IF TRUMP IS NATIONALIST SOCIALIST, SO ARE WE!

By Ruma Dubey

The shocking news of the day was Ford deciding to scrap its Mexico plant and instead invest $700 million to expand its existing plant in Michigan, USA. This is the effect of Trump even before he takes oath on the 20th of January!

A year ago, Ford had announced that it was investing $1.6 billion in Mexico to transfer production of the Ford Focus, its small car venture, from Michigan to Mexico to save costs. We said, “shocking news” because as early as last month, Ford CEO Mark Fields had gone on record saying that though he wanted to work with the incoming administration on its trade agenda, he said that it was too late for his company to change its plans to build the Mexico factory.

So what made the CEO do this complete U-turn? Many say that it could be because today there is a decline in demand for small cars and expected to slip down further in the years ahead; that and the low price of gasoline. Or else it could be the arm-twisting and threats of Trump – the President-elect has said that he has proposed a tax or tariff of 35% on goods made by companies that shift production abroad.

Ford’s U-turn comes just hours after Trump beat down General Motors on Twitter for importing cars from Mexico to sell in the USA. In fact manufacturers across USA, who have production bases out of America are worried big time and they are busy chalking out contingency plans to counteract the expected “protectionism” move of Trump. They are looking at options like factory relocation and wherever that is impossible, looking at tax planning options.

This is going to be extremely tough for US companies, especially garment, sports, electronics and such day-to-day use items; majority of these goods are today made in Bangladesh, Pakistan, Vietnam, Sri Lanka and such low economy countries, not to mention the giant share going to Mexico and China. The low cost of labor helps bring down the costs making goods more affordable in USA. The ones which carry the expensive  pricing are the ones which carry the “made in USA” tag. So if all such goods get made there, surely costs will go up and will that not affect the overall demand in the long run? Jobs will be created but if demand is hit due to pricing, what purpose will be met?

This one side to it. The argument is that Trump is using the power of government to intimidate these companies into changing their business decisions. He is coming across as a nationalist socialist.

But at the same time, aren’t we also doing the same in India? Take the case of Apple itself.  Last year, Tim Cook announced plans to set up a manufacturing hub in Hyderabad and open retail outlets all over the country. So we have rules in India. As per the FDI rules, single brand retailers which bring in more than 51% stake need to buy at least 30% of the manufacturing material from Indian vendors, mainly from small and medium scale vendors. This requirement can be waived if the retailer is bringing in a state of the art, cutting technology, which is not available in India. To ascertain this waiver, a panel in Delhi scrutinizes the proposals. This was done so for Apple and the panel recommended that this local sourcing rule could be waived off. But the Foreign Investment Promotion Board, along with the Finance Minister Arun Jaitley have disagreed.

In America, in many forums this topic had become a raging debate. There, naturally this protectionism attitude of India was looked down upon, an infringement on free trade practices.

Here, we in India feel, why not? We need to protect jobs here, create more employment for the teeming youth and this is a way to do that. Companies coming and setting shop, using India as a mere profit center without adding to the local economy is detrimental. In today’s world, we need to adopt this protectionism attitude.

If this is how we feel about our country, how wrong is Trump in wanting to protect the interest of his country? There is no doubt globalization has today created local issues and those need to be addressed first or else, it will derail the entire world. Not a protectionist but surely Free Trade agreements will need to be renegotiated.

Use and throw no longer works for any country, not even China.