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Trump to retake millions of jobs from China?

Unlikely: his deal making no match for economic forces.


August 5, 2015
by ASSOCIATED PRESS

Donald Trump speaking at the 2015 Conservative Political Action Conference in February.  Photo: Gage Skidmore

Donald Trump speaking at the 2015 Conservative Political Action Conference in February.
Photo: Gage Skidmore

WASHINGTON — Donald Trump vows to bring back the millions of American jobs lost to China and other foreign competitors if voters put him in the White House.

Economists say he wouldn’t stand a chance: Trump’s boundless self-confidence is no match for the global economic forces that took those jobs away.

Since the beginning of 2000, the US economy has lost 5 million manufacturing jobs. A study published last year by the National Bureau of Economic Research found that between 2 million and 2.4 million jobs were lost to competition from China from 1999 to 2011.

Announcing his presidential bid June 16, Trump declared: “I’ll bring back our jobs from China, from Mexico, from Japan, from so many places. I’ll bring back our jobs, and I’ll bring back our money.”

Economists were unimpressed. “It’s completely implausible,” says former Federal Reserve Vice Chairman Alan Blinder, a Princeton University economist who has studied the offshoring of American jobs.

Companies shifted low-skill jobs to China in the 2000s because American workers couldn’t compete with Chinese workers earning around $1 an hour. Now China itself is losing low-wage manufacturing jobs to poorer countries such as Bangladesh and Vietnam.

If America tried to block foreign-made products and make everything at home, prices would skyrocket and foreign countries would likely retaliate by blocking US goods from their countries. “You can’t turn back the clock,” Blinder says.

But there’s an even bigger problem for those who want to restore U.S. manufacturing employment (now 12.3 million) to its 1979 peak of 19.6 million: Technology has taken many of those jobs for good. Today’s high-tech factories employ a fraction of the workers they used to. General Motors, for example, employed 600,000 in the 1970s. It has 216,000 now – and sells more cars than ever.

“No matter who becomes president,” says economist David Autor of the Massachusetts Institute of Technology, “I cannot foresee a scenario where 5 million additional manufacturing jobs … reappear in the U.S. in the decades ahead.”

That’s especially true with US unemployment at a seven-year low 5.3%, a rate close to what economists consider full employment.

“If you took all the jobs we outsourced and brought them back, you’d have negative unemployment,” says Harold Sirkin, senior partner at the Boston Consulting Group and an expert on manufacturing competitiveness worldwide. “We’d have to bring in people from other countries to do the work.”

Trump, author of “The Art of the Deal,” says he could have protected American jobs by negotiating smarter trade agreements with US competitors. “When was the last time anybody saw us beating, let’s say, China in a trade deal?” Trump said in June. “They kill us. I beat China all the time. All the time.”

But economists say trade deals – for all the political heat they generate – play only a modest role in job creation. “Better trade deals are unlikely to be a panacea,” says Eswar Prasad, professor of trade policy at Cornell University.

Prasad says US policymakers should focus more on investing in things that will improve America’s competitiveness over the long haul – schools, roads and airports, for example. And Blinder says the US should do more to retrain American workers who lose their jobs to foreign competition.

Companies often decide where to locate factories and hire people on factors that can change: labour costs, energy bills, transportation expenses, proximity to customers.

Currently, several of those factors favour the US over China. The fracking boom has cut energy costs for US-based factories. Chinese wages have soared, while American wages have been flat. In parts of America, land is cheaper than in China.

So some American companies already are bringing jobs back, and some Chinese companies are investing in plants in America. Last year, for example, Chinese glassmaker Fuyao Glass Industry Group Co. announced plans to take over an abandoned GM plant in Moraine, Ohio, near Dayton, and create 800 jobs.

The Reshoring Initiative, which encourages companies to bring operations back to America, says the number of manufacturing jobs created in the United States by returning American companies and foreign investors exceeded those lost to offshoring last year by 10,000 – modest, to be sure, but a big change from the massive job outflows of the 1990s and 2000s.

Trump declared: “I will be the greatest jobs president that God ever created. I tell you that.”

But Daniel Rosen, partner at the New York economic research firm Rhodium Group, says: “Global direct investment – including from China, Mexico and Japan – is already flowing into the United States, not due to God’s political leanings but because the US economy is open both to those who would invest here and those who would decide to move abroad.”

1 Comment » for Trump to retake millions of jobs from China?
  1. Mike says:

    “Those who say it can’t be done are soon interrupted by someone doing it”.

    How much does labor add to the bottom line? Not that much actually. I should know, I’m manufacture products in the USA. When you factor in the cost to ship the products back to the USA, customs issues (long waits at the dock), customs costs, trucking the goods from the dock to your location, you’re talking about a 20-30% bottom line savings. That’s it. I’ll give you an example. Say a shirt cost $2.50 to make in China and $5 to make in North Carolina. By the time you get that shirt to the USA warehouse the cost has gone up to $3.25. That shirt will wholesale for $7.00 to distributors. The stores will sell it for $14. Did you see what just happened there? The dirty little truth is that the PROFIT MARGIN for the distributors, importer and stores is HIGHER when you make something in China. They want to double their money on a product that they didn’t make. Is that fair? No it isn’t. If the USA want’s to become competitive again and make things in the USA I propose we cut the middle man (distributor) out of the equation and have stores buy directly from the US factory! Instead of buying it from a distributor for $7 the could buy it from the factory for $7 ($2 could go to in a in house distributor / sales person) and the store could make the same profit margin. The truth is that the advent of the Internet has make the face to face salesperson obsolete. (distributor that knocks on doors) Not for all products but certainly for most. All Trump has to do to make this “deal” happen is even the playing field for large US Corps by allowing them to exist tax free in the USA (like they do overseas) and keep 100% of their profits in lieu of creating jobs in the USA. Break all free trade agreements and tax things coming into the country from 3rd worlders. WHO CARES if they do the same to our products! They don’t buy them anyway.

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