Does Trump Really Have the Guts to Move Manufacturing Back to the U.S.?

Kevin Fallon / Tuesday, January 17, 2017 / Strategy Management

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<iframe src="//embed.gettyimages.com/embed/631621814? et=zlGTy3GhScZLF7ALoMF5GA&viewMoreLink=off&sig=3a2RgEbjXklJ1l8ft8BCt4sjIdJ6nvkSBKfjnSBl86s=&caption=true" width="594" height="396" scrolling="no" frameborder="0" style="display: inline-block; position: absolute; top: 0px; left: 0px; width: 100%; height: 100%; margin: 0px;"> </p>   <div id='RadEditorStyleKeeper5' style='display:none;'> </div><style reoriginalpositionmarker='RadEditorStyleKeeper5'>  </style>   <p class="p1" style="text-align: center;"><span style="font-size: large; font-family: Calibri;"><br /> </span></p> <p class="p1" style="text-align: left;"><span style="font-family: Arial; font-size: 18px;">As <a href="http://www.startmeup.hk/">StartmeupHK</a> Venture Forum kicks off this week, I’m reflecting on my visit to Asia late last year to plan YPO Innovation Week 2017. While there, I attended <a href="http://www.investhk.gov.hk/index.html">InvestHK</a> and was impressed by the incredible and pervasive innovation occurring in the Asia region.   </span></p> <p class="p1"><span style="font-family: Arial; font-size: 18px;">Right after Hong Kong, I was on business in Silicon Valley where I met with many technology companies, including the <a href="http://info.rocketspace.com/industry-accelerator-program">RocketSpace Accelerator</a>. Their global expansion plans are unbelievable. </span></p> <p class="p1"><span style="font-family: Arial;"><span class="s1" style="font-size: large; font-style: inherit; font-variant-ligatures: inherit; font-variant-caps: inherit; font-weight: inherit;">The insight into Asia and Silicon Valley gave me  a chance to reflect on where innovation is headed in the future. This New York Times video, <i><a href="https://www.nytimes.com/video/technology/100000004574648/china-internet-wechat.html">How China is Changing the Internet</a></i></span><span class="s1" style="font-size: large; font-style: inherit; font-variant-ligatures: inherit; font-variant-caps: inherit; font-weight: inherit;">, offers a stark reality. </span></span></p> <p class="p1"><span style="font-size: large; font-family: Arial;">China, like all countries, enjoys the creativity of Silicon Valley and exploits it - but not in the spirit of innovation and free trade. The U.S. goods and services trade deficit with China was $366 billion in 2015. Trade deficits with specific nations are actually great if a country can source goods and services at a lower cost. This enables the country to deploy its capabilities where it has strengths to create its own exports and offer its citizens a higher quality life.</span></p> <p class="p1"><span style="font-size: large; font-family: Arial;">The case with China is different, evidenced by the number of fabulous non-Chinese companies in the Times video blocked by the Chinese government from doing free trade with China.  </span></p> <p class="p1"><span style="font-family: Arial; font-size: 18px;">Free trade would boost U.S. exports. The time is now when U.S. companies can reverse this tide by bringing goods businesses (manufacturing, etc.) back to the U.S., leveraging innovation to rebalance the trade deficit. With robots costing less than labor now, this can happen quickly and save massive distribution and energy costs while delivering more flexible offerings with faster delivery to U.S. consumers.</span></p> <p class="p1"><span style="font-family: Arial; font-size: 18px;">As an innovator, I look at this matter through a <i>Systems</i> lens.  I believe that the culprit in this imbalance of trade equation is clearly the U.S. government as it imposes the third highest corporate tax rate relative to global counterparts on businesses - 39%.  This drives U.S. businesses to compete by building operations in low labor cost countries to serve U.S. consumers while putting them out of work. It’s a long term economic death spiral - lunacy but reality! Ireland has demonstrated that it can prosper on 12.5% corporate tax.<br /> </span></p> <p class="p1"><span style="font-family: Arial; font-size: 18px;"> </span></p> <p class="p1"> </p>

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Tags: innovation Donald Trump Silicon Valley InvestHK StartmeupHK China free trade manufacturing U.S. businesses corporate tax rate exports internet RocketSpace Chinese government low labor costs

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