By Tom Still
As the presidential campaign moves toward its closing leg, the issues of trade and globalization are taking center stage nationally and in Wisconsin — a state that depends on a healthy export climate, and with a business sector that’s more connected to the world every day.
Not so long ago, Republicans were generally viewed as “free traders” and Democrats were seen as more likely to urge protective barriers, such as tariffs and quotas. This election year has brought about a political role reversal.
Republican nominee Donald Trump is urging rejection of some new trade agreements, such as the Trans-Pacific Partnership, and a renegotiation of others, claiming they cost American jobs or offer a “back door” for China to rip off America.
Democrat Hillary Clinton counts herself among advocates for “fair trade” and backed many bilateral trade agreements as Secretary of State, but she backed away from her initial support of the Trans-Pacific deal and has urged more concessions from the other 11 nations under the proposed agreement.
Wisconsin is a working example of why this debate matters. Read the full Milwaukee Journal Sentinel article here.
With a strong base in manufacturing and agriculture, and a rising share of tech-based exports, Wisconsin cannot afford to bury its head in the sand of a polarized debate over trade.
Wisconsin cannot hope to sell all it produces within its borders — or within the borders of the United States, for that matter. It depends on markets abroad — in Asia, Europe and the rest of the Americas — for sales of homegrown goods and services.
With about $22.5 billion in total 2015 exports, Wisconsin ranks among the nation’s leading export states. Tens of thousands of jobs are tied to trade, and many of the state’s leading companies have a global footprint.
The recent “Brexit’ vote shows why disruptions in trade can directly affect Wisconsin.
The state’s exports to the United Kingdom topped $825 million last year, with much of that from sales of industrial machinery, medical instruments, aircraft parts and plastics. That’s more than twice the $346 million in goods and services Wisconsin imported from the United Kingdom in the same year.
Many Wisconsin companies are keeping a nervous eye on what happens next with the U.K.’s breakup with the European Union, in part because the falling value of the pound against the dollar makes exports more costly for British buyers. Imagine what it would be like if all of Wisconsin’s leading trade partners were left in limbo due to disrupted trade relations with the United States.
Joined at the hip is the debate over globalized ownership, which increasingly involves some of Wisconsin’s iconic companies.
This past week’s announcement that Joy Global Inc. is being acquired by Japan’s Komatsu Ltd. for $2.9 billion sent shivers down the spines of many observers in Milwaukee, where Joy has nearly 1,000 employees and 132 years of history. Although Joy says it plans to keep its headquarters in Milwaukee, company officials so far have declined to answer questions about the deal, which comes at a time when the mining industry worldwide is mired in a slump.
Another Milwaukee-based mining equipment company, Bucyrus International, was acquired by Caterpillar in 2011; both Bucyrus and Joy have shed jobs in recent years.
In the same week, Johnson Controls announced it would complete its “inversion” merger with Tyco International on Sept. 2, a month ahead of schedule. The combined company will be incorporated in Ireland, where Tyco is now based, primarily to save on taxes.
Offshore corporate tax moves, or inversions, have also been an issue in the presidential campaign. Trump believes they explain why U.S. corporate tax rates should be lowered. Clinton has said she would crack down on inversions, noting companies such as Johnson Controls should be charged an “exit fee” for making inversion moves.
A counter-argument is foreign direct investment in Wisconsin, now home to more than 1,500 companies based overseas. This trend is globalizing the state’s economy in ways that create and save jobs, expand supply chains, open doors to new markets and provide needed investment dollars.
Exports and foreign direct investments are flip sides of the same coin. They represent Wisconsin’s ability to build, produce and grow what the world needs — and to attract investment from other markets that understand Wisconsin’s strengths.
There are risks inherent in foreign direct investment, such as the loss of Wisconsin-based corporate headquarters. For those who worry about Wisconsin jobs moving overseas, however, foreign direct investment counters that trend by retaining and creating jobs here.
As the political debate continues about the advantages and drawbacks of globalization, voters should recognize there aren’t simple, emotional answers. Wisconsin’s reputation as a place to do business can mean producing goods and services others want and attracting investment dollars from far beyond its borders.