Add David Siegel, co-founder of $US45 billion hedge fund Two Sigma Investments, to the list of those warning against protectionism.
In an op-ed on LinkedIn, Siegel recites a recent trip to an Abu Dhabi camel farm, which he toured in a “comfortable, Japanese-made SUV.” His host explained that everyone used to drive American cars, but they don’t stack up anymore.
“As US policymakers wrestle with how to stanch (if not reverse) the decline of manufacturing employment and alleviate the US trade deficit, my thoughts often return to that conversation in the desert, and to many others like it,” he said.
From the op-ed:
We hear a lot about how both automation and globalization have affected factory jobs here at home. It’s true that repetitive manual and cognitive tasks are increasingly likely to be automated, and that labour costs in developing countries remain far below those of the developed world. When it comes to solutions, however, I see a concerning sign: trade protectionism is once again becoming the response to dwindling factory payrolls and a swollen trade deficit.
The recent re-embrace of this warmed-over policy seems more like a convenient fig leaf for the shortcomings of US business leaders than a viable answer. The qualities that have driven US economic growth and job creation in the past — creativity, risk taking, and innovation — are what will actually help rekindle demand for US-made products overseas, and for American labour.
The rise of protectionism has been a hot topic of late, given the UK’s decision to leave the EU and the election of Donald Trump at US president. Trump made the debate over free trade one of the central topics of his campaign. He argued in favour of ripping up trade deals, said NAFTA was “the worst trade deal in the history of the country,” and called the Trans-Pacific Partnership, or TPP, “a rape of our country.”
Back in February, Jeff Immelt, then CEO of GE, said America “will be less of a leader in trade” in the coming years. And in June, Ray Dalio, the founder of Bridgewater Associates, said Trump was showcasing a tendency to choose the part over the whole. Trump’s actions are leaving people scrambling to figure out which Americans Trump is trying to help, such as American manufacturing workers, and at the expense of whom, Dalio wrote.
In his op-ed, Siegel cites Boeing, Apple, and Google as examples of American companies that have prospered globally, and touched on why protectionism was proving popular:
Those supporting increased trade barriers often couch it in terms of “levelling the playing field.” That is well and good, but my sense is that some simply hope to make it easier for US companies to compete in the global marketplace with inferior products or insufficient effort. Nobody claims making great products is easy, but again, this attitude is not a recipe for reviving American manufacturing employment. There is simply no substitute for doing the hard work of learning local markets.
The op-ed concluded:
Automation and competition from overseas will remain stiff headwinds for U.S. manufacturing employment. But we shouldn’t make excuses and hope protectionism will save the day. The only way for American manufacturers to succeed is through an uncompromising commitment to innovation.