Given I work in North America every few weeks, I don’t know why I still find the 24-hour rolling news hysteria surprising. Every time you flick on the TV it feels as though the US is on the cusp of an earth-shattering event. In some slow news weeks this continuous commentary has to eek out some minor political banality or offer endless conjecture about what might be.
Andy Rainforth- Managing Director
In the last 2 years it’s coverage has often been about Donald Trump and about how he couldn’t possibly be nominated as the Republican Presidential candidate, and then about how he couldn’t possibly be elected. Recently the news stations report in equal measure [and with fervent enthusiasm] the possibilities of him A) being impeached and B) serving 2 full terms in office.
But more on Mr. Trump later…
At the time of writing, I’ve been in the US for the last few days and the rolling news has understandably been reporting the devastation of Hurricane Irma and the terrible conditions that have besieged Florida and its residents. While this is undoubtedly the news story of the moment, I was reflecting about what happened to last week’s news – the increasing tensions in the Korean peninsula and the rising rhetoric from both Pyongyang and Washington.
I always have to trawl through several dozen TV News Channels to find one that concerns itself with US foreign policy but this story does seem to have been completely put on pause right now. I was left wondering whether Irma was timely in terms of Korea at least – are there diplomatic or back channels working tirelessly behind the scenes with North Korea and its political allies – as the eyes of the world [or the US news channels at least] were diverted elsewhere.
And when the story becomes newsworthy again what will be the US’s next move, should Kim Jong-un prove characteristically stoic? Washington has increasingly talked about trade sanctions against allies of North Korea, and although this threat won’t carry much weight in Moscow, it just might in Beijing.
If China is unwilling or unable to influence North Korea [and the timing of the latter’s Hydrogen bomb test – shortly before President Xi hosts a BRICS summit on his own turf – would suggest the two nations may not be on exactly the same page] how would the US actually exercise any such sanction?
A few decades ago this would have been a simple mechanism, just ban imports from a particular state or impose onerous import duties. But globalisation has changed all that. Over the last 20 years or more, so much US manufacturing has been offshored to China and other low-cost manufacturing regions that the situation becomes rather muddy. Let’s use Apple as an example. They use Foxconn in Shenzen, China to produce its iPhones etc. So how would any trade restrictions from the US impact that supply chain? And how would the inevitable reciprocal sanctions from China further complicate the picture?
And then there’s China’s increasing aggressive Foreign Direct Investment position in the West. The Chinese now own in whole or large part, many companies and organisations in Europe that enjoy successful and often mutual trading relationships with US businesses. It could prove to be a very cloudy process for the US to unravel as to whether a foreign trading partnership has some or all of its parentage in China.
In part, the US can thank the global financial crash a decade ago for this situation [and they don’t have too far to look to blame for that situation] as domestic businesses have been forced to look overseas for sources of new funding.
Chinese businesses, many of them with significant State sponsorship, now also own American household brands such as Starwoods, Ingram Micro, General Electric’s Appliance Division and Hoover. [They seem to have a thing for vacuum cleaners as Vax and Dirt Devil have also fallen into Chinese hands.] In Smithfield Foods, the premium supplier of pork products, China now owns 400 farms across the US and 1 in every 4 pigs. This acquisition alone makes China one of the largest overseas owners of US real estate. US policy makers may have to act carefully if they want to keep pork on the menu.
Of course there are some easy wins for the US should they choose in introduce sanctions. Straight forward Chinese imports could fall foul of any restriction and are an easy vote winner. There’s a lot of sympathy for this stance from the American [wo]man on the street, as unravelling the intricacies of, and connections between, lost US manufacturing jobs, globalisation and Chinese imports is no simple task.
I have had many conversations with US based Human Capital Management and Time & Attendance software providers who use hardware from Chinese suppliers, but through a combination of prudence and self-preservation, are actively considering alternatives. For them, using a hardware provider in the US offers long-term stability and protection from any possible future US economic policy shifts. Several have also told me it will also assist them overcoming both the security concerns and patriotic ethos of their ‘end user’ clients.
It is argued that it is inevitable that Mr. Trump’s domestic protectionist stance will remain long after the current spat with North Korea is resolved, and maybe that is no bad thing for those of us who provide US manufacturing jobs.
Here lies the rub- Normally I end these blogs with a sales proposition that validates our relevance to the subject content and how we’re ideally positioned to help clients. Yet in this scenario, it’s our irrelevance that counts. By locating in Miami and not China we’ve ensured continuity of supply for time clocks bound for US-based partners regardless of any future foreign policy.
It’s ironic; as the hurricane swirls around our office in Miami we feel strangely impervious to the issues that are on 24-hour news cycles.
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