Hong Kong ’s Dramatic Shift and Its Ripple Effects on Trade with Dan Harris

Machine Automated Transcript: Dan Harris 00:00I was actually people don’t remember this, there was a time where companies were, quote unquote forced to go into China. And by that, I mean, like, we would have a midsize company call us and say, you know, we have to go into China, we don’t want to, but we have to, I’d say what mean they go well, this huge company has told us that if we can’t supply them with their such and such in all of Asia, then they’re not going to use us for Europe or the United States either. Companies are feeling forced that they have to leave China because there is a lot of pressure.Annik 00:36Before we get started with the show. Here’s a quick word from our sponsor global Training Center. As trade compliance professionals, you want to make sure that your procedures and documentation are completed as correctly as possible. To avoid any delays and possible fines. We provide a range of trade compliance courses that will fit your needs, from in person or web training to record it on demand courses, we can train one or even 1000s on your team through your learning platform or on our portal. We can even customize a private session for your team. Go to global training center.com To find out more. Okay, folks,Andy 01:09we are back for another show for simply trade. And listen, we greatly appreciate your listenership and your viewership if you’re watching our videos and all and it you know, like us, subscribe to us download us, we greatly appreciate it. Our numbers are going way up. We’re over 50 shows I just found that out. And I am excited. I mean, like get these affiliate on a spring board. And folks, it’s great. You guys are wonderful. So with that, LOL Oh man, I tell you I’m I’m excited for today’s show. But how you doing? By the way?A

Lalo 01:41

Lalo 01:41

I’m doing good. Thank you for asking. And I Yes. And speaking of today’s show, so it was a challenge from our social media specialists, you know, Anik, who hosts the the daily or the daily? I’m sorry, the weekly roundup that we have. So she said I wish you guys would do is have the author of this article on your show. And I think she said it almost in passing thinking it wasn’t going to happen. So I’m glad she challenged us in that. And a week later, here we are. We’re interviewing the author of this. Hong Kong. I told you so type article from from, from Dan. And I will introduce him here in a little bit. But so anyway, I’m glad that that came out of this because that was the purpose of the of the weekly roundup is to try to generate more conversations.

Andy 02:36

Well, I love it. I tell you, we had a good, good discussion that sparked some interesting comments. And actually, we’ve had some good feedback from our listeners. So that’s guys, we love your stuff. And so keep that kind of stuff going. So you said you had a story though? Lala, what? So what do you have in mind?

Lalo 02:55

I was trying to think, you know, me and I tried to figure out a way to segue into our, our guest. So I remember back in 2008, there was a guy who everybody thought he was crazy, because he was he was almost hedging against the housing market. Remember housing market, he was gangbusters? You know, lots of lots of, you know, and he was pretty much hedging against that saying, this thing is gonna crash. He saw the signs and everything and he even bet against it. By buying what is it call, I don’t know, I’m not a finance person. So I excuse me if I say this wrong or anything, but I believe it was he was buying, like insurance or something against the housing market, meaning that he was going to make money if they default on it. So and people are saying, you’re crazy, you’re spending your money, you’re wasting your money. The housing market is doing great, you know, and obviously, they didn’t want to hear that bad news because, you know, they’re making lots of money out of it. And sure enough, what happened we had the big crash the housing market crash, you know, and he made a lot of money off of that and everything so anyway, I’m kind of trying to relate it in the sense that Dan wrote an article a while back when when when he saw the signs on on Hong Kong and China taking over again and you know, kind of saying the ice is gonna happen

Andy 04:26
lease on the British lease. That was 100 year lease actually ran out, and they turned it back

over to China.

Lalo 04:33

Right. And Dan’s point at that time was you know, just saying things that were going to happen, what might happen etcetera, and people you know, they didn’t say nasty things to him but I don’t know he’ll he’ll confirm that they did or not, but at least that’s not gonna happen or whatever, you know, but anyway, so So we’re I’m glad to have him because he did say write an article recently saying, I told you so I knew this was gonna happen. You know, and get to redeem yourself, Dan. So we have Dan Harris, everyone. And so we’ll let you introduce your background a little bit. And you know, and then we’ll go into the Hong Kong. If, if that’s okay.

Dan Harris 05:14

That’s great. Thank you for having me. Let me start out by distinguishing myself from the real estate person you’re talking about. That person was smart, and did well financially, due to his predictions. I don’t think of myself as smart. I think of myself as simply hearing what’s going on. And seeing the obvious, despite the fact that revealing the obvious is probably a stupid thing to do. Because it makes a lot of people angry. And it made a lot of people angry. I even got death threats. Because people were very mad about me. And they’ve been very mad about my predictions regarding China and Hong Kong, since I turned sour on both places in 2018. So I didn’t realize that my article came across as I, as an I told you, so I wanted it to be and I told you, so. But I didn’t want anyone to realize it was an I told you. So. You’ve

Andy 06:26

been vindicated? Let’s put it that way. Because you had some good read thing. So it’s like, yeah, and that’s some of the best ways to look at it, not necessarily Nananananana. Unfortunate, let’s put it this way. You have been unfortunately vindicated, because your assessment was pretty accurate.

Dan Harris 06:47

Right? Right. And I’m not so sure. It’s unfortunate, because I think that that was the reality when I set it, and it’s the reality now, and the more people who realize it, the better it will be. In fact, I’m in Austin, Texas right now. And when I was heading to my hotel, I was talking with a client, who said he’s never going to China again, he thinks it’s too dangerous. And my response was good for you. And I’m not saying that it was necessarily too dangerous for him, but good for him for actually realizing that possibility and taking it into account because too many people don’t. And China

Andy 07:31

is very aggressive in their agenda, they are very focused at all levels of from the top all the way down through their entire economy as well as in there population and, and culture. I will say personally, I’ve got some good friends that are in China, and have had the opportunity to meet with some good Chinese folks but I’m telling you, you got to be able to earn their respect and and all that you can’t just lay down with it and in China has been has now become that 800 pound gorilla in the room kind of thing. And in dealing with it. So alright, well, let’s let’s do this. Damn, the first off again, thank you for joining our show. We greatly appreciate this. And with that is alright, so let’s remind folks of the article that you’d written your prediction was that when Hong Kong then became went under Chinese rule, and as time went on in 2018, China, mainland China started exercising more aggressively, their influence and control over Hong Kong. Now, at the time, going back even further, when China took over control, and British relinquished it to the Chinese. It was a scenario where Hong Kong was considered the business mecca of Asia and was the center there it is like, it was a great place to do business in Asia, a lot of places used Hong Kong as an arbitration point. If there were disputes there were all kinds of business contracts handled in in through China. Well in and through Hong Kong, excuse me, as China, mainland China took effect now correct me if I go wrong here, but it’s like they started replacing the democratic elected folks in Hong Kong with more Chinese nationals. And as it went on, and his even gotten to the point now, where the Chinese government, or should I say the Hong Kong government, pseudo Chinese government has arrested dissidents that are you know, pushing back and trying to even one that was a multi millionaire or a billionaire of some kind were very wealthy. That was, again a dissident again, he was pro democracy The and not so much Mainland China. Alright, so saying all that as things have gone on and it progressed, there was in the article, if you’re using Hong Kong as a source, if you’re using Hong Kong as a major player as far as the intermediary for disputes and all that you better move out of that. Take that out of your contracts, find different sources for Hong Kong. And that was what the prediction was that people were getting their knickers in a knot over, right?

Dan Harris 10:26

Yes, that was certainly one of them. But essentially, what I was saying was Hong Kong, as we know, it is no more. It is China. It is Shenzhen. It is Wan Jo. It is not Hong Kong anymore. And these are the signs and everything indicates and really I mean, this is why I take no pride in what in my prediction, because absolutely everything all the writing on the wall said it’s just going to keep happening. All you have to do is look at the way the CCP treats its own people. Look at what the CCP has said about Hong Kong in the past. Look at the fact that the CCP has always hated Hong Kong, because it is not really China. It’s International. Its democratic. It doesn’t fit with the CCP. So to think that it could remain Hong Kong for long is an absolute pipe dream. And the arbitration portion is interesting, because that actually drew a lot of heat. But I also had a lot of friends who called me up and said, You’re 100%, right? Why would anybody put a Hong Kong arbitration clause in their contracts? Now, in fact, one friend said that he had an arbitration in Hong Kong and he couldn’t go because of the politics. So I mean, it was a huge deal. But arbitration in Hong Kong is a huge business. They arbitrators make a ton of money. The lawyers make a ton of money. And it’s easy for me to say this because our law firms arbitration practice is essentially country neutral. I mean, we do arbitrations in London, Geneva, Hong Kong, Singapore. But if you’re a Hong Kong lawyer, my comments threaten your livelihood. In

Andy 12:55
that arbitration scenario there, is that also associated with the International Chamber of

Commerce, the ICC, not

Dan Harris 13:02

necessarily I mean, there are a lot of good arbitration tribunals in Hong Kong. And what really worried me is the fact that Hong Kong’s courts have been compromised by China. And so no matter what arbitral body you use in Hong Kong, and there are terrific arbitral bodies in Hong Kong, there are terrific arbitrators in Hong Kong. I mean, it’s no accident that Hong Kong I love Hong Kong, and it’s a great city

Andy 13:44
is a fantastic that great food, great people. It’s I love Hong Kong.

Dan Harris 13:48
I love it except crossing the street because I always look the wrong way.

Andy 13:54

Actually, it’s funny you say that, I always I wound up actually hurting my back horrendously, in Hong Kong, because I stepped off a curb with all my bags, and I was walking one block to business office to go to the airport and all that. And I almost got hit by a taxi. I mean, it’s like I had to jump out of the way and I’m rich my bag is i Oh, my gosh. So to your point, I know that when

Dan Harris 14:19

I’ve never been able to drive on, quote, unquote, the wrong side of the road. And I don’t know how people who just do it. I mean, I can’t so I respect that and I respect anyone who cannot across the street in Hong Kong. But I don’t respect lawyers who keep putting Hong Kong in their arbitration clause. Well,

Andy 14:39

to your point i So as we’re going through is that what people should do? Let me ask this, even in today’s world, if they are pulling away from Hong Kong as a source, you know, again, Hong Kong had and has had I guess it’s still but they a lot of money. factories there, especially in the garment industry. There’s no question about that. But a lot of manufacturing was going on there. There’s the business side of things, the financing side of things, as far as you know, financing the some great international banking goes on there and all that. All that coming out of there now, where should people be looking at? Is there another place in Asia? They should consider in your opinion, or what? What’s the action that somebody should be taken here?

Dan Harris 15:28

Well, that’s an interesting question. And first off, there was almost no manufacturing happening in Hong Kong. What there is, is manufacturing companies, and most of those companies are manufacturing in mainland China. They’re just in Hong Kong, for the lower taxes. Okay, so. And, to a certain extent, I also have to confess that despite the fact that Hong Kong is sort of the city that you stamp on your contract for arbitration, I was never that big a fan of it. For a number of real well, actually not a number of reasons, for one reason, it’s phenomenally expensive, meaning the lawyers there are incredibly expensive, the arbitrators are incredibly expensive. And sometimes that makes sense. If you’re worried that your client is going to get sued, and you don’t want them to be, then maybe you put arbitration in Hong Kong. But if you’re worried that your suppliers not going to give you product, then maybe you put arbitration somewhere else. And there are a ton of good lawyers and a ton of good arbitrators in a ton of cities around the world. And we’ve always liked Believe it or not, Vancouver, Canada, the prices are good, the quality is high. Canada lets people in so a lot of times we would use that with Chinese companies. And they’re like, great we, we have, we’re gonna get a trip on the company that

Andy 17:08

when when the British came over, there was a section of Vancouver that they called Hong Coover, which is so many Chinese from Hong Kong were coming over and buying areas and all that, but it’s Yeah, but Vancouver is a great place. I love it. That’s another wonderful place.

Dan Harris 17:24

Yeah, no, Vancouver’s good. We had a dispute, it was a huge dispute. We were representing a Caribbean country that was suing a big Chinese construction company. And we were pushing for arbitration, we agreed to mediate and then arbitrate. There was nothing in the contract as to where and we were pushing for New York, they were pushing for Beijing. And we settled it on Mexico City. So now the arbitration never happened, the case was resolved. But the point is, there are plenty of places now. Now the new knee jerk is Singapore. Yeah, I

Andy 18:09
was gonna ask about Singapore, because that’s there’s a heavy Chinese influence in Singapore.

But there’s also a strong business acumen in Singapore. And there’s

Dan Harris 18:21

excellent lawyers, excellent arbitrators, and I used to love Singapore. But Singapore, I mean, we used to bring on lawyers to help us in Asia or in Singapore, and we would pay really good lawyers $250 an hour. Now there’s 650. I mean, Singapore has become really expensive. Singapore, has been rising fast for a long time. And Hong Kong’s decline has only accelerated that. But what’s really interesting is just yesterday, somebody I know who’s actually a very good arbitrator and has not, I respect him, and he has not made any threats against me, but he I know he wasn’t happy with my position on Hong Kong. He just sent me an article regarding someone being executed or being sentenced for execution in Singapore for transporting I think it was two kilograms of cannabis. And his message to me said, you’re always advocating for Singapore. Wonder how you feel about it after this was sort of what he said. And I responded by saying, I don’t think I’ve ever advocated for Singapore. I’ve advocated against all calm. And I felt like saying but I didn’t say it. I believe I think first off, I’ll just be blunt here. I’m against the death penalty. I’m for the legalization of cannabis. So on two grounds. I think what they’re doing there is horrific, yet at the same time, and this is going to sound a little bit callous in terms of choosing a place to arbitrate. I think it’s almost irrelevant. And the reason I say that is because I believe the Singapore criminal justice system is legitimate. So I’m not 100% Sure this person’s guilty. But I believe based on the fact that he was convicted, that he’s guilty. Just like if someone were convicted in Denmark, I believe that they’re guilty. China is random, China arrest people who I do not believe are guilty. So that’s your, I mean, if you look at what China has done in the last few months, they’ve gone after the Minsk Group, a consulting company, they’ve gone after micron technologies, they’ve gone after just today or yesterday, bein company, they’re going after American companies, and they’re choosing them, not 100% arbitrarily. But I believe that these companies really, almost certainly I’ve done nothing wrong, and China’s going after them to retaliate against the United States messing with their chips supply. And I don’t expect that to happen with Singapore. So there’s a big, big difference between the legal systems of Singapore and of Hong Kong. So I’m not going to say I advocate for Singapore. But if somebody on the other side insisted on Singapore, I would tell the client look, I it’s not one of my favorite places, but it’s completely legit. Do you want to fight him on this? It’s not that big a deal? Well,

Andy 21:49

the other is, you’re wanting to look at a location that if you need to geographically, like you said, first off, the location could be determined in you know, a variety of ways. But if you’re looking at again, geographically trying to get close, I mean, I will tell you, South Korea would be their very pro business, they seem to be very strong and many aspects. Malaysia and Vietnam right now seem to be so heavily influenced by China, that I would raise an eyebrow in that area. I don’t know about the court systems and all that again, and every one of these are some really good attorneys, like he said, and all of that. Hence, the deal. Again, Vancouver is, you know, it’s like halfway. It’s a long ways for a lot of people in the US to get there and just long ways for Asia, but it’s like halfway in the middle and it works out and it’s

Dan Harris 22:41

the proverbial neutral country. I mean, Canada’s not neutral, but everyone thinks they are. But it’s interesting. You mentioned Malaysia, Vietnam and Korea. I used to go to I went to Korea so many times that the Western chosen and Seoul threw a party for me on my 100

Andy 23:03

I love that Weston, that was I went there. Oh, it’s like I got to go there when they had just opened. I had been open about three months, I think and when I happen to come in, and I was like, Son of a biscuit eater. This is like, you know, I’m sitting high cotton on this doggone thing. And duck eggs, they you know, they serve a lot of duck eggs rather than chicken eggs. They’re like, Oh, hey, this is great.

Dan Harris 23:28

I mean, yeah, they didn’t have to party to get me to come back. But what I always say about Korea is it took me about 75 visits to like Korea, and it took me about 100 visits to love it. because Korea is really difficult for foreigners. I mean, Korean is an impossible language. You because Korea is really difficult for foreigners. I mean, Korean is an impossible language. You can’t if you say to a cab driver Western chosen, they won’t know what you’re saying. You have to say Western chose Han. I mean, you have to really nice. It’s such a homage homogenous country in the language. I mean, there’s very little deviation. So if you speak even with the slightest accent, oftentimes you’re not understood. And it is. People tell me who know these things. It is a very traditional confusion as society and their legal system is different. Their language is different. They don’t use much English. So it is a tough country. Malaysia is getting there. Vietnam, I love Vietnam. My I can I love it so much. I had my I convinced my eldest daughter to do her foreign study there. I love going there. I love the people. I love the optimism. I love the youth. I love the food, everything. Vietnam is a great country. And it’s rising. But for arbitration No, for a lot of other things, yes. Meaning for switching moving your manufacturing there. It’s fantastic. It’s almost full. So good luck finding a factory. But it is a very good country, although we have some clients. I mean, it’s so interesting because we do a lot of work with manufacturing companies. And a lot of them have strong views. So we’re we, we love Vietnam, we love Thailand. We love South Korea, we love Portugal, we love Poland, we’d love Mexico. But we’ll have a client say nothing in Asia. I’ve done with Asia, because I’m so worried about a Taiwan China war. There’s, I believe that moving to Vietnam is not going to solve the problem. I’m also worried about the US tariffs, this is up your guys’s alley. I’m worried about the tariffs, the China tariffs, I’m worried that Vietnam is gonna get sucked into that, because so much of what’s made in Vietnam is made with Chinese parts, but then we have an unlike okay, and you know, I’ve, I’m not going to be the one to convince them otherwise, especially because I’m not arrogant enough to make a prediction as to whether there will be a war between China and Taiwan. I have. I’ve read about a million things on it. And I still have no idea. But I don’t know. And then Mexico, I’ve clients, I have a client super savvy. I described them as our poster child for getting out of China, they got out, as soon as Trump initiated the tariffs and they had 10 suppliers, they will not look at Mexico, because their CEO, went to Mexico 20 years ago, and needed both felt he needed an armored car the whole time. To me, that’s ridiculous. But you know, it’s emotional.

Andy 27:08

Well, and again, it comes down to relationships, I was going to ask about the Taiwan situation. So let’s let’s back up for just a second, you had the scenario with Hong Kong, the transition of British rule to Chinese rule in Hong Kong was a very, you know, domestic type scenario. They’re civilized, if it was a handoff, whatever. And as time has gone on, again, China has gotten more aggressive with it and all that. That said, the situation with Taiwan, in looking at that as a source, and of course, there’s a tremendous amount of, of manufacturing going on there, especially from the the microchips, and all of that in that area. That would be a hostile takeover, and would pose a significant disruption in global supply in supply chain and some products and whatever. So in that scenario, playing that out, you know, right, wrong or indifferent. I’m sure that there are people moving away from Taiwan just because of the threat, let alone the actual you know, if something happens, so any suggestion from your perspective, like you say, you’ve not really looked at it from a prediction perspective, but what would you do from a business perspective? How would you provide some counsel there for people?

Dan Harris 28:34

Well, I mean, it’s, it’s interesting, because in 2018, when people were starting to sour on China, and Trump instituted the tariffs, we really were pushing Taiwan. And we did have clients. I mean, it was very interesting. The type of clients It was sort of, not like rubber ducky mean, it was very interesting. The type of clients It was sort of, not like rubber ducky manufacturing, not super high end, technical manufacturing, it was things like locks. For doors. They moved to Taiwan, and felt that the manufacturing was considerably better, and the price was only a little bit higher. So Taiwan was popular, but I don’t know that. I don’t think we’ve had a company mentioned Taiwan as a place to go. Since the Ukraine war i It’s like Taiwan. The concept of moving to Taiwan has been wiped off the map is it’s not it’s not there anymore, which is interesting and, and I don’t know that I blame people because if you’ve got the your I mean, there’s a big difference between Lee Even in Taiwan, if you’re already there, and going there, if you’re not there, and people have, there are a lot of choices out there, there’s no perfect choice and like depends on your product a lot depends on where you’re selling. I’m Ark, what I always say, as our clients who have moved to Mexico or Columbia, if you want to hear someone go Nan, and then and then call them, because they are delighted, even though I would say 90% of them it was the move was more difficult than they expected. Because they thought that they could move into a place like Mexico or Columbia, and it would be China. And they’re not. But now that they’ve got it together, they love it. And that’s generally what we find with Vietnam, also, and Malaysia and Thailand. But all those countries are really good for some sorts of companies, and really bad for others.

Andy 31:12

Well, all said and done, the one thing that we’re looking at here is as people are looking at sourcing. So this would be for our listeners, this would be like your sourcing group, Purchasing Group, whatever, you got a widget, you need a manufacturer, you’re looking to buy whatever. And as you’re sourcing, traditionally, people have just almost automatically go into China. And now that is in the last couple years, that’s really, you know, ratcheted down. Hong Kong is off the off the chart now. That’s just it’s same thing as China, if you will, Taiwan’s a threat. So where else do you go? And you start looking around? Well, one of the things I will say, again, Mexico has really benefited I think, from a lot of this effort. You just mentioned Colombia, there’s Brazil as well, Brazil has been a little difficult to do business at times, because they change their business rules so rapidly. And it’s a little frustrating. But aside from that, you know, different places where the key is, is that transportation wise, though, aside from getting it manufactured, geographically, if you’re serving the North American market, you know, Mexico and Colombia, and those areas are so close now, because of the other issue, aside from the political ramifications in the stability in these countries in Asia. Then we also have the scenario where, you know, again, it’s the the ocean liners that are coming over cargo ships, and then they get backed up in the West Coast ports, and all of that, and that’s disrupting the supply chain and adding days to whereas, you know, again, Mexico is fantastic in that, you know, trucking whatnot. In Colombia, you’re close by. So the point being is that you’ve got to look at this holistically. Would you agree with that, Dan, in that way, as you’re looking at sources, don’t look at just the manufacturer don’t look at just one area. Yeah, it’s a little easier to do business here. But also add your supply chain, your logistics, your transportation, your import exports, and all that kind of stuff. 100%.

Dan Harris 33:10

And that’s what makes it so difficult. Because you’ve got the huge companies like Apple, they have infinite money, infinite expertise. A lot of our clients are mid sized companies. They’re in China, everything’s going fine. They’re terrified, but everything’s going fine. And then they’ll say, I mean, I had a client, I love telling this story, because they were our client for 510 years. And if you had asked me what they are, I would have said, they’re a manufacturer. And they’re a big company. And they said, Can we get our widgets made in Thailand? And I said, Yeah, okay, no doubt about it. And I said, I’ll connect you with these people. And they’ll help you on this. And they said, Well, can they make our widgets? You realize, Damn, that our widgets are the absolute top of the line? I go, Yeah, no, I know that. Can Can they be made to our quality standards? And I go, I have no idea. I didn’t quite say like, I have no idea. But I have no idea. Okay. So you’re going to have to send your people over there. And he basically says, Well, we really don’t have any people. It turns out, they’re not a manufacturer. They were once a manufacturer, well known one. But now they have like, you know, four engineers, and probably three of them are design engineers. They’re amazing. You’re putting great design on the outside and marketing and telling a really good factory in China how to make the inside but really that really good factory in China knows how to make the inside. So then they’re now they’re faced with this idea, do they go to Thailand, hire people to help them figure out Thailand, then they then it turns out Thailand can’t do it, then they go to Malaysia and Malaysia can’t do it, then they go to Mexico and Mexico can’t do it. So everything’s fine. And they’re looking at maybe spending a huge amount of money and a year and a half to figure out where to go. Because there were so many factors. And a lot of companies simply freeze. So I tell reporters, I go. One week, I asked about 25 of our clients. It was just a question I would ask everybody I was on the phone with, I’d say, if you could move your manufacturing into Mexico, and pay 10% more? Would you do it? Every piece, every single one said yes, except one company, and that company makes a medical product. They pay eight cents 10 cents for and they charge eight to $8. So their margins are so astronomical. They don’t care about anything. Okay. So but every other one, and they don’t care about tariffs, because who cares about tariffs on 10 cents? But every other one said yes. And a lot of them said, I pay 15% more. And then when I tell people this they go, Well, that can’t be true, because why haven’t they moved to Mexico? And the answer is because they freeze, it’s super difficult, which is one of the reasons I I don’t the tariffs can be a problem, because the big companies are best equipped to get around. And it’s the mid sized companies and the smaller companies that tend to have to pay the price. So it’s, you know, there’s going to be a lot of change, and the more companies that go into Mexico, the more companies that will follow. Because

Andy 37:15

track Dan live, let me say this. So this is one of the things that we emphasize on our show. And I just like, Look, if you are if you’ve got a profit product, and you’re trying to expand your markets internationally, so you’ve got a product you want to sell regardless, wherever you’re at, and all that, you’re going to have to, you know, look at the culture, look at the market, look at the things and figure out do I need to get local folks to market it, whatever. But the point being is you got to develop those relationships to penetrate a market and figure out what’s going on the same thing goes, if you’re sourcing goods for an indifferent, I will tell you that somebody is so used to China, that that’s been established for so long, and now they’re looking at moving it. It’s like, Guess what, probably the people that originally set up the situation in China, I got news, when people were setting up things in China, they had to hammer out a lot of issues. And to China’s credit, they expanded it and in there, I developed things and the language and all that and, and had refined it to their credit, that’s good. Well, they’re gonna have to do that again. And so there’s a lot of folks that are ready for, let me just do it, I want it now what done what you’re gonna have to work that you’re gonna have to cultivate that you’re gonna have to work with people. And the quality’s not quite there. Let’s get through it. I mean, think back into the 70s when something made in Taiwan or something, they’re like, oh, man, this is cheap. And you know, it would fall apart or whatever. And as time has gone on, guess what, Taiwan, so good quality manufacture, same thing used to be made in China, it was cheap, well known that it became a better manufacturing, you’re gonna have to do the same thing. Now I see a lot of phenomenal, high quality products manufactured in Mexico. But it didn’t just happen. So to your point, when people are looking at that they’re looking for an easy answer. But it’s like, no, you change it to relocate or to change a source for a product from one country to another. That’s major, and it’s going to take time to establish it. And then it’s not going to to your point, they thought, well, I’ll just set it up and go, Oh, it’s going to take time for the employees, the culture, the business acumen, though but as time goes on, it will get there. I

Dan Harris 39:37

used to tell people, I remember somebody called once wanting to make something in China, and it would have saved them 15% It was actually book publishing. And I said, Don’t do it. That’s not enough. Because you’re looking at it. 15% You’re ignoring the fact that shipping costs could go up, you’re ignoring the fact that your first two orders are probably going to be worthless, you’re ignoring the fact that your fifth order half of its going to be bad. You’re ignoring the fact that we’re going to have to draft all these contracts in multiple languages. Somebody might run off with your IP, I mean, China was the was really difficult in the beginning. Now, Latin America is way better than China was when I first started doing China generally, but people expect it to be perfect. What’s also happening, which is interesting, you talk about having to work through things. We had a client who was making something in a Latin American country, and $1,500 products, and this, they were trying to get as much as they could locally. And the manufacturer in this country said, and the reason I’m even vague about the country is because if I don’t want anybody to hear this, because it could cause the fight to reignite. So the Latin American manufacturer said, we can get the springs locally. You know, like dollar springs, they said, presumably, to help our client. And, you know, 2000 of the widgets were shipped to the United States, and many more were to follow. And this rings, we’re not good enough. So then, our client had to fly in sprains from John, from China, because this is a seasonal product. And it was bad. And our client captain was furious and claiming that the manufacturer was a crook. And I and I’m like, I had to calm the client down by saying, Look, you told me that they have high end multimillion dollar equipment. It’s con artists don’t build good factories and buy multimillion dollar equipment. That’s not a no cost. I know it makes an investment like that. I said, we’ve done. And so for days, we were trying, they had really come to hate each other over this spring, and everything was falling apart. And it reminded me of China in the early days. But our our client just kept insisting, you know that he had never dealt with that in China. And he hadn’t because it got in there once China was smoother.

Andy 42:36
Yeah. Well, like I said, it was going to have to, you know, it’ll take time to to, if you will cultivate

the business and the environment, and you’ll get you’ll get there as time goes on.

Dan Harris 42:48

Oh, my gosh, well, and it’s interesting, because people feel, I mean, there was actually people don’t remember this, there was a time where companies were, quote, unquote, forced to go into China. And by that, I mean, like, we would have a midsize company call us and say, you into China. And by that, I mean, like, we would have a midsize company call us and say, you know, we have to go into China, we don’t want to but we have to, I’d say What do you mean, they go? Well, this huge company has told us that if we can’t supply them with their such and such in all of Asia, then they’re not going to use us for Europe or the United States, either. Companies are feeling forced that they have to leave China because there is a lot of pressure right now.

Andy 43:29

Well, and they’re, you know, one thing that’s coming into play, is the Uighur anti forced labor Prevention Act, the anti slavery type, act, all that kind of stuff. We’ve been talking a lot about that. And it is having an impact on China’s economy. Other countries around the world are implementing, you know, same similar legislation. So it’s beginning to permeate out there. And as such, I mean, again, you’re gonna have to look at maybe you need to change if you didn’t want to, or become flexible in that. So who knows? Listen, Dan, man, I could keep talking to you. You know, it’s like, Man, this is this has been good. But we’re gonna have to cut this off at this point. I will say one. Is there one key thing based on all this, we’ve been talking about here that you could you know, what would be an important thing to emphasize what we’ve talked about today?

Dan Harris 44:27

Well, the key thing is planning. And it’s both planning you. We’ve talked about how difficult it is to go into a new country. It’s also difficult to leave China because once people think you’re leaving, you don’t have any friends in China. And everything you own. There is up for grabs, including your IP, and so you have to prepare to leave China and the one word of advice I have for that is Don’t tell anybody you’re leaving until maybe 15 seconds before you’re gone. And then you also have to figure out where you have to figure out where you’re going, you have to leave China and you have to go there. So it’s really three very difficult things that need to be done. And they’re not, there’s nobody who knows how to do all three of those things. In fact, I don’t think there’s anybody who really knows how to do any two of them. So it is tough. So I don’t know if that’s a key thing, or a vague thing?

Andy 45:38

Well, the planning means that you’ve got to collaborate with several different entities within your company, and to achieve the overall strategy, whether we’re talking about China or anything else here. I mean, that’s, overall, I would just say that your point is well taken, planning is essential. So Dan, I greatly appreciate your insights. I’m sure we’re gonna have some more and matter of fact, I would love to, on some future stuff here, you know, any other predictions you may have are something that you’re you’re looking at, you’re gonna be welcome to come back. Well, we’ll engage in some of this will be a great discussion.

Dan Harris 46:20
Thank you for having me. I enjoyed it.

Andy 46:23
Lalo, what do you say clips from your perspective and friend?

Lalo 46:26

That’s good. Thank you. Thank you, Dan, for coming on. And I know I’ve, in my research of Dan, I also found some really nice stuff on reshoring into Mexico, for example, which we touched on today. You know, it’d be nice to have a full episode on that. Because, you know, obviously, being in North America, you know, so well,

Dan Harris 46:47
for that. We I have 32 lawyers at my firm who are better.

Lalo 46:55
Well, we can have a roundtable so it’s not a problem.

Dan Harris 46:57

Okay. One, one is Robert cosec. He’s a total trade geek. He has even as a PhD. He’s also fully completely fluent in Spanish and practice law in Mexico for five years. And the others, Fred Rocha, for who is not so into the weeds. Fred is completely fluent in Spanish. Also, he does a lot of international IP. And also, he does forced labor cases. So, but those two are sort of leading our Mexico charge.

Andy 47:46

Dan, what is the name of your firm that you’re at? Harris? Bricken. Okay. We will put your contact information with the show notes. And then kind of So folks, you know, we’ve talked through this, this has been a good, Dan’s gonna be a good one to to reach out to if you’ve got some questions, again, based on what we’ve talked about, or you’re looking at expanding some things, his firm may be a good one to reach out to and talk to get some advice here. Lalo I guess for that, we need to wrap this up. And, and also, any last comments, from your perspective,

Lalo 48:24

this is a good way to kick off. It is. May it is the International, what is it? World treatment, I think that’s what they call it the month of May. So it’s a good episode for that. Where we can push it out and let people know about, you know, different aspects of international trade. And in this

case, it was a lot more about doing business than trade as much but it did cross into that. So we

Andy 48:52

started out talking primarily about Hong Kong, and then wound up talking about trade with multiple countries. All right. Well, Dan, again, thank you so much to our listeners. Again, thank you so much for your listening to us. And without you, we would not have a show. We greatly appreciate you and let us know what you say that, have a great day.

Lalo 49:16

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