Over the past few weeks, President Donald Trump has engaged America into what many experts are starting to call a trade war by using tariffs on products. Our allies and China have answered in kind. The Trump administration argues that the tariffs are necessary to level the playing field.
One of the potential losers might be the State of Louisiana, our economy and some of the businesses, particularly manufacturers. Then, there is also our ports that are involved in tens of billions of dollars annually in the trade pipeline.
Yesterday, Bloomberg published an article focused upon the potential losers in Louisiana. One of the companies mentioned was Laitram LLC, which is one of the largest manufacturer’s in the state. Bloomberg interviewed Jay Lapeyre, Laitram’s President who is also a top business leader in Louisiana.
Bayoubuzz will be publishing more articles and interviews regarding the potential and actual impact of the tariffs, looking at the maneuver from a range of issues and perspectives.
This morning, I discussed the trade with Lapeyre during a video stream interview that was broadcasted live on Facebook, Twitter, Youtube, Linkedin, Periscope and Bayoubuzz.com.
Below is the transcript of Part I of the interview and the entire video.
SABLUDOWSKY: I came across the article in Bloomberg where you were one of the people who have featured and the tariffs are just very very confusing to me, I'm sure to a lot of people out of the audience, but if you don't mind--why don't you first tell us about your business and the worldwide effect of the business and then we'll talk more deep into the tariffs
LAPEYRE: Sure, well i'll try to keep this brief and give quick context, Laitram was founded based on an invention of my father's--to automate shrimp peeling, so he invented a shrimp peeler when he was a boy. He worked in his father's plant down in Houma Louisiana which was a hand peeled shrimp and packing operation, and came up the invention and they founded a company in '49 and from its early days, we were we were forced to be a bit of a global business--so very small but we were always in the business of making a machine and trying to peel shrimp wherever the need was and wherever the economics made sense, globally.
LAPEYRE: From that background we've grown to where we still are in that business and we've added different product lines of that business but we've also added numbers of other businesses all based on internally generated inventions and and they're all global. So today we have 2,500 employees located in--sales or global--so that's 30 plus different countries--but, assembly operations and support service operations in seven or eight countries around the world and including China, Brazil and then obviously the the European markets as well as the US.
SABLUDOWSKY: OK the type of you don't mind, the type of say equipment products that y'all sell worldwide—
LAPEYRE: So the the biggest business would be what i'll call modular plastic conveyor belting which is lego pieces for conveyor belting. So we will sell our unique technology. We were very small but now we're we've grown and now we're as big as--we're the largest, we're the global leader and really all of our sectors, but but you have to look at the niche we're in. So we'll, we'll sell a conveyor belting to equipment makers and those equipment makers will be located all around the world and many of them will also be global, they'll be exporting and importing. And then we also make high speed sorting equipment so if you think of a UPS--so if you think of a of a of a high speed sorting line at a post office or a UPS or Amazon or wherever, we would make equipment for that. We make shrimp peelers still. We make a shrimp cookers and other processing equipment. And almost all of the equipment side uses globally sourced complex, products, where you really have to be careful about the form and the fit and the function of each component and anytime you make any change you can have a quality or a fit or an integration problem so as you start to deal with with the complexity of that you deal with supply sourcing, that gets quite complex. And that's true for us and it's true for all of our customers at every stage along the way. So that gives a quick overview
SABLUDOWSKY: No absolutely, so I read that you would describe yourself as a free trader
LAPEYRE: Yes and in in, I would describe myself as a free trader, philosophically, because I think that's what drives prosperity that we take for granted. If you if you look at why automobiles are so good today, it's because they face the US companies face competition globally and that's just one micro example. But we live with the best source product for product service value. We live with that competing from around the world so that's part of what makes what makes our industry so amazingly productive and how we get such a fantastic array of consumer goods that that everyone just takes for granted in their standard of living. So when you look at why why the the prosperity is so phenomenal in this country and why a dollar buy so much it's because of all of that efficiency and the global in the global game. I don't then say that that everybody buys in and plays by the same rules and I'm not a naive to the, to the problems. I just think that the only answer to that is to continue to work to to try to get more and more free markets because that's what benefits people. It it does cause big dislocations, there's no doubt about that but that's that's true and even more so with automation which causes even more dislocations. So so both are factors in prosperity. Well we came from from the horse and buggy days and now we we a lot of those those businesses don't exist at, but but consumers benefit from that and industry changes and innovation changes. For us personally, so it also aligns with what we do, we're probably the leading, we are the historically, if at least the last five years when I checked, we generated more US patents at Laitrem than any other company in Louisiana. So we are innovators and we're constantly innovating and trying to stay ahead and we face global competition, and we need we need to be on a level playing field to compete globally and if we don't compete globally sure enough we'll will end up losing, even domestically, so that's that's that's a big part of what motivates us to lace up our sneakers and and show up with our best game every day.
SABLUDOWSKY: So in your industry or industries--who would you say is not playing on the on the level playing field, who is tilting it?
LAPEYRE: Well I don't, I don't know enough about all of the different aspects. I can I can explain how things work for us--
LAPEYRE: But I think the lack of rule of law, consistent predictable law, in countries, for example-- China is a real issue, the lack of protection of intellectual property--but people think of that as American, it's not. It's it's somebody's property. It's it's a particular company that that can be over there and in our case, it's our property and we have to have the brains not to disclose or or or give it away, in a way that doesn't make sense for us.
SABLUDOWSKY: Now I can't speak to national security type technology, I can speak to anything that's private--is there is that company's choice, and and they certainly anyone sophisticated today with any complex technology is aware of of the risks they're taking, but it's their risk to take. And and and they're being foolish if they're short term minded, and they step into sort of giving away the farm for a short term opportunity. We tried out to be strategic and we think every company that that is likely to do the same. But that's definitely a tilted playing field, they're also big subsidies of in in markets and in China certainly one of them in particular areas with steel being a major a major problem for the steel industry, but the problem with that one is that for every user of steel, I mean for every steel company for every employed person in a steel company, they're probably 10 to 20 to maybe even 50 steel users and if China, if maybe the best way to think of this is the way you would a an individual deal--if you think, "boy I got cheated in that deal" you never think to yourself because the guy gave me too low a price--you think, well I got cheated in that deal because I didn't realize something he charged too much--I didn't realize that better prices were available. The Chinese are cheating, by subsidizing, by giving us too good a deal and if we don't accept that deal, we're going, we're going to remove ourselves from being competitive in the global play with all the users of steel. The end result, then you come back and say, well who is getting cheated? And the people who are getting cheated are the Chinese. They're the ones who are subsidizing these industries in a way that it doesn't make sense ultimately for the Chinese. Now their system doesn't provide that level of transparency but that's the facts, that's what's going on. So now, for us, it's terrible for people in the steel industry, who are dislocated, but there's no good answer to to that because there's at least, and I mean this, I don't know the data, but there's at least a 20 to 1 and it's probably closer to 100 to 1 steel users to steel makers. So, I don't think that gives a picture of it.
SABLUDOWSKY: Okay, I do you see that some people are saying hi to you and I just wanted to mention that-- on Facebook--
LAPEYRE:Hi people, hi back
SABLUDOWSKY: One is Rick Hasse
SABLUDOWSKY: And so so let's let's talk then about the impact of-- in terms of your business-- the impact of the tariffs--from what I could gather from the article that was on Bloomberg, basically the issue for you, and for so many others, including the Port of New Orleans, the Port of South Louisiana, is uncertainty. Am I correct there?
LAPEYRE: Yeah that's exactly right. My comments are all about the perspective risks--it's the the cautionary tale, of the prophecy, that if if we think we are good with a trade war, we're we're missing both the foundational economics of what the endgame will be, but also the period of uncertainty that dislocates where everyone, is waiting to get the rules clear before they can make economic decisions and you can't actually be confident in making long-term decisions. And every decision in business is is geared to some time frame and that time frame for most companies is--I need to be really confident that it's at least a deal depending on the magnitude of the investment that gets its payback, and that payback has to be, in some some reasonable time frame of three to five years. Well in this world, you can't think that way. I mean, you can't have predictability, so the uncertainty is that is the terrible part and as you put that cloud over your business, that sends implications for the suppliers that you'd be dealing with, so everyone's hold--is lost revenue and lost movement forward and caused--and it ultimately results in waste, because it just prolongs decisions and adds inefficiency to the processes. Then even worse, the endgame--not even worse--additionally, the endgame may result in a change. So you make a decision counting on one direction and it turns out that it isn't reliable and you unravel it. Well that's all mal-investment, that's all part of what economic readjustments and crisis come from, so.
PART 2, TOMORROW