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15 Aug 08/15/2017
In an era that seemingly turns on tweets, it is increasingly challenging to determine the types of manufacturing policy changes that could actually be implemented, rather than just threatened. Here’s a quick glance at what is currently up in the air.
The North American Free Trade Agreement found itself in the tweets and speeches of the current administration throughout the presidential campaign and continues to this day. At this point they have somewhat narrowed the focus to a goals document that sets the stage for discussions.
Given this, negotiations with Canada and Mexico could begin soon. That step alone would move this discussion from rhetoric to concrete changes that everyone could use to begin their planning for the next few years. That couldn’t come soon enough as several manufacturers, from Ford to Fiat Chrysler, have placed their plans on hold pending the outcome.
The TPP involves twelve Pacific Rim nations, representing one-third of world trade. President Trump, per his campaign promise, abandoned this trade deal. It was meant to address tariffs, quotas, and intellectual property standards along with a host of other issues. The U.S. will now be watching from the sidelines as the agreement moves forward.
The real issue is whether free trade, under the auspices of whatever agreement, increases the wealth of nations, to quote Adam Smith, or decreases their wealth. History will render the answer. However, that doesn’t make it any easier to plan your own operations in the here and now.
A great deal of effort was spent by the previous administration to aggressively move to clean power no matter the economic impact. It looks at this point like the EPA’s Clean Power Plan is being closed down along with eliminating restrictions on coal production. Subsidies for wind and solar may be dropped or restricted, and ethanol will come under a strict review of its actual benefits.
All this adds up to the potential for lower cost power and reduced regulations for manufacturing facilities. Whether these changes can be implemented at the agency level or require Congressional legislation will determine how swiftly or even if such changes can be made.
Much of the discussion of policy and trade agreements has been an attempt to maintain or grow manufacturing employment levels in the US. However, the primary driver of lost manufacturing jobs is actually technology.
Technology drives productivity, which increases manufacturing output while lowering the need for employees. That, in turn, frees up those employees for more productive higher-level tasks. Yet it also requires that those same employees develop the skills for these new jobs through training and significant change. As you have seen in your operations, some make the grade, but many don’t.
All this leads to uncertainty and, as you well know, uncertainty is not your friend. Whether you’re trying to determine sales forecasts for next month or next year, perpetual uncertainty over whether you’ll have access to Canadian, Mexican, or even Australian markets can significantly impact your planning. That includes equipment purchases, plant expansions, or hiring additional workers.
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