InnOvation Capital & Management, LLC
IntelDigest
LAW – POLICY – FINANCE – MARKETS
INFORMATION FOR THE ENTERPRISE AND INVESTOR
JUNE 21 , 2017
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Having devoted several issues of IntelDigest to the subject of “Work in America,” we begin a series on “Technology and Connectivity.” This issue will constitute a bridge between the two series, as it touches on both areas.
Economic Nationalism
The prevailing policy of the current Administration is one of Nationalism. Donald Trump campaigned vigorously on an “America First” platform, and almost 63 million American voters decided that that sounded good to them. We have discussed, in several previous issues, the widespread concerns among millions of our citizens for their ability to hold a good job and maintain a decent livelihood in the 21st Century.
Some would say that a resurgence of Nationalism in stressful economic times is natural; in any event, this will be a significant force in remaking (or, undoing) the European Union, and reshaping U.S. interactions with allies and adversaries alike.
However, this is a particularly bad time for Americans to adopt an insular, self-dependent attitude with respect to the global economy.
Unrelenting technological development and demographic trends support increased connectivity with the rest of the world. There is a greater demand for skilled labor in the 21st Century global marketplace, in both services and manufacturing. Advances in telerobotics and technology transfer across borders continue to grow apace, which will allow workers greater opportunities to have careers and good jobs in one country while continuing to reside in another. Foreigners will certainly want to take advantage of such an option, allowing a worker the chance at a good job without having to emigrate and break up his or her family.
Why would American workers choose to close themselves off from similar opportunities?
American business executives realize that their companies’ competitiveness is not enhanced by American Isolation. Most U.S. companies favored the Trans-Pacific Partnership (TPP) negotiated by the Obama Administration, and generally favor most trade agreements. They know that U.S. companies have generally outgrown domestic markets and need international markets in order to sustain growth.
Punitive measures by the Trump Administration against our trading partners are self-defeating; they obstruct American businesses from competing in a world of growing opportunity.
American economic growth depends on opening foreign markets to U.S. goods, services and investment, while reforming our tax structure, immigration and education policies, and infrastructure in order to make investment in America more attractive.
The Trump Administration should take care that “America First” does not hinder our participation in global markets.
Global Trends
Despite oft-expressed anxieties about Globalization, the reality is that one of the most significant trends of the 21st Century is the unrelenting expansion of cross-border connectivity around the world. The movement of people, capital, goods and services, transactions, and data grows every minute of every day. As Americans, we have to worry that our country will fall behind because of political intransigence while other regions, entities, and nations deepen their connections with each another.
Donald Trump’s WorldView is that the U.S. should leverage its economic might … force the rest of the world to “play ball” if they want to access American finance and customers. That may have been true in the past. But, global trade relationships have been realigning, suggesting that such trade will keep growing with or without the United States.
We mentioned the TPP, above. After President Trump pulled the U.S. out of the TPP, most of the other members of the Partnership decided to move forward, and welcomed China into the Partnership in our place. Ironic, in that the Obama Administration had initially pitched the agreement to Congress as a means of containing the rise of China!
Another massive deal centered on China is the Regional Comprehensive Economic Partnership (RCEP), which includes ten Southeast Asian economies, as well as Australia, Japan, South Korea, and India. All of the TPP and RCEP member economies are current or prospective trading partners for the U.S. However, while America sits on the sidelines, China takes our place in global trade.
What will happen when these Mega Trade Deals move forward? They will certainly integrate Asian markets in a way that will make them even harder for American firms to penetrate. Indigenous Asian businesses will quickly move up the value chain to take the places that U.S. companies have had to themselves.
Is there any wonder that the largest U.S. companies oppose Trump’s efforts to erect barriers that would keep manufacturing, pharmaceuticals, and other sectors at home? A proposed “border adjustment tax” would raise the cost of their imports. Meanwhile, absent the TPP, how easy will it be for American multinationals to expand into markets … and compete with other developed economies … where the U.S. refused to join the trade partnerships?
Next week, we will continue this series on “Technology and Connectivity,” tracing the history of technological advances, and looking at the effects of technology on our own society and on some of our trade partners and rivals.