By Bill Conerly / www.forbes.com / January 31st, 2017
Imports permeate the United States manufacturing sector, a point that should be kept in mind by business leaders as well as by politicians. I realized this talking to a number of manufacturing executives concerned about their supply chains. Even if they are assembling products in the United States, with American labor and many American-made parts, they also use some foreign components. Disruption of the supply chain due to political change could be disastrous for some companies and harmful to the economy, at least until alternative purchasing arrangements have been made.
Imagine, for example, an American appliance manufacturer which uses a great electronic control module made in Taiwan, available for just a couple of dollars. Without the module, the rest of the appliance is just scrap steel. If access to that module is disrupted, all production stops, even if the module is a tiny portion of the total product. It’s necessary even if tiny.
The U.S. Bureau of Economic Analysis’s Input-Output reports show that every type of major commodity imported into the country is used by some manufacturing industry.
Capital goods are another area of concern. Lewiston, Idaho is a remote community with 62,000 people in its “metropolitan area.” A paper mill is a big part of the local economy, and the mill is being renovated at a cost of $160 million. With the new equipment, the mill should be competitive in a challenging industry, ensuring local jobs. The centerpiece of the renovation is a pulp digester made in Sweden. Those of us who love factory tours are used to seeing equipment made in Germany or Italy or Korea. Government data show that last year 27 percent of goods imported to this country were capital goods, enabling U.S. businesses to compete in global markets.
Adjustment to a new trade reality is possible in time. Politicians should consider two questions: will we be better off after the adjustment period, and will such a gain be worth the short-term adjustment costs?
Business leaders should look at their supply chains and see where they are vulnerable to a disruption triggered by political action. Even if the new administration is not intending to hurt U.S. manufacturers, some may well be hurt by government action or by some chain reaction triggered by government action.
Businesses should also consider their domestic supply chain. Even if your company is buying from another American company, is that company using some foreign components? It’s worth asking critical vendors about the reliability of their supply chains.
www.shipwatchers.com - 24/7 Support including Chat