How do global economic powers reconcile a move to protectionism with a world that has become so interconnected? As the CEO of Alghanim Industries, a company which represents over 300 global brands in the region and is celebrating a 70 year relationship with General Motors this year, I want to share some thoughts on the matter.
An article published today by the BBC highlighted that the Dodge Ram 1500 pickup truck, assembled in Michigan, is “only 59.5% made in America”. For those of you who aren’t car enthusiasts, a Dodge Ram is as American as Apple Pie – so this statistic is rather stark. As a matter of fact, many of the Ram 1500s are made in Mexico.
Likewise, the US-sold Honda Accords, one of Japan’s most iconic brands, are 81% American-made. German giant, BMW has factories in South Africa. And, to highlight just how global car markets have become, General Motors now sells more cars in China than in the United States.
Over the years, producers have excelled at minimizing supplies and reducing waste. Just-in-time manufacturing allowed companies to stay lean with inventory that can last as little as four hours – that is before the next shipment arrives. The result: unprecedented productivity gains that are entirely dependent on the global flow of goods. New barriers and protectionist policies can create chaos for operations, dramatically increase costs and ultimately, make companies less competitive.
And that’s just cars – the auto industry is only one example of how intricately interlinked our world has become over the past decades. In today’s world, virtually every major industry depends on the import and export of products and/or services.
So against a backdrop of rising populism, and more specifically, anti-globalization rhetoric, how do global economic powers reconcile a move to protectionism with a world that has become so interconnected? The answer – you can’t.
Now, let me be clear – I have a vested interest in globalization, international trade and connectedness. Alghanim Industries has 30 businesses across 40 countries so I keep a close eye on what’s happening in the world. I’m also the Chairman of Gulf Bank, a financial institution that is integrally linked with the global economy.
But as a business leader from the MENA region, as a citizen of the Gulf and as a Kuwaiti – I’m worried.
Our region has been a conduit for global trade throughout its rich history. As Kuwaitis, we take pride in our seafaring culture, our ability to build ships that could sail to East Africa, the Indian Sub-continent and Southeast Asia. As a region, we represented an integral part of the Silk Road – one of the oldest manifestations of globalization and international trade. And this legacy continues to this day.
So what happens when one of Europe’s largest economies leaves the union, i.e. Brexit? What happens when the US, the world’s largest economy, puts up barriers to imports from Mexico, China and beyond? Populism and protectionism are on the rise, whether it’s in France, Germany, or Holland – so when half of the world’s eight largest economies exchange their globalization banners for that of protectionism, populism and nationalism, what does that mean for the global economy, given its interconnectedness?
I don’t have an answer. But protectionism is a large sledgehammer, and using it to take swings at our interconnected world will have unintended and unquantifiable consequences – and this is gravely concerning to me. Like other business leaders, I continue to follow this issue closely, because I believe that we, as a region, as societies and as a people have benefited greatly from globalization and trade. I hope we stop and reflect on what we stand to lose if we try to turn back the clock to a less connected world.
