December 01, 2016
Dean Baker
CNN, November 30, 2016
Donald Trump and Mike Pence deserve credit for putting on a great show around saving the jobs of 1,000 workers at Carrier, the Indiana-based air conditioner manufacturer that had planned to relocate the jobs to Mexico. They also deserve credit for saving the jobs. This action will make an enormous difference in the lives of 1,000 workers and their families, who faced bleak employment prospects if Carrier went ahead with its planned move.
But the deeper story is far from clear at this point.
First, on the deal itself, it was encouraging to see the President-elect going to bat for ordinary workers who were seeing their livelihoods threatened. It is easy to believe that workers losing their jobs at places like Carrier do not figure prominently in the minds of the politicians who negotiated trade deals like NAFTA. And there is one point that everyone should be clear on: The decision of manufacturing companies like Carrier to move jobs overseas is not an accidental byproduct from these deals, it is the point of deals like NAFTA.
A major goal of NAFTA was to make it as easy as possible for companies to take advantage of lower-cost labor in Mexico. It prohibits the Mexican government from nationalizing factories, restricting the ability of companies to send profits home, or other measures that would make investing in Mexico unattractive.
But while Trump and Pence may have saved the jobs of 1,000 workers (apparently 400 jobs are still going to Mexico), it is not clear what the price to the state of Indiana or the US government is. It appears that vice president-elect and Indiana Gov. Mike Pence may have made some concessions, and perhaps Trump made promises as well.
Unfortunately, this is a team that does not believe in transparency. The people of Indiana are likely to find out how much these jobs cost them when the state needs to raise taxes or cut education spending to make up for a revenue shortfall due to the concessions. Only then will we be able to know whether Trump and Spence negotiated a good deal.
But the bigger issue will be the Trump administration’s overall agenda on trade. He is not going to bring back millions of manufacturing jobs by hectoring and deal-making one company at a time. And here the picture is very unclear.
Some of what Trump has said is good policy. China has at times deliberately acted to keep down the value of its currency against the dollar, as have other countries. Such currency management is the major cause of our trade deficit.
Trump can try to confront China on currency management, but he also complains they don’t respect copyrights on software and patents on drugs, along with many other sins. Trump can make headway on one of these issues, but certainly not all of them. He will have to set priorities. At this point we have no idea whether he will side with workers and place the priority on currency values, or whether he will focus on copyrights, patents and other issues important to American corporations.
This also gets to one of the major confusions that Trump perpetuated in his campaign. China and other countries didn’t “win” in their trade deals with the United States. We have major corporations like GE that love taking advantage of low-cost labor in China. The same is true of Walmart, with its low-cost supply chains that allow it to undersell competitors. These and other companies are big winners in the current pattern of trade with China and other developing countries.
Our trade negotiators weren’t suckers, as Trump seems to believe. They just weren’t working for the country’s blue-collar workers. We will have to see who they work for in a Trump administration.
The Carrier episode can be seen as the opening round in the Trump administration’s efforts to bring back millions of manufacturing jobs. Trump and Pence deserve credit for putting on a good show; we will need more information before we can assess the substance.
In the meantime, one thing we can be happy for is that at least 1,000 workers in Indiana and their families will be able to enjoy a nice holiday season. That is certainly good news.
