In Pursuit of Nissan, a Jobs Lesson for the Tech Industry?

The Dairy farms once draped the countryside were paved over so Japanese carmaker Nissan could build its first American assembly plant. Eighty miles to south, another green pasture was replaced by a Nissan engine factory, across Tennessee about 100 Nissan suppliers dot the landscape, making steel in Murfreesboro, air conditioning units in Lewisburg, transmission parts in Portland. Three decades ago, none of this existed. Conventional wisdom at time was simple: Japanese automakers would not build many cars anywhere but Japan, where supply chains were in place, costs were tightly controlled, the reputation for quality was unparalleled. “They were unfamiliar doing anything outside Japan,” said Senator Lamar Alexander, a Republican who was governor of Tennessee State when Nissan opened its factory here in 1983. “They were tentative and awkward even discussing it.” Today, echoes of that conventional wisdom can be heard within American technology industry. For years, high-tech executives have argued United States cannot compete in making the most popular electronic devices. Companies like Apple, Dell and Hewlett-Packard, which rely on huge Asian factories, assert that many types of manufacturing would be too costly and inefficient in America. Only overseas, have said, can they find an abundance of educated midlevel engineers, low-wage workers, at-the-ready suppliers. But the migration of Japanese auto manufacturing to United States over the last 30 years offers a case study in how unlikeliest of transformations can unfold. Despite the decline of American car companies, United States today remains one of the top auto manufacturers and employers in the world. Japanese and other foreign companies account for more than 40% of cars built in the US, employing about 95,000 people directly and hundreds of thousands more among parts suppliers. United States gained these jobs through a combination of public, Congressional pressure on Japan, “voluntary” quotas on car exports from Japan and incentives like tax breaks, encouraged Japanese automakers to build factories in America. Pressuring technology companies to move manufacturing would pose different challenges. For one thing, Apple and many other technology giants are American, not foreign, and so are viewed differently by politicians and the public. But it is possible and the benefits might be worth it, some economists say. “The U.S. has a long history of demanding companies build here if they want to sell here, because it jump-starts industries,” said Clyde V. Prestowitz Jr., a senior trade official in Reagan administration who helped negotiate with Japan in 1980s. Government could encourage domestic production of technologies, including display manufacturing and advanced semiconductor fabrication, would nurture new industries. “Instead, we let those jobs go to Asia, and then the supply chains follow, then R&D follows, and soon it makes sense to build everything overseas”. “If Apple or Congress wanted to make the valuable parts of the iPhone in America, it wouldn’t be hard” (…..)



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Consultor Internacional

7 Responses to In Pursuit of Nissan, a Jobs Lesson for the Tech Industry?

  1. Professor Uziel Nogueira says: The following statement from this piece is misleading ” a developing country like Brazil can adopt trade policies that would be difficult for the United States to do. Taking a hard line to reduce imports of technology goods and encourage domestic manufacturing could violate international trade agreements and set off a trade confrontation.” Fascinating, the US plays by the WTO rules while Brazil does not. US is afraid of trade confrontations while Brazil is not. The reason for the US position -as usual – is money, the devalued but precious greenback. Here is the basic difference between US and Brazil as far as industrial-high tech policy is concerned. Like any other emerging economy, Brazil’s position on industrial goods is defensive at the WTO. The country needs the synergy of high tech industries –and the hig hly specialized jobs that come along — to strength other segments of the industrial sector. For example, high tech is fundamental for Brazil’s new defense policy that calls for local manufacturing of advanced weapons systems. The US position is offensive at the WTO. The US creates most of high tech products and is headquarters for the most advanced technological companies in the world. The USTR has one primary goal in this key sector. To make sure that US INVESTORS get the best deal during any trade negotiation, irrespective of domestic job creation. Like CEOs of major US based high tech corporations like Apple, job creation is not part of the USTR mandate.

  2. Glen: This article only briefly mentions the price premium attached to Brazillian-made products… And it’s over 50%! It also coyly notes that this “excess” profit accrues solely to Apple and not Brazilian workers. How long will The Times tolerate this new economic inequality? The article also fails to mention that, at best, Brazilian Apple products will arrive to market at least six months later than those produced in the Company’s open, global supply chain. While six months may not sound long, in high tech, it’s a lifetime. The Times’ iEconomy series has already published an earlier article explaining that labor costs are not the reason why Apple’s (and other manufacturer’s) supply chains are clustered in Southern China. Apparently, these reporters failed to grasp the significance of these earlier stories. Automobiles are not handheld consumer electronics. Both Nissan and Apple introduce new models annually. But not much changes every year in a new car, while almost every component in a new iPhone is different from last year’s model. And those different components often incorporate bleeding-edge technology. Apple and Foxconn’s decision to expand production to Brazil was driven by many factors beyond that nation’s protectionist policies. That The New York Times would suggest emulating Brazil demonstrates how thoroughly bankrupt the American Progressive movement has become.

  3. Professor Uziel Nogueira says: Glen, another powerful reason why Foxconn and Apple decided to expand production in Brazil, BRICS are the fastest growing markets today. The US is a mature market in the highest indebted economy of the world. However, I do agree with you. Brazil is the wrong example to be imitated by the US as far as industrial policy is concerned. I think Germany is a much better model for the US. After all, is the only G-7 country unafraid and welcome Chinese competition. Perhaps the US can learn a few lessons from Germany on industrial policy and how to compete successfully in this brave new world.

  4. J. Pastore: Uziel, realmente esse jogo na OMC parece ter diferentes regras, todas obscuras e sujeitas a contestações. Não tinha pensado nas diferentes posições do Brasil e EUA. Gostei.

  5. Professor Uziel Nogueira: Pastore, creio que a questão fundamental, do ponto de vista brasileiro, e a seguinte: Por que nunca conseguimos estabelecer um setor industrial competitivo? No passado, falhou a estrategia de substituição de importações e fechar o mercado interno a competição externa. Hoje e o custo Brasil que não tem solução no curto ou médio prazo. Esperar que o governo diminua os impostos terá o mesmo resultado que os esforços de FHC em atrair o apoio sindical. Continuar ‘empurrando com a barriga’ = travar importações + incentivo fiscal qdo algum setor estiver ameaçado e a unica solução. Minha preocupação, igual a sua, e a questão do emprego. Onde serão criados empregos, que paguem salários decentes, para milhões de jovens semi alfabetizados que buscam empregos anualmente? Empregos na areá de serviços, estilo MacDonalds, não parece ser a solução.

  6. In tough economic times, politicians press to find ways to increase production and employment at any cost. But when choosing options to alleviate hardship in the short run, they should consider the long-term impact. Providing incentives for Apple and other tech companies to manufacture products in the United States can have unintended consequences. Brazil’s experience shows that he United States should be cautious. It benefits enormously from having access to gadgets like iPhones and iPads that are relatively cheap because they are manufactured in Asia. Buoyed by millions of smartphone owners, the apps industry employs about 300,000 people in the United States, according to The Economist, more than in all other countries combined. Exports in this field, even to China, are booming. Last year, Brazil attracted some of that Asian manufacturing. It granted Foxconn — a major Taiwanese supplier and assembler of iPhone components in China –subsidized credit, and protection from imports, in exchange for its manufacturing in Brazil. A few months after the deal was signed, though, the government realized that the country didn’t have enough engineers and other properly trained workers to run the factories. And while pay scales were at a historic high, the government did not show a particular resolve to attract skilled immigrants. As a result, Foxconn’s production costs were higher. Brazilian-made iPhones and iPads are the most expensive sold by Apple. A few lucky Brazilian engineers have benefited, but fewer people can afford to buy smartphones, and neither “app” firms nor tech jobs are booming.

    Room for debate:

  7. Professor Uziel Nogueira says: Human resources and wrong policy have always been Brazil’s weakest link to establish a competitive manufacturing industry. Thus, the Brazilian case does not apply to other countries, particularly the US. Take the case of the auto industry. The country started to produce cars in the 50s when China, Korea and Japan were producing bicycles. Since then, Brazil was unable to set up a competitive platform to export high quality vehicles. Short of qualified workers + defensive industrial policy protecting domestic producers from overseas competition explain, to a large extend, the ‘custo Brasil” and lack of competitiveness. Computers are another case study. In the 80s, the Brazilian government decided to establish a computer industry. A state enterprise was created and barriers to imported computers were established. The result was Brazil being 20 years behind the rest of the world in the IT area. The iPad iPhone case is another example of high tech industrial policy with little chance of success because it lacks competitiveness. It did not work in the past and will not work today. For many reasons — particularly high quality jobs — Brazil cannot give up a strong and vibrant industrial sector, particularly in the high tech area. A new approach and policy measures are urgently required. Among them, allow massive immigration of highly skilled foreign workers and, attract qualified foreign professors to teach a new generation of engineers/technicians.

    Room for debate:


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