Protecting Whom from What?
APRIL 01, 1989 by BJORN AHLSTROM
Bjorn Ahlstrom is president and chief executive officer of Volvo North America Corporation. This article first appeared in the July 14, 1988, issue of The Detroit News.
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?
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, representing 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?
The Volvo 780 that we sell in the United States has a French engine, a Japanese transmission, an American air conditioner, a German 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 Swedish car?
Volvo North America sells the 780. We directly or indirectly (through our dealers) employ 25,000 American citizens—including me. The other cars and tracks 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 countries, quite a few of them in the United States. Is this a foreign company?
I think “international” is a better word. International, just like Ford. Or Coca-Cola. Or IBM.
Companies like these—and there are thousands of us—buy raw materials and components all over the world, wherever the price and the quality are right. We 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” approach. We have to. What this means is that we operate in the United States or France or Australia as if it were our home country.
We cannot just take the Swedish Volvo and sell it, unchanged, in the United States. Americans have different tastes in handling, styling, and other areas. And transportation and component 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 Taiwan’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 domestic or foreign company. We’re all international. And that means we’re all American.
So, when you talk about trade barriers, remember 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.
The Key to Progress
In the highly complex, interwoven world marketplace of today, it is pointless to think of national economies as independent entities. Like it or not, modern industrial nations have become intertwined and interdependent economically, and the result is rising prosperity. Vigorous international commerce is the key to progress.