Donald Trump campaigned for office promising to stop — possibly even reverse — the flood of jobs to China, Mexico, and other low-wage countries. And many experts believed that Trump was setting his supporters up for disappointment.
“Announced in July 2015, the Nabisco layoffs in Chicago continued during the Illinois primary in March, despite jabs from Mr. Trump and both Democratic presidential contenders, Hillary Clinton and Senator Bernie Sanders,” the New York Times predicted in May. “United Technologies is similarly unlikely to rethink Carrier’s move out of Indianapolis.”
The Times, and many other experts, didn’t think Trump would be able to make good on his promises to stop outsourcing for a simple reason: The law doesn’t give the president authority over factory relocations. And policy changes — even drastic ones like pulling out of NAFTA and jacking up tariffs on Mexican goods — are unlikely to neutralize the powerful economic forces that have driven the flow of jobs overseas.
But the experts are wrong: There is a way President Trump could stop the decline of manufacturing jobs. It’s just a strategy that would have terrifying implications for the long-term health of America’s economic and political institutions.
The strategy is simple: Trump would call up a CEO who is considering moving jobs to Mexico and threaten to throw the full weight of the federal government against him if he carries through with the plan. That would be a flagrant violation of the rule of law, of course. But given the vast powers of the modern administrative state, few CEOs could afford to take the risk of antagonizing a freshly-elected president.
To be clear, we don’t know if Trump is going to pursue a strategy like this. But Ford’s recent announcement that it is going to continue Lincoln production in Kentucky — instead of relocating it to Mexico — should raise red flags for anyone who cares about the rule of law.
Ford and Trump have been fighting over Mexican outsourcing all year
During the campaign, Trump repeatedly blasted Ford for moving jobs to Mexico.
“It was just announced that Ford is moving all small car production — all of it — 100 percent to Mexico over the next two to three years,” Trump said in September. “We shouldn’t allow it to happen.”
Ford has been defiant, insisting that it would move forward with plans to build a new factory for small cars in Mexico regardless of the outcome of the election.
The plan to expand small car production in Mexico hasn’t changed. But this week Ford apparently decided to throw the president-elect a bone:
Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky - no Mexico— Donald J. Trump (@realDonaldTrump) November 18, 2016
I worked hard with Bill Ford to keep the Lincoln plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me!— Donald J. Trump (@realDonaldTrump) November 18, 2016
The backstory here is that Ford has a plant in Louisville, Kentucky, that manufactures both the Ford Escape as well as the Lincoln MKC. There was no danger of that plant shutting down altogether, but Ford had been considering shifting production of Lincolns — the less popular of the two models — to Mexico, and using the extra manpower to build more Escapes. Keeping Lincoln production in Kentucky might ultimately mean more work for auto workers in Louisville. (Though it could also ultimately just push Escape production to other facilities.)
A lot of people have written about this as part of the “fake news” trend, arguing that Trump was just taking credit for preventing something that wasn’t going to happen in the first place. But Ford has said that Lincoln production really was slated to move to Mexico.
As the Wall Street Journal describes it: “Ford’s call represented a genuine change in direction for the automaker, not just a symbolic gesture, according to people close to the executive. The automaker has been in contact with Mr. Trump’s transition team over the past 10 days, and executives see the Lincoln move as a relatively painless but authentic way to give Mr. Trump a victory even before he moves into the White House.”
Whether this is benign or sinister depends on what Trump does next
It would be a mistake to portray this kind of negotiation as totally unprecedented. Sometimes companies and government officials have messy disputes that straddle the line between business and policy.
For example, when Comcast was trying to get its acquisition of NBC Universal approved by regulators in 2010, it offered to make a variety of concessions to get the merger approved. For example, Comcast promised to provide about 2.5 million low-income households with internet access for $10 per month, expand children’s programming, and provide more public access programming if they were allowed to acquire NBC Universal. These concessions had no apparent connection to the core issue in the merger — whether the merged firm posed a danger to competition — but they helped to make a controversial deal more politically palatable.
At low levels, this kind of quid pro quo is unseemly but relatively harmless. It’s possible Ford’s decision to keep Lincoln production in Kentucky will prove to be equally harmless — a one-off favor to a newly elected president.
The big worry is that it will instead prove to be a blueprint for a larger Trump policy of coercion, with Trump exerting more and more pressure on companies to maintain and even expand their US-based production facilities.
And the modern administrative state would give a president who was willing to flout the rule of law a lot of leverage. Federal agencies regulate cars for safety and environmental impacts. They review car companies’ patent applications. They decide how vigorously to pursue trade disputes with foreign carmakers. They buy cars for government employees to use. If Trump was able to appoint loyal cronies in these agencies who were willing to mete out vengeance at Trump’s behest, his threats could become very powerful.
Our system has checks and balances designed to prevent this kind of abuse. Key regulatory agencies like the Federal Communications Commission and the Federal Trade Commission are supposed to operate independently. Most regulatory decisions are reviewable by the courts, and executive branch activities are overseen by congressional committees.
But in the past, these checks and balances have generally operated in concert with presidents who mostly respected conventional restraints on their power. Trump, in contrast, has repeatedly signaled a willingness to flout laws and conventions if they got in the ways of his objectives without having to make any specific threats— advocating, for example, targeting the families of suspected terrorists. Given Trump’s reputation for taking revenge on his enemies, it wouldn’t be very hard for him to convince companies that it would be a bad idea to make an enemy out of Trump.
Probably everything is going to turn out fine. Either Trump won’t push things that far, or America’s system of checks and balances will work the way they’re supposed to. But the fact that powerful American companies are already making business decisions in order to “give Mr. Trump a victory” before he’s even in the White House is not an encouraging sign.
Keeping jobs in the US could have a huge downside
There would also be a serious practical problem if Trump tried to keep jobs in the US at any cost. Most US companies — especially big ones like Apple and Ford — operate in a global market. That means they’re competing for market share with foreign competitors. And it also means that, at least if they’re successful, a lot of the products they produce are going to wind up being shipped overseas.
Ford is a good example here. They’re locked in competition with foreign competitors like Volkswagen and Toyota. Those companies locate factories all over the world, including in Mexico.
Advocates of keeping automaking jobs in the US imagine that it might mean slightly higher car prices, but that that’s worth it to save more jobs for US workers. But the larger danger is that keeping jobs in the US will put US automakers at a competitive disadvantage against foreign automakers who can’t easily be forced to locate production facilities in the US. The result could be that US car companies just lose global market share against foreign competitors who locate factories overseas, leaving US autoworkers no better off in the long run.