Where to Build Trump’s Wall?
Any economy’s success is heavily influenced by the performance of that sliver of activities that sells its products to outsiders. And what is true for countries is true for states, cities, and towns, which is why policies to address disruption from foreign trade are often – and increasingly – irrelevant.
CAMBRIDGE – What do Huntsville (Alabama), Princeton (Indiana), Georgetown (Kentucky), Blue Springs (Mississippi), San Antonio (Texas), Buffalo (West Virginia), and Greer (South Carolina) have in common? They are the locations where Toyota and BMW built their manufacturing plants in the United States. None is in the US Rust Belt – the tract of industrial towns stretching from Michigan to eastern Pennsylvania – where much of the car industry and its suppliers were traditionally located.
Evidently, the US Rust Belt’s decline was not the exclusive doing of China and Mexico. It was also caused by the auto industry’s geographic spread into other regions of the US, out of the clusters in which it had originally been concentrated. And this shift resulted not so much because GM moved its plants, but because it lost market share to Toyota, Nissan, Honda, Hyundai, BMW, and Mercedes-Benz.
Of course, pointing this out does not reduce the pain for those affected. But it does change the policy implications – and the lessons from the US example are relevant worldwide.