What will it take to Make America Great Again? A big part of it, at least in terms of the public show, is the creation of manufacturing jobs. Of the four words in MAGA, the top two appear to be “America” and “Make”. It’s a noble effort all around, without a doubt.
But can this be done as a matter of policy? Can we turn back evils like bad trade deals and force the products which are consumed in America to be made in America?
Two stories from the opening daze of the Trump administration demonstrate just how unlikely this effort will be. Indeed, it’s entirely possible to cause more damage than good in many ways.
The first story, the big promise, is that Trump made phone calls to Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto to start re-negotiating NAFTA. How exactly this might go down remains an open question because the treaty has no formal process for any of this. There is no existing body in charge of it, for one, unlike the European Union. It’s always been a haphazard affair, set up and allowed to run its course.
The process, once it is developed, is certain to take a lot of time. That’s the problem. The further we all get from the election the less critical the effort will seem and the more time those who are benefitting from free trade will have to organize. There is a lot at stake. In 2015, the US exported $267 billion to Mexico and imported $316 billion – making them our second largest export partner, behind only Canada.
NAFTA is a big deal all around. No one is going to let it go without a fight.
Symbolically it looks good to take on Mexico, of course, and there will be a lot of noise in any process that develops. But we can’t expect anything will happen quickly and for that reason it’s ridiculous to assume that anything at all can happen. Whether we like it or not, the US is tied forever to our neighboring nations and we will have to come to terms with this one way or the other.
Some discussion of the role of a Value Added Tax (VAT) in trade has come up over the course of figuring this all out, and there is a point to that. Adjustments to a VAT, really a sales tax, do tend to hurt imports more than exports and can be an important tool for equilibrating trade between nations. However, the US is currently the only developed nation without a VAT. Proposing one, likely as part of an overhaul of corporate tax code, may actually be a reasonable way to go – if unquestionably regressive by itself. But it would also be incredibly unpopular and would reasonably be perceived as a tax increase on consumers.
“Read my lips, no new taxes!” has felled more popular presidents than Trump, after all.
Away from the dragged out and esoteric negotiations over trade with Mexico, Trump appears to have strong-armed Toyota into a significant investment. With the publicity generated by a demand from Trump, Toyota buckled and decided to invest a whopping $600 million in its plant in Evansville, Indiana rather than at a similar plant in Mexico. It looks like a great victory for the new president all around, and does appear significant.
That is, it’s a big deal until you look at the actual number of jobs – a mere 400. Compared to the labor force of 136 million, it’s not even a drop in the bucket. Next to the 180,000 jobs created every month we can reasonably say that it’s about the total number of jobs created every 97 minutes.
The problem, of course, is that Mexico isn’t taking our jobs – robots are.
Where does this leave the big effort to make more stuff in America? As much as every president is held accountable for things like this, the simple truth is that highly directed policy efforts have almost nothing to do with the situation at all. Broader policy, such as reducing the overhead cost of employees, are almost certainly going to be far more successful. That means a general overhaul of the entire tax code and, of course, the health care system. Anyone paying attention can see that every single aspect of this requires substantially more thought and effort than anyone is willing to invest today.
Where does this leave us in terms of American manufacturing? More of the same, except for a few glitzy headlines. We will always be tied inextricably to Mexico and manufacturing will continue to be automated at a rapid clip. In short, nothing has changed because still, as of now, no one is looking at the things which really make a difference.