Trump’s Jawboning Won’t Deliver Enough US Jobs
Is the U.S. President trying to evade the necessity to tackle China on trade policy?
- Trump would have to create 100,000 more jobs each month to bring growth up to economic growth rate to 3% to 4%
- Because of US industry's dependence on components from Mexico, US would not come out the winner in a trade war.
- The impulse to rely on individual deals runs deep in the Trump's administration. That's how Trump, Mnuchin and Ross amassed fortunes.
President Trump does not have to deliver on all his campaign promises — even all the big ones — but he does have to rev up growth and create more jobs.
That is the only way for him to avoid a dramatic setback for Republicans in the mid-term elections and maximize his reelection chances in 2020.
Key elements of his economic program — tax, regulatory and trade reform — are delayed by the considerable distraction of replacing ObamaCare. For now, he can only tout progress by pointing, as he did in his recent address to congress, to the deals with corporate leaders to move jobs back to America.
The list is impressive — United Technologies, Fiat Chrysler and other top companies have jumped on board — but the impact of those agreements pale in comparison to the task at hand.
Not enough jobs in the offing
The Obama recovery accomplished 2.1% annual economic growth and averaged about 186,000 new jobs a month. Mr. Trump would have to create at least 100,000 more jobs each month to bring growth up to 3% to 4% and substantially improve living standards for ordinary working Americans.
Generally, company announcements include many jobs that were planned before the president’s surprise election. For example, Lockheed Martin CEO Marillyn Hewson promised 1,800 jobs at its Fort Worth factory after meeting with the persuasive president, but those include some 1,000 that were announced in 2015.
Most deals announced only create 1,000 to 2,000 jobs. Calculating generously, Trump would need 50 new deals each month — a Herculean task — to hit his growth goals.
Time to go after China
Even if Trump found the time for so much jawboning and enlisted Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, the administration would quickly run out of big companies who could afford to placate the president’s demands.
As regards foreign government practices that inhibit U.S. firms spreading their wings abroad, none is a bigger obstacle than China.
It tightly regulates foreign investment and requires most U.S. companies to take on joint-venture partners. Often, these deals entail shifting production and R&D to access the Chinese market.
Against that backdrop, it is hard to fathom that his new trade policy document emphasizes lodging individual company complaints against foreign governments instead — for example, of taking on China to accomplish comprehensive compliance with its WTO commitments.
Mexico plays it smart globally
All this notwithstanding, Congress and the President must recognize other countries have done a lot in recent years to become more competitive. For example, Mexico has negotiated an extensive network of free-trade agreements.
U.S. and foreign auto makers can make cars and parts there for sale duty-free throughout North America, Europe and Japan — that is not something automakers can do in the United States.
Given the dependence of the U.S. industry on components from Mexico, it is not at all clear that the United States would come out the winner in a trade war.
US: Slow to act
As a result, the United States definitely comprehensive free-trade agreements that accomplish fair market access, currency reform and balanced trade.
They are sorely needed to motivate scores more U.S. businesses to keep manufacturing, R&D and administrative activities here without presidential attention.
Tax and regulatory reform, as envisioned by the Trump team, face multiple barriers: First, there are the divisions within the Republican Party in Congress, second is opposition from Democrats and finally there are the bureaucratic requirements of legislation that slow down rule changes.
Trump cabinet: Exploiters of the system, not shapers
Unfortunately, the impulse to rely on individual deals runs deep in the new administration — that’s how Messrs. Trump, Mnuchin and Ross amassed fortunes.
As businessmen, they were great at exploiting the system — including controversial records of lobbying for protection and outsourcing jobs.
Now, they must try their hands at accomplishing radical systemic reform and need cooperation from congress and foreign governments, where leaders have ideas of their own and can’t be fired by Trump.
Presidential blustering can motivate negotiating partners to offer some quick, token results but it won’t work well for making the really big deals America needs to prosper again.