Under Obama, Eternal Vigilance Will Become the Cost of Free Trade

I was at a Super Bowl party the other week and someone was parading around in her Obama socks. I suggested the irony in them -- chances are they were manufactured in a developing economy that under President Obama, will see new tariffs and import duties slapped on them. Given the recent "Buy American" mumbo-no-free-trade-jumbo coming out of DC in the past couple of weeks, it would do us all well to think through how we will manage our global procurement strategies and supply chains differently if and when Obama makes good on his recent hints to protect American jobs by restricting trade. For one, any company with significant operations selling into developing markets (e.g., Caterpillar, Deere, GM, Cisco, etc.) should think about contingency plans to greatly reduce headcount in these regions if and when the US-initiated trade-wars begin because such an effort will make US-produced goods -- or goods designed by US companies -- prohibitively expensive. In addition, companies should begin to think more seriously about protecting their IP in developing markets, as you can be sure such a trade war would encourage global competitors to borrow from US IP in their own designs to meet the needs of local buyers who won't be able to afford imported US goods. And perhaps most important, develop contingencies to close or materially change the goals of regional IPOs because globally sourced products for US import will lose much of their price advantage.

A trade war will be ugly. But if you can't see the writing on the wall from the recent rhetoric and take steps to prepare, it could end up even worse. If you're curious about the local manufacturing view of the dangers in taking a step-back from free trade, check out this non-partisan piece from the Northeast PA Business Journal that argues that "free trade has successfully created markets in other countries for American products, while reducing the costs of many imported goods for consumers in the U.S." Let's not forget it!

Jason Busch

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