country
produce products and they export them
to consumers in other countries,
and it feels like the manufacturing countries win
and the importing countries lose.
Well, reality's a little bit different.
I'm a supply chain professional,
and I live and work in Mexico.
And I work in the middle
of a highly connected network of manufacturers
all collaborating from around the world
to produce many of the products we use today.
What I see
from my front-row seat in Mexico City
actually looks more like this.
And this is a more accurate depiction of what trade really looks like.
I've had the pleasure of being able to see
how many different products are manufactured,
from golf clubs to laptop computers
to internet servers, automobiles
and even airplanes.
And believe me, none of it happens in a straight line.
Let me give you an example.
A few months ago, I was touring the manufacturing plant
of a multinational aerospace company
in Querétaro, Mexico,
and the VP of logistics points out a completed tail assembly.
It turns out the tail assemblies are assembled from panels
that are manufactured in France,
and they're assembled in Mexico
using components imported from the US.
When those tail assemblies are done,
they're exported via truck to Canada
to their primary assembly plant
where they come together
with thousands of other parts,
like the wings and the seats
and the little shades over the little windows,
all coming in to become a part of a new airplane.
Think about it.
These new airplanes,
before they even take their first flight,
they have more stamps in their passports
than Angelina Jolie.
Now, this approach to processing goes on all around the world
to manufacture many of the products
we use every day,
from skin cream to airplanes.
When you go home tonight, take a look in your house.
You might be surprised to find a label that looks like this one:
"Manufactured in the USA from US and foreign parts."
Economist Michael Porter
described what's going on here best.
Many decades ago, he said that it's most beneficial for a country
to focus on producing the products it can produce most efficiently
and trading for the rest.
So what he's talking about here is shared production,
and efficiency is the name of the game.
You've probably seen an example of this
at home or at work.
Let's take a look at an example.
Think about how your house was built
or your kitchen renovated.
Typically, there's a general contractor
who is responsible for coordinating the efforts
of all the different contractors:
an architect to draw the plans,
an earth-moving company to dig the foundation,
a plumber, a carpenter and so on.
So why doesn't the general contractor
pick just one company
to do all the work,
like, say, the architect?
Because this is silly.
The general contractor selects experts
because it takes years
to learn and master
how to do each of the tasks it takes to build a house or renovate a kitchen,
some of them requiring special training.
Think about it:
Would you want your architect to install your toilet?
Of course not.
So let's apply this process to the corporate world.
Companies today focus on manufacturing
what they produce best and most efficiently,
and they trade for everything else.
So this means they rely
on a global, interconnected, interdependent network of manufacturers
to produce these products.
In fact, that network is so interconnected
it's almost impossible
to dismantle and produce products in just one country.
Let's take a look at the interconnected web
we saw a few moments ago,
and let's focus on just one strand
between the US and Mexico.
The Wilson Institute says that shared production represents
40 percent of the half a trillion dollars in trade between the US and Mexico.
That's about 200 billion dollars,
or the same as the GDP for Portugal.
So let's just imagine
that the US decides to impose
a 20 percent border tax on all imports from Mexico.
OK, fine.
But do you think Mexico is just going to stand by and let that happen?
No. No way.
So in retaliation, they impose a similar tax
on all goods being imported from the US,
and a little game of tit-for-tat ensues,
and 20 percent -- just imagine that 20 percent duties
are added to every good, product, product component
crossing back and forth across the border,
and you could be looking at more than a 40 percent increase in duties,
or 80 billion dollars.
Now, don't kid yourself,
these costs are going to be passed along
to you and to me.
Now, let's think about what impact that might have on some of the products,
or the prices of the products, that we buy every day.
So if a 30 percent increase in duties were actually passed along,
we would be looking at some pretty important increases in prices.
A Lincoln MKZ would go from 37,000 dollars to 48,000.
And the price of a Sharp 60-inch HDTV
would go from 898 dollars to 1,167 dollars.
And the price of a 16-ounce jar of CVS skin moisturizer
would go from 13 dollars to 17 dollars.
Now, remember, this is only looking at one strand of the production chain
between the US and Mexico,
so multiply this out across all of the strands.
The impact could be considerable.
Now, just think about this:
even if we were able to dismantle this network
and produce products in just one country,
which by the way is easier said than done,
we would still only be saving or protecting
one out of 10 lost manufacturing jobs.
That's right, because remember,
most of those jobs, 87 percent,
were lost due to improvements in our own productivity.
And unfortunately, those jobs, they're gone for good.
So the real question is,
does it make sense for us to drive up prices
to the point where many of us can't afford the basic goods we use every day
for the purpose of saving a job
that might be eliminated in a couple of years anyway?
The reality is that shared production
allows us to manufacture higher quality products
at lower costs.
It's that simple.
It allows us to get more
out of the limited resources and expertise we have
and at the same time benefit from lower prices.
It's really important to remember
that for shared production to be effective,
it relies on efficient cross-border movement of raw materials,
components and finished products.
So remember this:
the next time you're hearing somebody try to sell you on the idea
that protectionism is a good deal,
it's just not.
Thank you.
(Applause)
Voir Plus de Vidéos Connexes
Our New Global Economy
How Americans Are Losers In The US-China Trade War
PERDAGANGAN INTERNASIONAL - EKONOMI - MATERI UTBK SBMPTN DAN SIMAK UI
International Trade and Supply Chains
4 vs 1 | Milton Friedman faces FOUR British Leftists in HEATED Debate (1980)
The Globetrotting Journey of a Sneaker | World101
5.0 / 5 (0 votes)