Protecting Whom from What? B. Ahlstrom

If we were to rewrite our story of the rail barons in modem terms, it might go something like this: Cornelius Vanderbilt slashes the rates on his New York Central cargo fares. This time, Jim Fisk complains to Senator "Boss" Tweed in Albany. Securing an injunction against 153 Vanderbilt, Fisk appeals to the people against "the shameful predatory pricing" of the New York Central Railroad, and justifies the sudden legal barrier to lower rates as "'necessary" for the preservation of jobs, national security, and the sanctity of government institutions. Jim Fisk, no longer the wily entrepreneur, has be come a coward and a scoundrel. We, too, have an image to maintain. Where once Americans might have taken advantage of dumping to reap a tidy profit on finished goods and inexpensive consumption from cheap for eign exports, we now seek protection from them with barriers to fair trade and shrill con demnation of our allies and trading partners. In the name of dumping, we have humiliated our selves internationally. Worse, in facing our problems we have denied our heritage of free dom and equality for the "opiate" of protec tionism. It is time for us to reclaim that heri tage, and with it the opportunity of a better future for America. It is time to overcome the ,'evil" of dumping, that evil which is in our selves, and reclaim those opportunities which made America great. D Protecting Whom frOID What?

by Bjorn Ahlstrom I have a problem with the word' 'foreign. " Every few years, someone urges us to protect American commerce by erecting trade barriers against "foreign" products. But what does foreign really mean? Sony televisions are made in San Diego. Harley-Davidson motorcycles are 50 percent made in Japan. Which one is foreign? Bjorn Ahlstrom is president and chief executive officer of Volvo North America Corporation. This article first ap peared in the July 14, 1988, issue of The Detroit News. For that matter, what is domestic? Some 335,000 of the "American" cars sold here each year are made in Japan or Korea-more than the number of cars imported by Mazda, Mitsubishi, and Isuzu combined. Chrysler Corp. annually sells in the United States more than 120,000 Chryslers imported from the Far East, repre senting more than 11 percent of its total sales, while Honda builds more than 320,000 cars here. Which of these are domestic and which foreign?

154 THE FREEMAN. APRIL 1989 The Volvo 780 that we sell in the United States has a French engine, a Japanese trans mission, an American air conditioner, a Ger man electronic system, Singaporean control valves, a Canadian exhaust system, a Taiwan ese power antenna, South Korean electrical components, Swedish axles, and Irish tires. It is designed and assembled in Italy. Is this a Swed ish car? Volvo North America sells the 780. We di rectly or indirectly (through our dealers) em ploy 25,000 American citizens-including me. The other cars and trucks we sell are made in Nova Scotia, Virginia, Ohio, Utah, Belgium, and Sweden. Our parent company, AB Volvo, is owned by 162,000 shareholders in 50 coun tries, quite a few of them in the United States. Is this a foreign company? I think "international" is a better word. In ternational, just like Ford. Or Coca-Cola. Or IBM. Companies like these-and there are thou sands of us-buy raw materials and compo nents all over the world, wherever the price and the quality are right. W~ make our products all over the world, wherever it makes the most business sense.

But when we operate across a lot of borders, we all adopt what I call a "home-country" ap proach. We have to. What this means is that we operate in the United States or France or Aus tralia as if it were our home country. We cannot just take the Swedish Volvo and sell it, unchanged, in the United States. Amer icans have different tastes in handling, styling, and other areas. And transportation and compo nent availability change the economics. So the American Volvo is unquestionably a Volvo-but it's a different car from the Swedish Volvo. The same thing is true with a Coca-Cola: it tastes one way when it's bottled in Atlanta, and another way bottled in Stockholm. It's adapted to the characteristics of the markets in which it is sold. That's what international companies do: in the many places they do business, they act as if they were local businesses, not carpetbaggers from abroad.

Now let's make this more complicated. AB Volvo is a Swedish company. Our Volvo Penta division makes marine engines in Virginia. Most are sold here, but some are exported, even to Sweden. What's foreign in this case? Are we dealing with imports or exports? This is not a minor curiosity. Why is Tai wan's trade surplus with the United States so large? One-third of the surplus results from American corporations making or buying things in Taiwan and shipping them back to the United States-at a profit. The same thing is true of Singapore, South Korea, and Mexico: their trade surpluses are heavily dependent on American/international corporations that have based themselves there. What's the point? After the Great Crash of 1929, our country erected huge trade barriers and helped to launch the Great Depression. Back then, it was easy to tell the difference between "us" and "them" and to pass a law that penalized "them" (even if the law turned out to be a disaster).

Today, "us" is "them." Except for quite small businesses, there's no such thing as a do mestic or foreign company. We're all interna tional. And that means we're all American. So, when you talk about trade barriers, re member this: You cannot write a trade restriction law that will not cost American jobs. Or one that will not raise what we pay for American-made products. Or one that will not reduce the value of American savings invested in American and international securities. The way the world works now, if anyone imposes trade barriers, everyone loses. 0 The Key to Progress I n the highly complex, interwoven world marketplace of today, it is pointless to think of national economies as independent entities. Like it or not, modem industrial nations have become intertwined and interdependent economically, and the result is rising prosperity. Vigorous international commerce is the key to progress.

-RICHARD LESHER 155 The International Monetary Fund by Ken S. Ewert I t was on July 1, 1944, just three weeks after the Allies had landed in Normandy, that the most significant intergovernmental conference of the century began. The confer ence took place at Bretton Woods, New Hamp shire, and it represented, in the main, the think ing of two individuals, Harry Dexter White and John Maynard Keynes. Both of these men had grave doubts about the beneficence of market processes and preferred to put their faith in the ability of national and international "man agers" to coordinate the world's economic af fairs. And in 1944 White and Keynes were not alone in their views. As some 45 countries met to plan out the "new economic order," there was consensus on the necessity for increased economic coordination and a general view that the international gold standard was undesirable because of the restraints it placed on a nation's ability to pursue the "full employment" poli cies prescribed by the nouveau Keynesian wisdom.!