Despite 30 years of trade deficits sucking demand out of the U.S. economy, you still have a declining but powerful cliche of free trade utopians that get hives and anxiety when someone talks about smart trade. Then they try to kick you out of the club.
Andrew Liveris, CEO, Dow Chemical
When I was at a Trans Pacific Partnership negotiating round last year, I started explaining the merits of balanced trade to a State Department employee. He became emotionally upset at the challenge to the failed Washington trade (deficit) strategy, turned on his heel, and marched away.
It is inevitable that we will get smart about trade, because “if something cannot go on forever, it will stop.” The question is when.
Even a chieftain of industry is subjected to schoolyard bullying when he does not toe the line.
As Dow Chemical’s chief executive, Andrew N. Liveris has made himself into something of an outcast among his fellow business leaders.
Liveris has been vocal in supporting a pro-U.S. trade and production strategy for the entire economy, not just energy. Dow Chemical has been investing in the U.S., relying on locally inexpensive energy to add value and produce finished products. You know. Produce finished products. Like China and Japan and Germany do.
Dow Chemical has assembled a list of more than 120 manufacturing projects, representing investments of $100 billion, that are being planned or are already under construction in the United States at least partly because of lower gas prices. The beginnings of the manufacturing renaissance Mr. Liveris imagines for petrochemicals, fertilizers, steel, aluminum, pulp paper and cement can be seen at its giant complex of plants in Freeport, Tex., the largest of its kind in the world.
The current flap is over whether the U.S. should export natural gas or utilize it in-house as a competitive advantage in producing finished goods. Given that our biggest export items have been raw materials - like scrap steel and waste paper for recycling - it makes sense to veer away from being a low-end natural resource colony for foreign finished goods manufacturers.
“This is a giant turnaround,” said Daniel Yergin, a longtime energy expert and author of a recent book, “The Quest: Energy, Security and the Remaking of the Modern World.” “This is fundamentally improving the competitive position of the United States in the world economy.”
So the knives are out among the free trade zombies who can’t think beyond a cartoon version of Econ 101.
The debate has grown personal. In the words of Charif Souki, an energy industry executive promoting a new natural gas export facility, Mr. Liveris is both “self-serving” and a “hypocrite.”
Ouch. But there’s more.
Mr. Liveris withdrew his company from the National Association of Manufacturers this year when his ideas clashed with those of other members, particularly Exxon Mobil, which hopes to convert a Louisiana gas terminal that was built to import the fuel to process exports instead. In an interview, Ken Cohen, an Exxon Mobil vice president, said that having a major business leader like Mr. Liveris supporting “protectionism” is so incongruous that “it’s almost like man bites dog.”
Mr. Liveris even came close to withdrawing Dow Chemical from the American Chemical Council over the export issue, until the trade group modified its pro-export position.
The thing is that we don’t have a strategy in the U.S. We don’t want a strategy. We are allergic to a strategy. Even though we’re getting economically killed by global rivals that have a strategy which results in persistent trade surpluses with the U.S. to grow on the backs of our consumers. Liveris wants a strategy to be a valued added economy.
“Why should we gamble?” he asked. “I think we should be out of the gambling business on energy policy. I mean, we’re not in the gambling business on food policy. We’re not in the gambling business on defense.” …
“The paint ingredients need the paint can,” he
said. “The paint supply chain needs trucks. The trucks go to warehouses. Warehouses go to retail. I’m not importing finished goods. I’m making them in the United States of America.”
Amen.
Mike,
Great article. I will be speaking at a noon Rotary meeting in Mt. Pleasant, MI (near MIdland) on September 23. Nice to know that their local CEO is standing up for Made in America. (was wondering why the community contacted me)
Tom
Andrew Liveris wrote a great book called “Make it in America.” I read it in 2011, the year it was published. I highly recommend it to anyone who wants to understand the centrality of manufacturing in a prosperous national economy, and the POV of a manufacturing executive who wants to “make it in America” but is also in the position of managing many billions of dollars for investors who are driven by money not patriotism. In other words, his book gives advice to American policy-makers about how to make our economy more competitive so manufacturing and other high-value-added operations will be located in the USA.
Mike Stumo wrote a great article here above. When he says “we don’t have a strategy,” he puts his finger on the central problem. The fact that our political leaders “are allergic to a strategy” is another way of saying they are infected with an extreme form of laissez faire ideology. Supposedly this is an anti-socialist ideology but it ended up being socialism for the banks.
This laissez-faire ideology and the cronyism of Washington DC were behind the deregulation that led to the tech and real estate bubbles, which were themselves symptoms of the flight from productive investments and into a financialization of the economy. Manufacturing and genuine VALUE-ADDED operations were cast aside in favor of deal-making. Instead of re-shoring our lost manufacturing, Wall Street and their investors were following a perverse incentive system paying commissions on transactions exponentially increased the number and complexity of unregulated financial instruments like “mortgage-backed securities,” the likes of which are still to this day being rescued/bought by the Federal reserve in “QE,” printing $Trillions to bail out the big investors holding the bag. It is socialism all right, but for the 1%.
It seems to me Mr. Liveris and Mr. Stumo are saying the USA needs some Industrial Policy. This doesn’t mean a “centrally-planned” economy, it needn’t resemble the Soviet or Chinese systems. Andrew Liveris, Chair and CEO of Dow Chemical Corporation, is no socialist, but in his book “Make It In America” he says that “it is a false choice to say that you can be either pro-business or pro-government,” (p6) and “we cannot afford to get stuck in the tired old debate between pure free market philosophy and state socialism -as if these are the only 2 economic models from which to choose….” (p. 8).
Mr. Liversis’ book offers much policy advice regarding “smart regulation” and tax reform. He writes to wake up Americans to the fact that all the prosperous economies buying out our technologies and factories and jobs and future are employing strategic national economic policies of myriad active govt encouragement of domestic industry.
My one criticism of his book was his advocating more “free trade” policies. But apparently he is still evolving on that minefield, and judging by Mr. Stumo’s account above, I am pleased to see Mr. Liveris seems to be moving beyond a simplistic faith in so-called “free trade” deals and into a deeper advocacy of a real economic strategy that puts manufacturing and other high value-added industries ahead of gross exports.
Finally I wish to commend and encourage Mike Stumo for his leadership in advocating BALANCED TRADE. The State Department is managing the American Empire, a global political-military project seemingly blind to the economic rot within.
The elites in Washington DC and on Wall Street, as sophisticated and intelligent as they are, are by virtue of their positions and interests the last ones to recognize or appreciate the economic crisis at home. They are not suffering the mass unemployment and poverty spreading through America. Indeed the official statistics-makers seem dedicated to defining away the real human crises spreading through America. Bloated with the windfalls offshoring has brought to the highest executives and biggest investors, they will be the last ones to understand what it means to say “if something cannot go on forever, it will stop.”