Editor's Page -- Fanning Protectionism's Flames

Executives should consider their role in adding fuel to the fire.

We're not getting anywhere with this debate -- or at least what we're calling debate -- on the state of U.S. manufacturing, and it's because we're still talking past each other. We cannot seem to agree on the basic premise: Is U.S. manufacturing in peril or just going through a transition after which it will emerge stronger? We cannot agree on which economic metric, or set of metrics, is the most accurate measure of manufacturing strength. It's hardly a surprise then, that we cannot agree on the public policy measures needed to address the one thing we do agree on: China and other low-cost countries continue to flout with impunity a host of trade rules. Most interesting to me though, is the fault line growing between executives leading small and mid-sized companies (SMCs) and those heading multinational companies (MNCs). Though I've not seen statistical data comparing the positions of the two groups, anecdotal evidence is piling up in the form of conversations I've had, reader letters and news reports, among other sources. Broadly speaking, the MNCs are less likely to agree that the U.S. manufacturing sector is threatened -- not surprising since MNCs are big beneficiaries of free trade because they're better able to implement strategies that blunt the negative effects of thwarted trade laws. Also, MNCs are more likely to argue the debate in terms of "innovation or isolation," and to label far more public policy actions as protectionism that is certain to cause retaliation. SMCs, many of whom are among the big losers of the current trade policy, are more likely to see U.S. manufacturing strength diminished by unfair competition. They believe that stronger action against trade violations is not only worth the risk of retaliation but also necessary to preserve the integrity of trade agreements and to give those negatively affected by cheating a fair chance to compete. Increasingly, SMC executives are challenging the belief that the free trade policy implemented by the Bush administration is good for manufacturing, while MNCs defend it. Both groups come armed with anecdotes, economic statistics, polls, surveys and research that buttress their positions. However, neither really pays much attention to the others' arguments. Unfortunately, the debate breaks down when MNCs lump all the disagreeing SMCs with a third, smaller group -- those calling outright for protectionist measures. Likewise it falters when SMCs accuse all MNCs as being part of the problem with their increased demands for price reductions, and their eagerness to move to or source from the same low-cost countries that are breaking trade laws. In addition, representatives from both groups have derisively dismissed the other's arguments. MNC's label SMCs (and anyone else who dares question their stand on trade policy) as "chicken-littles," and belittle their concerns by citing how U.S. manufacturing has historically weathered similar challenges. SMCs deride MNCs, who've captured public policy makers' attention with their own doomsday scenarios about the U.S.' high cost structure, as freeloaders unwilling to shoulder their share of the costs of the U.S.' high standard of living. Can these two groups come together to advocate for policies that will strengthen the U.S. manufacturing sector? They can. Both offer viable and not mutually exclusive public policy recommendations that deserve implementation. The National Coalition for Advanced Manufacturing, Washington, D.C., has taken the lead in bringing together leaders from industry, research and education with federal policymakers to facilitate discussion, develop solutions and propose a comprehensive manufacturing strategy. Its next meeting to push forward this ambitious effort will be June 10 in Washington. I'll be there, and I urge you to attend. Patricia Panchak is IW's editor-in-chief. She is based in Cleveland.

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