Ohio Business Waiting And Watching For Trump Moves On Trade

File photo of the Cleveland Port (Tony Ganzer / ideastream)
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Trade featured prominently in the presidential campaign last year, and President Trump continues to talk about wanting better deals for the U.S.  He’s pointed to China and NAFTA as two areas of focus, though it’s still not clear what the future of trade will look like. 

Peter Navarro spoke about trade this week—he’s the director of the White House National Trade Council:

PETER NAVARRO: “The broader goal of the free-trade policy based on fairness and reciprocity is not to raise either tariffs or nontariff barriers, rather it is simply to encourage our trading partners to lower theirs.”

In Ohio, it’s not clear how the administration will act, and how that will affect businesses here. 

David Silk is Chairman Emeritus of the British-American Chamber of Commerce in Ohio, and a founder of SGI Global Business Advisors.  He says businesses aren’t reacting just yet:

SILK: “The picture that we’re seeing at the moment is it’s very much business as usual.  That’s not to say people don’t have their ears to the ground—of course they do.  But generally from Ohio businesses and organizations, from the cities, we’re seeing business as usual, both in terms of exports, imports, development of overseas trade initiatives, etc.”

GANZER: “Is that a surprise to you, being in the realm of where people like stability to be able to make decisions about their businesses and things?”

SILK: “No, not really.  We have seen for some considerable time, going back over years, that whatever the ups and downs of the political climate, the international climate, Ohio businesses have tended to treat this as business as usual.  Ohio as a state is the eighth-largest exporting state by volume.”

GANZER: “So when you hear things coming from the White House, what do you do with that?  I get that it’s a wait-and-see approach, but that has to affect you tangibly about how you’re thinking about your business and your confidence, right?”

SILK: “Yes, and I think that depends to some extent on the markets to which you are exporting.  Obviously we have heard discussions from the present administration with regard to countries like Mexico, we’ve heard concerns about China.  But the reality is that if you look at Ohio’s trade partners, about 40% of our exports from Ohio go to Canada.  Roughly $6 billion goes to Mexico every year, then you have China, which is the third-largest trading partner.  But if you look at the European picture it represents roughly 18-20% of the export volumes.  And as I said, when you consider that Ohio is a huge exporting state that’s significant numbers, significant numbers of jobs, etc.”

GANZER: “We recently saw the governor travel to Germany for the Munich Security Conference, he also travelled to London I guess talking up Ohio for potential investments.  Do you think there is still value in Ohio officials making those trips when there is uncertainty from Washington?”

SILK: “If you look back to 2016, and looking forward into 2017, there are initiatives from Dayton, from Cincinnati, from Akron, from other cities in Ohio as well, all going out overseas dealing with everything from bio-tech to aerospace.  The fact that the governor is engaged in reinforcing those activities, and supporting Ohio exports and imports, reinforcing the overseas investment picture in Ohio as well, is very important and very helpful for those communities.”

David Silk is a founder of the Cleveland consulting firm SGI Global Business Advisors.

While some see uncertainty, others see potential in the new administration’s talk on trade so far.  Ideastream’s Nick Castele spoke recently to local union members, and here are a couple perspectives:

BOB HARPER: “If he actually fulfills this, I’m going to have a hard time arguing about him, because he’s carrying out what he’s looking for. NAFTA, it goes away and we get something better in place…would help us a lot.”

JOE PLOTT: “How are you going to fix what’s been wrong for 40 years? Just by stomping your feet and saying, well we’re going to penalize you for this? That’s not going to happen.”

We heard there Bob Harper and Joe Plott of United Steelworkers 1123.

Some people have warned that a too-tough stance with China, or NAFTA countries, could lead to a trade war. 

And that would be far from pain-free, according to Ned Hill.  He’s professor of public affairs and city and regional planning at The Ohio State University.

HILL: “If we start a trade war with the countries that we’ve got the largest trade deficits with, we’d also be starting a trade war with the countries that are our three largest customers.  So this is a discussion which is based on emotion, not on facts, and it can be typified as being ‘ready, fire, aim.’”

GANZER: “Is there anything that Ohio manufacturers, specifically, can do in this climate of uncertainty, or do you really have to wait for the details of potential tariffs or other actions the administration might take?”

HILL: “What’s happening right now is the lobbyists and the government relations people don’t have to worry about their bonuses at the end of the year, they’re working overtime to find a symbolic, face-saving action for the administration that does no harm, which really won’t change much of anything.”

GANZER: “When it comes to impact on Ohio, what is something that you’re looking for, maybe a buzzword—cross-border tariffs, or an example of something that if that comes from the administration then you’re really going to think, ‘yeah this will hit Ohio pretty hard?’”

HILL: “There are going to be two things.  One, if there is some sort of tariff, it will disrupt supply chains for up to two years as the supply chains begin to try to figure out where to locate production and how to deal with the tariff wall, and also how long does it take the consumer to figure out they’re paying it.  But the largest disruption could be just all of the sudden an increase in paperwork on clearing customs, and that could make supply chains uncertain, and increase the cost of U.S.-manufactured products.  What would be ironic, is if you disrupt those North American supply chains, it’s going to make it easier for offshore finished-good manufacturers to ship their products into the United States.”

GANZER: “I know there’s a lot of talk out of Washington, but what really should people keep in mind when we’re talking about trade, and talking about economic impact?”

HILL: “One important thing to keep in mind is that the U.S. manufacturing sector is on the verge of one of the largest increases in productivity that we’ve had since the deployment of the electric motor, and that is the fully digitally-integrated factory floor, it’s going to change the skill-mix on the factory floor, and that’s coming.  What we have to do in the United States is realize that a fundamental problem we have is being blamed on trade, is the fact that we’ve got a surplus of semi-skilled labor compared to the demand for that labor, and that’s one of the reasons why wages have dropped so much.”

HILL: “If you go into government, and you try to think it’s all about cutting better deals, and having more effective one-on-one negotiations, someone who has that mindset doesn’t understand how complicated government is, and government works by having fair and transparent rules, and    having the rule of law replace the whim of the human being, and making certain that we’ve got ways in which we can protect our intellectual property and to effectively and aggressively go after dumping.  It’s fixing those rules is more important rather than blowing up the global trade system.  If we go back to being an insular United States, where we produce for our own consumption, and we turn our backs on trade, it means costs of goods are going to go up for low-income people, actually more difficulty when it comes to developing the economy, and you’ll be interviewing me about the depths of the next recession.”

GANZER: “Let’s hope not professor…”

HILL: “Hey, remember I’m an economist. So if I can find the dark lining of a dark cloud I get paid twice.”

Ned Hill is professor of public affairs and city and regional planning at The Ohio State University.

 

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