0:00:00.880,0:00:02.576
When someone mentions Cuba,

0:00:02.600,0:00:03.800
what do you think about?

0:00:05.200,0:00:07.256
Classic, classic cars?

0:00:07.280,0:00:08.600
Perhaps good cigars?

0:00:09.600,0:00:11.696
Maybe you think[br]of a famous baseball player.

0:00:11.720,0:00:14.056
What about when somebody[br]mentions North Korea?

0:00:14.080,0:00:16.175
You think about those missile tests,

0:00:16.200,0:00:18.096
maybe their notorious leader

0:00:18.120,0:00:20.120
or his good friend, Dennis Rodman.

0:00:20.640,0:00:22.136
(Laughter)

0:00:22.160,0:00:24.496
One thing that likely doesn't come to mind

0:00:24.520,0:00:26.280
is a vision of a country,

0:00:26.960,0:00:28.216
an open economy,

0:00:28.240,0:00:32.759
whose citizens have access to a wide range[br]of affordable consumer products.

0:00:35.240,0:00:39.856
I'm not here to argue how these countries[br]got to where they are today.

0:00:39.880,0:00:43.576
I simply want to use them[br]as an example of countries and citizens

0:00:43.600,0:00:46.816
who have been affected,[br]negatively affected,

0:00:46.840,0:00:49.120
by a trade policy that restricts imports

0:00:49.960,0:00:51.480
and protects local industries.

0:00:52.480,0:00:55.376
Recently we've heard a number of countries

0:00:55.400,0:00:57.576
talk about restricting imports

0:00:57.600,0:01:00.616
and protecting their local,[br]domestic industries.

0:01:00.640,0:01:03.896
Now, this may sound fine in a sound bite,

0:01:03.920,0:01:06.160
but what it really is is protectionism.

0:01:07.160,0:01:10.920
We heard a lot about this[br]during the 2016 presidential election.

0:01:11.600,0:01:14.056
We heard about it[br]during the Brexit debates

0:01:14.080,0:01:17.400
and most recently[br]during the French elections.

0:01:18.680,0:01:21.416
In fact, it's been[br]a really important topic

0:01:21.440,0:01:23.576
being talked about around the world,

0:01:23.600,0:01:26.016
and many aspiring political leaders

0:01:26.040,0:01:29.600
are running on platforms[br]positioning protectionism as a good thing.

0:01:30.800,0:01:33.576
Now, I could see why they think[br]protectionism is good,

0:01:33.600,0:01:37.720
because sometimes[br]it seems like trade is unfair.

0:01:39.120,0:01:41.056
Some have blamed trade

0:01:41.080,0:01:44.216
for some of the problems[br]we've been having here at home in the US.

0:01:44.240,0:01:45.616
For years we've been hearing

0:01:45.640,0:01:48.840
about the loss of high-paying[br]US manufacturing jobs.

0:01:49.560,0:01:53.136
Many think that manufacturing[br]is declining in the US

0:01:53.160,0:01:56.296
because companies are moving[br]their operations offshore

0:01:56.320,0:01:58.736
to markets with lower-cost labor

0:01:58.760,0:02:01.320
like China, Mexico and Vietnam.

0:02:02.720,0:02:06.376
They also think trade agreements[br]sometimes are unfair,

0:02:06.400,0:02:08.096
like NAFTA

0:02:08.120,0:02:09.936
and the Trans-Pacific Partnership,

0:02:09.960,0:02:13.416
because these trade agreements[br]allow companies

0:02:13.440,0:02:16.680
to reimport those cheaply[br]produced goods back into the US

0:02:17.720,0:02:20.856
and other countries[br]from where the jobs were taken.

0:02:20.880,0:02:23.976
So it kind of feels like the exporters win

0:02:24.000,0:02:26.000
and the importers lose.

0:02:26.960,0:02:28.176
Now, the reality is

0:02:28.200,0:02:31.120
output in the manufacturing[br]sector in the US

0:02:32.080,0:02:33.816
is actually growing,

0:02:33.840,0:02:35.416
but we are losing jobs.

0:02:35.440,0:02:36.680
We're losing lots of them.

0:02:37.400,0:02:40.096
In fact, from 2000 to 2010,

0:02:40.120,0:02:43.760
5.7 million manufacturing jobs were lost.

0:02:44.560,0:02:48.120
But they're not being lost[br]for the reasons you might think.

0:02:49.120,0:02:50.960
Mike Johnson in Toledo, Ohio

0:02:52.080,0:02:54.056
didn't lose his jobs at the factory

0:02:54.080,0:02:56.536
to Miguel Sanchez in Monterrey, Mexico.

0:02:56.560,0:02:57.776
No.

0:02:57.800,0:03:00.080
Mike lost his job to a machine.

0:03:01.600,0:03:04.896
87 percent of lost manufacturing jobs

0:03:04.920,0:03:07.736
have been eliminated[br]because we've made improvements

0:03:07.760,0:03:10.320
in our own productivity[br]through automation.

0:03:11.720,0:03:16.416
So that means that one out of 10[br]lost manufacturing jobs

0:03:16.440,0:03:18.720
was due to offshoring.

0:03:19.680,0:03:22.096
Now, this is not just a US phenomenon.

0:03:22.120,0:03:23.336
No.

0:03:23.360,0:03:26.696
In fact, automation is spreading[br]to every production line

0:03:26.720,0:03:28.640
in every country around the world.

0:03:29.720,0:03:31.336
But look, I get it:

0:03:31.360,0:03:32.856
if you just lost your job

0:03:32.880,0:03:34.536
and then you read in the newspaper

0:03:34.560,0:03:37.176
that your old company[br]just struck up a deal with China,

0:03:37.200,0:03:39.656
it's easy to think you were just replaced

0:03:39.680,0:03:40.880
in a one-for-one deal.

0:03:42.080,0:03:45.056
When I hear stories like this,[br]I think that what people picture

0:03:45.080,0:03:48.360
is that trade happens[br]between only two countries.

0:03:49.120,0:03:51.536
Manufacturers in one country

0:03:51.560,0:03:53.496
produce products and they export them

0:03:53.520,0:03:56.160
to consumers in other countries,

0:03:57.000,0:04:00.016
and it feels like[br]the manufacturing countries win

0:04:00.040,0:04:02.600
and the importing countries lose.

0:04:03.520,0:04:06.040
Well, reality's a little bit different.

0:04:07.400,0:04:08.976
I'm a supply chain professional,

0:04:09.000,0:04:10.760
and I live and work in Mexico.

0:04:12.520,0:04:13.776
And I work in the middle

0:04:13.800,0:04:16.976
of a highly connected network[br]of manufacturers

0:04:17.000,0:04:19.136
all collaborating from around the world

0:04:19.160,0:04:21.560
to produce many[br]of the products we use today.

0:04:22.600,0:04:23.816
What I see

0:04:23.840,0:04:26.416
from my front-row seat in Mexico City

0:04:26.440,0:04:28.760
actually looks more like this.

0:04:29.680,0:04:33.760
And this is a more accurate depiction[br]of what trade really looks like.

0:04:34.616,0:04:36.616
I've had the pleasure of being able to see

0:04:36.640,0:04:39.136
how many different products[br]are manufactured,

0:04:39.160,0:04:41.976
from golf clubs to laptop computers

0:04:42.000,0:04:44.576
to internet servers, automobiles

0:04:44.600,0:04:45.800
and even airplanes.

0:04:46.520,0:04:49.280
And believe me, none of it[br]happens in a straight line.

0:04:50.440,0:04:51.726
Let me give you an example.

0:04:53.520,0:04:57.776
A few months ago, I was touring[br]the manufacturing plant

0:04:57.800,0:05:00.776
of a multinational aerospace company

0:05:00.800,0:05:02.080
in Querétaro, Mexico,

0:05:02.920,0:05:06.480
and the VP of logistics points out[br]a completed tail assembly.

0:05:07.440,0:05:11.816
It turns out the tail assemblies[br]are assembled from panels

0:05:11.840,0:05:14.336
that are manufactured in France,

0:05:14.360,0:05:16.576
and they're assembled in Mexico

0:05:16.600,0:05:19.520
using components imported from the US.

0:05:20.040,0:05:22.056
When those tail assemblies are done,

0:05:22.080,0:05:24.536
they're exported via truck to Canada

0:05:24.560,0:05:26.736
to their primary assembly plant

0:05:26.760,0:05:28.016
where they come together

0:05:28.040,0:05:30.456
with thousands of other parts,

0:05:30.480,0:05:32.856
like the wings and the seats

0:05:32.880,0:05:35.776
and the little shades[br]over the little windows,

0:05:35.800,0:05:38.200
all coming in to become[br]a part of a new airplane.

0:05:39.480,0:05:40.680
Think about it.

0:05:41.320,0:05:42.776
These new airplanes,

0:05:42.800,0:05:45.376
before they even take their first flight,

0:05:45.400,0:05:47.856
they have more stamps in their passports

0:05:47.880,0:05:49.120
than Angelina Jolie.

0:05:50.760,0:05:54.256
Now, this approach to processing[br]goes on all around the world

0:05:54.280,0:05:56.776
to manufacture many of the products

0:05:56.800,0:05:59.336
we use every day,

0:05:59.360,0:06:01.680
from skin cream to airplanes.

0:06:02.520,0:06:04.960
When you go home tonight,[br]take a look in your house.

0:06:05.680,0:06:08.880
You might be surprised to find[br]a label that looks like this one:

0:06:10.080,0:06:14.280
"Manufactured in the USA[br]from US and foreign parts."

0:06:15.160,0:06:17.336
Economist Michael Porter

0:06:17.360,0:06:19.320
described what's going on here best.

0:06:19.840,0:06:24.576
Many decades ago, he said[br]that it's most beneficial for a country

0:06:24.600,0:06:28.976
to focus on producing the products[br]it can produce most efficiently

0:06:29.000,0:06:30.760
and trading for the rest.

0:06:32.000,0:06:34.760
So what he's talking about here[br]is shared production,

0:06:35.520,0:06:37.400
and efficiency is the name of the game.

0:06:38.720,0:06:41.256
You've probably seen an example of this

0:06:41.280,0:06:42.640
at home or at work.

0:06:43.800,0:06:45.536
Let's take a look at an example.

0:06:45.560,0:06:47.680
Think about how your house was built

0:06:48.520,0:06:49.920
or your kitchen renovated.

0:06:50.600,0:06:53.056
Typically, there's a general contractor

0:06:53.080,0:06:55.296
who is responsible[br]for coordinating the efforts

0:06:55.320,0:06:56.936
of all the different contractors:

0:06:56.960,0:06:58.600
an architect to draw the plans,

0:06:59.480,0:07:02.416
an earth-moving company[br]to dig the foundation,

0:07:02.440,0:07:04.320
a plumber, a carpenter and so on.

0:07:05.000,0:07:06.856
So why doesn't the general contractor

0:07:06.880,0:07:09.496
pick just one company

0:07:09.520,0:07:10.736
to do all the work,

0:07:10.760,0:07:11.960
like, say, the architect?

0:07:12.600,0:07:13.800
Because this is silly.

0:07:14.760,0:07:17.056
The general contractor selects experts

0:07:17.080,0:07:18.816
because it takes years

0:07:18.840,0:07:20.576
to learn and master

0:07:20.600,0:07:24.376
how to do each of the tasks it takes[br]to build a house or renovate a kitchen,

0:07:24.400,0:07:26.680
some of them requiring special training.

0:07:28.040,0:07:29.256
Think about it:

0:07:29.280,0:07:32.720
Would you want your architect[br]to install your toilet?

0:07:33.320,0:07:34.736
Of course not.

0:07:34.760,0:07:37.600
So let's apply this process[br]to the corporate world.

0:07:38.200,0:07:40.776
Companies today focus on manufacturing

0:07:40.800,0:07:44.136
what they produce best[br]and most efficiently,

0:07:44.160,0:07:46.000
and they trade for everything else.

0:07:46.680,0:07:49.376
So this means they rely

0:07:49.400,0:07:54.376
on a global, interconnected,[br]interdependent network of manufacturers

0:07:54.400,0:07:55.656
to produce these products.

0:07:55.680,0:07:57.736
In fact, that network is so interconnected

0:07:57.760,0:07:59.000
it's almost impossible

0:08:00.080,0:08:03.440
to dismantle and produce[br]products in just one country.

0:08:04.120,0:08:06.416
Let's take a look[br]at the interconnected web

0:08:06.440,0:08:08.096
we saw a few moments ago,

0:08:08.120,0:08:10.416
and let's focus on just one strand

0:08:10.440,0:08:12.520
between the US and Mexico.

0:08:14.640,0:08:17.456
The Wilson Institute says[br]that shared production represents

0:08:17.480,0:08:22.560
40 percent of the half a trillion dollars[br]in trade between the US and Mexico.

0:08:23.080,0:08:25.736
That's about 200 billion dollars,

0:08:25.760,0:08:28.720
or the same as the GDP for Portugal.

0:08:29.720,0:08:32.256
So let's just imagine

0:08:32.280,0:08:35.376
that the US decides to impose

0:08:35.400,0:08:39.120
a 20 percent border tax[br]on all imports from Mexico.

0:08:39.840,0:08:41.056
OK, fine.

0:08:41.080,0:08:45.440
But do you think Mexico is just[br]going to stand by and let that happen?

0:08:46.120,0:08:47.816
No. No way.

0:08:47.840,0:08:50.896
So in retaliation,[br]they impose a similar tax

0:08:50.920,0:08:53.760
on all goods being imported from the US,

0:08:54.640,0:08:56.880
and a little game of tit-for-tat ensues,

0:08:58.200,0:09:01.656
and 20 percent -- just imagine[br]that 20 percent duties

0:09:01.680,0:09:05.176
are added to every good,[br]product, product component

0:09:05.200,0:09:07.896
crossing back and forth across the border,

0:09:07.920,0:09:11.256
and you could be looking at more[br]than a 40 percent increase in duties,

0:09:11.280,0:09:13.040
or 80 billion dollars.

0:09:13.800,0:09:15.576
Now, don't kid yourself,

0:09:15.600,0:09:17.896
these costs are going to be passed along

0:09:17.920,0:09:20.160
to you and to me.

0:09:21.960,0:09:27.216
Now, let's think about what impact[br]that might have on some of the products,

0:09:27.240,0:09:29.960
or the prices of the products,[br]that we buy every day.

0:09:30.600,0:09:35.016
So if a 30 percent increase in duties[br]were actually passed along,

0:09:35.040,0:09:38.680
we would be looking at some[br]pretty important increases in prices.

0:09:39.640,0:09:43.440
A Lincoln MKZ would go[br]from 37,000 dollars to 48,000.

0:09:44.760,0:09:48.120
And the price of a Sharp 60-inch HDTV

0:09:48.800,0:09:54.016
would go from 898 dollars[br]to 1,167 dollars.

0:09:54.040,0:09:58.176
And the price of a 16-ounce jar[br]of CVS skin moisturizer

0:09:58.200,0:10:01.640
would go from 13 dollars to 17 dollars.

0:10:02.240,0:10:07.616
Now, remember, this is only looking[br]at one strand of the production chain

0:10:07.640,0:10:09.016
between the US and Mexico,

0:10:09.040,0:10:11.840
so multiply this out[br]across all of the strands.

0:10:12.600,0:10:14.256
The impact could be considerable.

0:10:14.280,0:10:16.936
Now, just think about this:

0:10:16.960,0:10:20.200
even if we were able[br]to dismantle this network

0:10:21.480,0:10:24.696
and produce products in just one country,

0:10:24.720,0:10:27.216
which by the way is easier said than done,

0:10:27.240,0:10:30.656
we would still only[br]be saving or protecting

0:10:30.680,0:10:33.576
one out of 10 lost manufacturing jobs.

0:10:33.600,0:10:35.640
That's right, because remember,

0:10:37.400,0:10:40.056
most of those jobs, 87 percent,

0:10:40.080,0:10:42.760
were lost due to improvements[br]in our own productivity.

0:10:43.520,0:10:46.680
And unfortunately,[br]those jobs, they're gone for good.

0:10:48.160,0:10:49.720
So the real question is,

0:10:50.520,0:10:52.856
does it make sense for us[br]to drive up prices

0:10:52.880,0:10:58.400
to the point where many of us can't afford[br]the basic goods we use every day

0:10:59.280,0:11:01.496
for the purpose of saving a job

0:11:01.520,0:11:04.000
that might be eliminated[br]in a couple of years anyway?

0:11:06.040,0:11:08.056
The reality is that shared production

0:11:08.080,0:11:11.736
allows us to manufacture[br]higher quality products

0:11:11.760,0:11:12.976
at lower costs.

0:11:13.000,0:11:14.200
It's that simple.

0:11:14.960,0:11:16.816
It allows us to get more

0:11:16.840,0:11:19.256
out of the limited resources[br]and expertise we have

0:11:19.280,0:11:22.480
and at the same time[br]benefit from lower prices.

0:11:23.560,0:11:25.616
It's really important to remember

0:11:25.640,0:11:28.456
that for shared production[br]to be effective,

0:11:28.480,0:11:33.896
it relies on efficient cross-border[br]movement of raw materials,

0:11:33.920,0:11:35.880
components and finished products.

0:11:36.960,0:11:38.160
So remember this:

0:11:39.120,0:11:43.176
the next time you're hearing somebody[br]try to sell you on the idea

0:11:43.200,0:11:45.520
that protectionism is a good deal,

0:11:46.440,0:11:48.016
it's just not.

0:11:48.040,0:11:49.256
Thank you.

0:11:49.280,0:11:52.040
(Applause)