0:00:01.145,0:00:02.846
When someone mentions Cuba,

0:00:02.846,0:00:04.925
what do you think about?

0:00:04.925,0:00:07.826
Classic, classic cars?[br]Perhaps good cigars?

0:00:07.826,0:00:11.926
Maybe you think[br]of a famous baseball player.

0:00:11.926,0:00:14.353
What about when somebody[br]mentions North Korea?

0:00:14.353,0:00:16.496
You think about those missile tests,

0:00:16.496,0:00:18.315
maybe their notorious leader

0:00:18.315,0:00:21.155
or his good friend, Dennis Rodman.

0:00:21.155,0:00:22.457
(Laughter)

0:00:22.457,0:00:24.829
One thing that likely doesn't come to mind

0:00:24.829,0:00:27.021
is a vision of a country

0:00:27.021,0:00:28.643
with an open economy

0:00:28.643,0:00:33.148
whose citizens have access to a wide range[br]of affordable consumer products.

0:00:35.527,0:00:40.319
I'm not here to argue how these countries[br]got to where they are today.

0:00:40.319,0:00:43.968
I simply want to use them as an example[br]of countries and citizens

0:00:43.968,0:00:46.847
who have been affected,[br]negatively affected,

0:00:46.847,0:00:50.151
by a trade policy that restricts imports

0:00:50.151,0:00:52.893
and protects local industries.

0:00:52.893,0:00:55.832
Recently we've heard a number of countries

0:00:55.832,0:00:57.882
talk about restricting imports

0:00:57.882,0:01:01.066
and protecting their local[br]domestic industries.

0:01:01.066,0:01:04.082
Now this may sound fine in a soundbyte,

0:01:04.082,0:01:07.375
but what it really is is protectionism.

0:01:07.375,0:01:11.893
We heard about this during[br]the 2016 Presidential election,

0:01:11.893,0:01:14.269
we heard about it[br]during the Brexit debates

0:01:14.269,0:01:18.928
and most recently during[br]the French elections.

0:01:18.928,0:01:23.847
In fact, it's been a really important[br]topic being talked about around the world,

0:01:23.847,0:01:26.403
and many aspiring political leaders

0:01:26.403,0:01:31.194
are running on platforms[br]positioning protectionism as a good thing.

0:01:31.194,0:01:34.114
Now, I could see why they think[br]protectionism is good,

0:01:34.114,0:01:39.412
because sometimes it seems[br]like trade is unfair.

0:01:39.412,0:01:41.533
Some have blamed trade

0:01:41.533,0:01:44.791
for some of the problems we've[br]been having here at home in the US.

0:01:44.791,0:01:46.371
For years we've been hearing about

0:01:46.371,0:01:49.840
the loss the high-paying[br]US manufacturing jobs.

0:01:49.840,0:01:53.299
Many think that manufacturing[br]is declining the US

0:01:53.299,0:01:56.580
because companies are moving[br]their operations offshore

0:01:56.580,0:02:00.250
to markets with lower cost labor

0:02:00.250,0:02:03.047
like China, Mexico and Vietnam.

0:02:03.047,0:02:04.639
They also think trade agreements

0:02:04.639,0:02:06.634
sometimes are unfair,

0:02:06.634,0:02:08.392
like NAFTA

0:02:08.392,0:02:10.300
and the Trans-Pacific Partnership,

0:02:10.300,0:02:14.412
because these trade agreements[br]allow companies to reimport

0:02:14.412,0:02:18.011
those cheaply produced goods[br]back into the US

0:02:18.011,0:02:21.112
and other countries[br]from where the jobs were taken.

0:02:21.112,0:02:24.231
So it kind of feels like the exporters win

0:02:24.231,0:02:26.374
and the importers lose.

0:02:27.203,0:02:28.419
Now, the reality is

0:02:28.419,0:02:31.935
output in the manufacturing[br]sector in the US

0:02:31.935,0:02:34.188
is actually growing,

0:02:34.188,0:02:35.754
but we are losing jobs.

0:02:35.754,0:02:37.689
We're losing lots of them.

0:02:37.689,0:02:40.341
In fact, from 2000 to 2010,

0:02:40.341,0:02:44.740
5.7 million manufacturing jobs were lost.

0:02:44.740,0:02:49.456
But they're not being lost[br]for the reasons you might think.

0:02:49.456,0:02:51.860
Mike Johnson in Toledo, Ohio

0:02:51.860,0:02:54.417
didn't lose his jobs at the factory

0:02:54.417,0:02:56.979
to Miguel Sanchez in Monterrey, Mexico.

0:02:56.979,0:02:57.860
No.

0:02:57.860,0:03:01.404
Mike lost his job to a machine.

0:03:01.404,0:03:05.250
87 percent of lost manufacturing jobs

0:03:05.250,0:03:08.383
have been eliminated because[br]we've made improvements

0:03:08.383,0:03:11.516
in our own productivity[br]through automation.

0:03:11.516,0:03:15.754
So that means that one out of 10

0:03:15.754,0:03:16.753
lost manufacturing jobs

0:03:16.753,0:03:19.989
was due to offshoring.

0:03:19.989,0:03:22.520
Now this is not just a US phenomenon.

0:03:22.520,0:03:23.583
No.

0:03:23.583,0:03:27.089
In fact, automation is spreading[br]to every production line

0:03:27.089,0:03:29.971
in every country around the world.

0:03:29.971,0:03:31.621
But look, I get it:

0:03:31.621,0:03:33.171
if you just lost your job

0:03:33.171,0:03:35.428
and then you read in the newspaper[br]that your old company

0:03:35.428,0:03:37.552
just struck up a deal with China,

0:03:37.552,0:03:39.852
it's easy to think you were just replaced

0:03:39.852,0:03:42.135
in a one-for-one deal.

0:03:42.135,0:03:44.314
When I hear stories like this,[br]I think that what people picture

0:03:44.314,0:03:49.336
is that trade happens

0:03:49.336,0:03:49.830
between only two countries.

0:03:49.830,0:03:51.756
Manufacturers in one country

0:03:51.756,0:03:53.827
produce products and they export them

0:03:53.827,0:03:57.224
to consumers in other countries,

0:03:57.224,0:04:00.105
and it feels like the[br]manufacturing countries win

0:04:00.105,0:04:03.635
and the importing countries lose.

0:04:03.635,0:04:07.230
Well, reality's a little bit different.

0:04:07.230,0:04:09.109
I'm a supply chain professional,

0:04:09.109,0:04:12.335
and I live and work in Mexico,

0:04:12.335,0:04:14.450
and I work in the middle

0:04:14.450,0:04:17.376
of a highly connected network[br]of manufacturers

0:04:17.376,0:04:19.628
all collaborating from around the world

0:04:19.628,0:04:22.914
to produce many of[br]the products we use today.

0:04:22.914,0:04:25.306
What I see from my front row seat

0:04:25.306,0:04:29.792
in Mexico City actually[br]looks more like this,

0:04:29.792,0:04:34.711
and this is a more accurate depiction[br]of what trade really looks like.

0:04:34.711,0:04:38.545
I've had the pleasure of being able[br]to see how many different products

0:04:38.545,0:04:40.815
are manufactured, from golf clubs

0:04:40.815,0:04:42.255
to laptop computers

0:04:42.255,0:04:44.925
to Internet servers, automobiles,

0:04:44.925,0:04:46.974
and even airplanes,

0:04:46.974,0:04:50.714
and believe me, none of it[br]happens in a straight line.

0:04:50.714,0:04:53.008
Let me give you an example.

0:04:53.008,0:04:57.939
A few months ago, I was touring[br]the manufacturing plant

0:04:57.939,0:05:01.156
of a multinational aerospace company

0:05:01.156,0:05:03.175
in ??, Mexico,

0:05:03.175,0:05:07.678
and the VP of logistics points out[br]a completed tail assembly.

0:05:07.678,0:05:12.106
It turns out the tail assemblies[br]are assembled from panels

0:05:12.106,0:05:14.548
that are manufactured in France,

0:05:14.548,0:05:16.919
and they're assembled in Mexico

0:05:16.919,0:05:20.360
using components imported from the US.

0:05:20.360,0:05:22.477
When those tail assemblies are done,

0:05:22.477,0:05:24.865
they're exported via truck to Canada

0:05:24.865,0:05:27.007
to their primary assembly plant

0:05:27.007,0:05:29.497
where they come together

0:05:29.497,0:05:30.821
with thousands of other parts,

0:05:30.821,0:05:33.175
like the wings and the seats

0:05:33.175,0:05:36.155
and the little shades[br]over the little windows,

0:05:36.155,0:05:39.797
all coming in to become[br]a part of a new airplane.

0:05:39.797,0:05:41.237
Think about it.

0:05:41.237,0:05:43.626
These new airplanes,

0:05:43.626,0:05:45.626
before they even take their first flight,

0:05:45.626,0:05:48.204
they have more stamps in their passports

0:05:48.204,0:05:50.942
than Angelina Jolie.

0:05:50.942,0:05:54.510
Now this approach to processing[br]goes on all around the world

0:05:54.510,0:05:57.009
to manufacture many of the products

0:05:57.009,0:05:59.665
we use every day,

0:05:59.665,0:06:02.759
from skin cream to airplanes.

0:06:02.759,0:06:04.167
When you go home tonight,

0:06:04.167,0:06:05.928
take a look in your house.

0:06:05.928,0:06:08.161
You might be surprised to find

0:06:08.161,0:06:10.243
a label that looks like this one:

0:06:10.243,0:06:12.653
"Manufactured in the U.S.A.[br]From U.S. And Foreign Parts."

0:06:12.653,0:06:17.667
Economist Michael Porter

0:06:17.667,0:06:20.149
described what's going on here best.

0:06:20.149,0:06:22.410
Many decades ago, he said

0:06:22.410,0:06:24.945
that it's most beneficial for a country

0:06:24.945,0:06:26.594
to focus on producing

0:06:26.594,0:06:32.245
the products it can produce[br]most efficiently

0:06:32.245,0:06:34.147
and trading for the rest.

0:06:34.147,0:06:34.807
So what he's talking about here

0:06:34.807,0:06:35.819
is share production,

0:06:35.819,0:06:38.765
and efficiency is the name of the game.

0:06:38.765,0:06:41.530
You've probably seen an example of this

0:06:41.530,0:06:44.124
at home or at work.

0:06:44.124,0:06:46.652
Let's take a look at an example.

0:06:46.652,0:06:48.756
Think about how your house was built,

0:06:48.756,0:06:51.215
or your kitchen renovated.

0:06:51.215,0:06:53.395
Typically there's a general contractor

0:06:53.395,0:06:55.459
who is responsible for coordinating

0:06:55.459,0:06:57.135
the efforts of all[br]the different contractors:

0:06:57.135,0:06:59.669
an architect to draw the plans,

0:06:59.669,0:07:03.285
an earth-moving company[br]to dig the foundation,

0:07:03.285,0:07:05.301
a plumber, carpenter, and so on.

0:07:05.301,0:07:07.094
So why doesn't the general contractor

0:07:07.094,0:07:09.873
pick just one company

0:07:09.873,0:07:11.243
to do all the work,

0:07:11.243,0:07:12.848
like, say, the architect?

0:07:12.848,0:07:14.785
Because this is silly.

0:07:14.785,0:07:16.770
The general contractor selects experts

0:07:16.770,0:07:19.190
because it takes years

0:07:19.190,0:07:21.702
to learn and master

0:07:21.702,0:07:24.872
how to do each of the tasks it takes[br]to build a house or renovate a kitchen,

0:07:24.872,0:07:28.349
some of them requiring special training.

0:07:28.349,0:07:29.385
Think about it:

0:07:29.385,0:07:31.542
would you want your architect

0:07:31.542,0:07:33.581
to install your toilet?

0:07:33.581,0:07:35.061
Of course not.

0:07:35.061,0:07:38.489
So let's apply this process[br]to the corporate world.

0:07:38.489,0:07:41.103
Companies today focus on manufacturing

0:07:41.103,0:07:44.518
what they produce best[br]and most efficiently

0:07:44.518,0:07:46.985
and they trade for everything else.

0:07:46.985,0:07:49.841
So this means they rely

0:07:49.841,0:07:54.736
on a global, interconnected,[br]interdependent network of manufacturers

0:07:54.736,0:07:56.052
to produce these products.

0:07:56.052,0:07:58.185
In fact, that network is so interconnected

0:07:58.185,0:07:59.819
it's almost impossible

0:07:59.819,0:08:04.460
to dismantle and produce[br]products in just one country.

0:08:04.460,0:08:06.796
Let's take a look[br]at the interconnected web

0:08:06.796,0:08:08.586
we saw a few moments ago,

0:08:08.586,0:08:10.700
and let's focus on just one strand

0:08:10.700,0:08:14.348
between the US and Mexico.

0:08:14.348,0:08:17.867
The Wilson Institute says[br]that share production represents

0:08:17.867,0:08:23.397
40 percent of the half a trillion dollars[br]of trade between the US and Mexico.

0:08:23.397,0:08:26.090
That's about 200 billion dollars,

0:08:26.090,0:08:30.006
or the same as the GDP for Portugal.

0:08:30.006,0:08:32.566
So let's just imagine

0:08:32.566,0:08:35.625
that the US decides to impose

0:08:35.625,0:08:40.233
a 20 percent border tax[br]on all imports from Mexico.

0:08:40.233,0:08:41.317
Okay, fine,

0:08:41.317,0:08:46.423
but do you think Mexico is just[br]going to stand by and let that happen?

0:08:46.423,0:08:48.085
No. No way.

0:08:48.085,0:08:51.880
So in retaliation, they impose[br]a similar tax on all goods

0:08:51.880,0:08:54.868
being imported from the US,

0:08:54.868,0:08:57.512
and a little game of tit-for-tat ensues,

0:08:57.512,0:09:02.296
and 20 percent, just imagine[br]that 20 percent duties

0:09:02.296,0:09:05.444
are added to every good,[br]product, product component

0:09:05.444,0:09:08.180
crossing back and forth across the border,

0:09:08.180,0:09:11.430
and you could be looking at more[br]than a 40 percent increase in duties,

0:09:11.430,0:09:14.092
or 80 billion dollars.

0:09:14.092,0:09:15.979
Now don't kid yourself,

0:09:15.979,0:09:18.715
these costs are going to be passed along

0:09:18.715,0:09:22.058
to you and to me.

0:09:22.058,0:09:25.676
Now, let's think about what that impact

0:09:25.676,0:09:29.683
might have on some of the products,

0:09:29.683,0:09:30.998
or the prices of the products,[br]that we buy every day.

0:09:30.998,0:09:35.249
So if a 30 percent increase in duties[br]were actually passed along,

0:09:35.249,0:09:39.959
we would be looking at some[br]pretty important increases in prices.

0:09:39.959,0:09:45.000
A Lincoln MKZ would go[br]from 37,000 dollars to 48,000,

0:09:45.000,0:09:49.041
and the price of a Sharp 60-inch HDTV

0:09:49.041,0:09:54.294
would go from 898 dollars[br]to 1,167 dollars,

0:09:54.294,0:09:57.868
and the price of a 16-ounce jar[br]of CVS skin moisturizer

0:09:57.868,0:10:00.684
would go from 13 dollars to 17 dollars.

0:10:00.684,0:10:07.925
Now remember, this is only looking[br]at one strand of the production chain

0:10:07.925,0:10:09.264
between the US and Mexico,

0:10:09.264,0:10:12.320
so multiply this out[br]across all of the strands.

0:10:12.320,0:10:14.578
The impact could be considerable.

0:10:14.578,0:10:17.305
Now just think about this:

0:10:17.305,0:10:21.303
even if we were able[br]to dismantle this network

0:10:21.303,0:10:24.983
and produce products in just one country,

0:10:24.983,0:10:27.590
which by the way is easier said than done,

0:10:27.590,0:10:29.987
we would still only be saving

0:10:29.987,0:10:33.953
or protecting one out of 10[br]lost manufacturing jobs.

0:10:33.953,0:10:37.665
That's right, because remember,

0:10:37.665,0:10:40.382
most of those jobs, 87 percent,

0:10:40.382,0:10:43.701
were lost due to improvements[br]in our own productivity.

0:10:43.701,0:10:48.410
And unfortunately, those jobs,[br]they're gone for good.

0:10:48.410,0:10:50.518
So the real question is,

0:10:50.518,0:10:53.155
does it make sense for us[br]to drive up prices

0:10:53.155,0:10:57.430
to the point where many of us[br]can't afford the basic goods

0:10:57.430,0:10:59.368
we use every day

0:10:59.368,0:11:01.775
for the purpose of saving a job

0:11:01.775,0:11:05.820
that might be eliminated[br]in a couple of years anyway?

0:11:05.820,0:11:09.462
The reality is that share production

0:11:09.462,0:11:11.980
allows us to manufacture[br]higher quality products

0:11:11.980,0:11:13.329
at lower costs.

0:11:13.329,0:11:15.229
It's that simple.

0:11:15.229,0:11:17.515
It allows us to get more

0:11:17.515,0:11:19.472
out of the limited resources[br]and expertise we have,

0:11:19.472,0:11:23.766
and at the same time benefit[br]from lower prices.

0:11:23.766,0:11:25.937
It's really important to remember

0:11:25.937,0:11:28.783
that for share production to be effective,

0:11:28.783,0:11:34.230
it relies on efficient cross-border[br]movement of raw materials,

0:11:34.230,0:11:37.239
components and finished products.

0:11:37.239,0:11:39.136
So remember this:

0:11:39.136,0:11:41.495
the next time you're hearing somebody

0:11:41.495,0:11:43.464
try to sell you on the idea

0:11:43.464,0:11:46.687
that protectionism is a good deal,

0:11:46.687,0:11:48.328
it's just not.

0:11:48.328,0:11:50.678
Thank you.

0:11:50.678,0:11:52.028
(Applause)