Cadbury needs cad like Trump
If any of Trump’s policies or promises ripple through to New Zealand, it will be those about saving jobs and punishing manufacturers who abandon their homeland for low wage countries.
In November last year, even before the American election, Trump’s meaty comments about Indiana manufacturer Carrier, which makes air conditioning equipment, prompted it to revise plans to move its factory to Mexico. Apparently 1000 jobs were saved.
That situation resonates in New Zealand which has, over the last 20 years, lost thousands of manufacturing jobs to Asia and other places, albeit without a great deal of fuss.
For instance just in December General Cable, once one of Christchurch’s largest employers, retrenched further with the loss of 160 jobs in the city and another 10 in Auckland. No big deal.
In the last few weeks we have heard of efforts to save the Cadbury factory in Dunedin which employs about 350 people. Its American owner, Mondelez International, wants to move its manufacturing to low wage countries.
Cadbury is a bit of an institution in Dunedin and the product has instant recognition in New Zealand but essentially it’s no different to a manufacturer of socks which wants to reduce costs so it can maximise its profits and bury the competition.
You can imagine the reaction if Dunedin was in Trumpland. The President would be tweeting like mad and his officials would be offering all sorts of sweeteners (excuse pun) and threats to make the manufacturer stay put.
Naturally there are problems with that sort of intervention. For a start, other manufacturers queue up for the same benefits as those provided to the operation readying to leave.
If the company carries on much as usual it will inevitably fail because it can’t compete with the low wage operators elsewhere and will need to be protected by tariffs. That’s how trade wars start.
Consumers are also disadvantaged by higher prices for a protected local product which might not even be as good as cheaper counterparts made offshore.
The appeal to patriotism – jobs for New Zealanders, buy New Zealand made – is rousing but doesn’t stand a lot of scrutiny. Business is not responsible for solving a country’s problems and things get murky when responsibilities to shareholders are muddied by the half-hearted pursuit of some national good.
I have seen it argued that we need to accept inefficient manufacturing and higher prices for the sake of maintaining a cohesive society. In other words steady jobs and decent wages are fundamental to strong, healthy communities and worth some consumer pain.
It’s an issue potentially rich with votes as we have seen in America, Britain and Europe. For instance in France, National Front leader Marine Le Pen is leading the charge for a new industrial revolution in which things will be ‘‘made in France’’.
Losing jobs hurts and those affected turn to politicians for answers and vote accordingly. Trump rode that wave to the White House.
The cry to bring jobs back from abroad or to stop factories going offshore is really a call to turn the clock back many years. Maybe Dunedin can hold on to the Cadbury factory for a while with Government help but such a move seems doomed.
Manufacturing jobs have gone mainly because manufacturing has changed enormously. Those steady jobs are far more likely to have been replaced by automation than a move to China.
Of the millions of jobs lost in America over the last decade, probably about 80 per cent have been replaced by automation. America is producing just as much if not more than 20 years ago, but it is using far fewer workers.
And just over the horizon, we have robotics, further computerisation and artificial intelligence to take over even more work.
Labour costs are just a small part of the attraction of manufacturing in Asia.
Manufacturing today brings in various ready-made bits from around the world and the trick is mastering that supply chain efficiently and quickly.
Big Asian factories are just much better at doing that and their workers are more diligent and flexible. The maker of iPhones, Foxconn City in Shenzhen, China, has 230,000 workers at its disposal.
No doubt we will hear some interesting rhetoric about the issue as we approach the election. But it’s time for some realism.
The jobs aren’t coming back and we need to think very carefully about ongoing education, the changing nature of work and how we occupy ourselves if, with our modest skills, we can’t find a decent job.
I hope Cadbury can be saved but the tide turned a long time ago.
The cry to bring jobs back from abroad or to stop factories going offshore is really a call to turn the clock back many years.