COMMENTARY: Rhetoric vs. reality: The American dream and pursuit of global growth

Amid Trump anti-trade stance, incoming administration should look to trade to offset impact of automation

By: Patrick Duffy
Photo: Wellphoto/Shutterstock
   The gulf between rhetoric and reality following the surprising election of Republican presidential candidate Donald Trump in November is approaching potentially dangerous levels as large swaths of the population struggle to distinguish one from the other.
   A reconciliation between the language of the candidate and of a president-to-be continues to play out, leaving many American executives with oversight of global supply chains in an anxious state.
   As Trump’s administration begins taking shape with the announcements of secretaries and his Strategic and Policy Forum advisory council, an underlying pragmatism is beginning to shine through the veil of fiery language and visionary plans.
   Trump all but torpedoed the Trans-Pacific Partnership with his victory, and is now taking aim at the North American Free Trade Agreement, much to the consternation of the United States’ neighbors and major trading partners, Canada and Mexico. However, Trump and his brain trust must be cognizant of the parallels between his proposed thorny trade walls and the situation President Hoover encountered with the protectionist Smoot-Hawley Tariff Act of 1930.
   Further, Trump must be hearing from his advisors of the good intentions of the Act and the incredibly destructive reality that followed its implementation — U.S. gross domestic product, the equity markets, and total U.S. trade all fell by more than 50 percent in four years.
   A dose of reality, following conversations with President Obama and briefings designed to bring Trump up to speed on the expansive scope of the Oval Office’s responsibilities, is yielding an encouraging emergence of moderation that should begin to quell the anxiety of executives who are reliant on unimpeded flows of trade.
   This moderation may take the form of accommodative stances that play out following the inauguration through deal-making brinksmanship with bombastic language as leverage—setting the table for trade negotiations and trillion-dollar infrastructure plans that will be ratcheted downward toward more palatable win-wins.
   This may be the reality of President Trump’s strategy. Three decades ago in Art of the Deal, he laid out his understanding of the power of showmanship: “I play to people’s fantasies. People may not always think big themselves, but they can still get very excited by those who do. That’s why a little hyperbole never hurts. People want to believe that something is the biggest and the greatest and the most spectacular. I call it truthful hyperbole.”
   With a tablespoon of truthful hyperbole, Trump’s big-stick style of politics may set the stage for his lieutenants to find persuasive compromises for enlightened capitalism with a Republican majority in Congress that’s capable of swiftly implementing tools to unlock pent up growth through deregulation, a tax code overhaul, and massive capital inflows.

The so-called “fourth industrial revolution” is being driven by cognitive computing, automation, and additive manufacturing (3D printing). These accelerating technologies will further shift patterns in trade, immigration, and regulation, while altering the density of manufacturing and service outputs in nations around the world

   Trump, his administration, and allies in Congress must be diligent in their choices moving forward. While they will undoubtedly look for quick victories on issues for which their voters are most impassioned, this political reset presents an opportunity to reframe the United States. Making use of that opportunity can only be accomplished with clarity in regards to the economic reality and scale necessary to exact a meaningful acceleration in global GDP growth.
   One-off deals, such as with United Technologies’ Carrier, are obviously not scalable strategies to achieve Trump’s goals. And is, perhaps more significantly, the required acceptance that while America’s economy may be able to grow domestic manufacturing capacity, it may not result in an abundance of new American jobs.
   Fantastic headlines like those resulting from SoftBank’s Masayoshi-son’s plans for $50 billion in investments and 50,000 jobs should be soberly received, with the understanding that the co-parties for Masa’s plans is Foxconn. Together with Foxconn, they’ve developed a humanoid robot, Pepper, which they are manufacturing at a rate of 20 per hour. While Pepper’s capabilities are fairly limited, Foxconn’s use of robots is not. Earlier this year, Foxconn replaced 60,000 workers with robots in a single factory in China.
   The so-called “fourth industrial revolution” is being driven by cognitive computing, automation, and additive manufacturing (3D printing). These accelerating technologies will further shift patterns in trade, immigration, and regulation, while altering the density of manufacturing and service outputs in nations around the world.
   Exponential leaps in technologies may further deteriorate demand for human workers, particularly in manufacturing residing in high-cost environments such as the United States. The World Economic Forum expects automation to result in the destruction of 5 million jobs globally by 2020. Threats or implementation of prohibitive legislation, tariffs, duties, and sanctions, may accelerate the shift towards automation—putting additional pressure on future administrations on employment at home.
   As the global population pushes towards 7.5 billion, the United States and Trump administration must reject nationalistic policies that stifle cross-border trade. If they are in fact interested in meaningful growth, they should look at radical solutions for the needs of the 4 billion individuals living on less than $4 per day.
   Ambitious trillion-dollar plans to rebuild America’s infrastructure are not a bad place to start, but should be one component and not the whole package in a proposed package of solutions for domestic growth. So far, the administration's plans miss the mark in supporting potential onramps towards radically beneficial technologies that will reinforce America’s position as the globe’s economic leader—solutions that will have global consumers.
   Now is the time for moonshots. In chasing these ambitious goals, the United States has the opportunity to create net-new employment and economic growth while at the same time improving the lives of billions of consumers around the world.
   In Adam Smith’s Wealth of Nations, the power of persuasion is perhaps the most overlooked facet of the economist’s arguments. This describes how the market’s invisible hand is guided not by brutish will, but by ceaseless compromises that come about from the conflicting interests of stakeholders.
   The incoming administration, and even Trump himself, is showing an open-mindedness that many didn’t expect. Trump’s leadership team will need to be cautious in its use of carrots and sticks to craft persuasively compelling compromises on the future of global trade.
   A reckoning is coming between rhetoric surrounding job creation, economic realities, and the inherently intertwined relations with nations worldwide and their people. Let’s hope that an audacious belief in the power of free trade does not fall victim to shortsightedness. The fate of billions rests upon the laurels of cooperative global capitalism.
   As actual policy emerges it is more important than ever for American businesses and their counterparts overseas to unite in the rejection of politically motivated trade barriers.