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The Government Circuit: Recession Fears, Trade Wars: What Can We Do?

Despite many strong economic indicators, recent news reports are filled with growing concerns about the risk of a U.S. and global recession in the next 12–24 months. Amid a prolonged trade war between the U.S. and China, and an "inversion" between long-term and short-term bond yields, a recent survey ^[1] found that 74% of economists predict the next recession will hit by the end of 2021. IPC is gearing up to expand its industry research programs to address topics like international supply chains, trade wars, skilled workforce issues, and the role of electronics in the global economy.

What do you think about the possibility of a recession? How might it affect your company, and what will you be doing to anticipate it and ride it out when it comes? What should we, as industry leaders, be doing about it? I welcome your thoughts.

Trade Wars

The primary contributor to the current recession panic is the breakdown of certainty in the international trade regime. The American- and European-led, post-World-War-II agenda of ever-lower barriers to global trade is now almost completely obscured in something akin to "the fog of war." It's hard to see how national governments and international organizations will navigate through this fog and emerge stronger when the nasty weather clears.

Whatever happens in the next few weeks and months, IPC will continue to advocate for a fair, open, and rules-based international trading system. This is vitally important to our members because most of them rely on complex, international supply chains for raw materials, goods, and/or services, and most are small- and medium-sized companies with narrow profit margins. Rising and unpredictable tariffs cause disruptions and uncertainties for our members, their employees, and their customers.

On the U.S.-China front, we are calling on both governments to de-escalate the tariffs battle, return to the negotiating table, and conclude agreements that address long-standing issues of concern to both sides. A prolonged trade war will not necessarily bring back U.S. manufacturing jobs; rather, it will increase the attractiveness of other countries that are not touched by these battles.

On the European front, IPC is concerned about the supply-chain disruptions that could occur if there is a "no deal" British exit from the European Union, which is currently scheduled to occur on October 31. Several major companies have already taken steps to shift operations and resources from the United Kingdom to other countries that maintain their ties to the EU. Meanwhile, leaders of the U.S. and U.K. have expressed desires to develop a new free trade agreement between them, although formal negotiations could not begin until the "Brexit" process is resolved.

Aside from Brexit, the U.S. and the EU are also embroiled in a long-running dispute over government subsidies provided to Airbus by the EU and to Boeing by the U.S. The World Trade Organization has ruled that both sides are entitled to respond to the subsidies by placing retaliatory tariffs on each other, and not just on airplanes and airplane parts. Those tariff actions could come within three to six months.

The U.S. is also considering aggressive trade actions this fall against imported autos and auto parts, which would send even more shock waves through our industry and the wider economy.

Overall, these trade disputes are exerting a drag on economic growth and on the electronics industry, which is at the heart of almost every other economic sector. And with so many trade policies in flux on a near-daily basis, IPC has developed a "cheat sheet" on the various situations that we are continuing to track on behalf of the electronics industry ^[2]. I invite you to check it out and let us know your concerns and questions.

Trade Peace?

If there is a silver lining in the gray skies over international trade, it is the proposed U.S.-Mexico-Canada Agreement (USMCA), which may come up for crucial votes in the U.S. Congress this fall. According to an IPC-commissioned, independent study ^[3], USMCA would be a positive step for the electronics industry, our customers, and our employees by strengthening the North American supply chain and adding new chapters on digital services and small- and medium-sized enterprises.

Conversely, a failure to enact USMCA—and a possible breakdown of the current NAFTA pact—would throw North American supply chains into doubt and wreak havoc in our industry. For these reasons, IPC supports passage of the USMCA, and we invite you to join us in our advocacy campaign. Visit IPC’s Online Action Center ^[4] to contact your elected representatives with just a few clicks.

Help Us Advocate for Lead-free R&D

Another IPC advocacy campaign focuses on securing funding in the U.S. Defense Department's fiscal 2020 budget for R&D into the performance and reliability of lead-free electronics in the aerospace, defense, and high-performance (ADHP) sectors. The U.S. House of Representatives called for such funding in June ^[5], and now the action is in the U.S. Senate.

Investing in lead-free electronics R&D would help alleviate a critical supply chain issue in the defense industrial base since most commercial electronics and cutting-edge systems are based on lead-free designs. IPC and its allies are working to revive and complete a public-private R&D program that has languished in recent years. You can read this article ^[6] to get up to speed on the issue and visit our Action Center to ask your senators to support this funding ^[4].

We Invite Your Input and Participation!

IPC's success depends in large part on the guidance and support we receive from IPC members. If your facility is an IPC member, and you want to be in the loop on our government relations activities, you can set your email preferences to receive advocacy updates. If you are not an IPC member, or you’re not sure, just send a note to friends@ipc.org, and our staff will add you to our email list.

See you here again next month!

Connect With Us

• IPC Governmental Relations Staff
• IPC Online Advocacy Action Center
• Chris Mitchell on Twitter
• IPC on Twitter
• Email preferences

References

1. National Association for Business Economics, “Economic Policy Survey,” August 2019.
2. IPC, “IPC Trade Issues Fact Sheet,” August 12, 2019.
3. IPC, “Strengthening Interconnections: The U.S.-Mexico-Canada Agreement and the Electronics Industry,” May 2019.
4. IPC Advocacy Team, “HELP: Urge Your Senators to Back Funding for Lead-Free Electronics R&D.”
5. IPC, “U.S. House Approves Measure to Promote Lead-Free R&D in Milaero, Automotive, Medical,” June 21, 2019.
6. C. Mitchell, “IPC Working to Revive Lead-Free R&D in High-Reliability Sectors,” April 10, 2019.

Chris Mitchell is IPC’s VP of global government affairs. Contact Mitchell at ChrisMitchell@ipc.org.