President-elect Donald Trump delivered on his promise to prevent jobs at the Carrier company from leaving Indiana for Mexico. That does not mean that this is a viable strategy to stop jobs from moving out of the country. This is an exceptional case that, due to its characteristics, is hard to replicate.
The air conditioner manufacturer owned by United Technologies (UT) wanted to transplant 1,400 employments from its Indianapolis plant to Mexico to save $65 million in taxes per year.
Trump used this case to denounce the migration of manufacturing employment to other countries which, for years, has hurt workers in industrial states, the same constituency who won him the election.
After an intervention by Trump, Carrier decided to keep 1,000 jobs in the plant. The reason was not his recurring threat to impose a 35% tariff on products built overseas. It is more complicated than that.
United Technologies is a vendor of the U.S. Department of Defense, receiving 10 % of its annual income – about $5.6 billion – from the federal government, their main client. The advantages of getting on the new administration’s good side mean great business.
This move also helps UT’s public relations, particularly when it receives Trump’s praise as a corporate model to follow despite the fact that the company is still sending 400 jobs from that plant to Mexico, as well as another 700 from a United Technologies Electronics Control plant in Huntington, Indiana – 94 miles from Indianapolis – a division to which Carrier belongs. Another sweet deal.
The fact that vice president-elect Mike Pence is the governor of Indiana also comes in handy to allow Carrier to swiftly receive $7 million in tax incentives, which will come from the pockets of tax payers.
Trump’s merit is to have addressed the national problem of job losses in manufacturing, which Democrats and Republicans have ignored. The causes for it are many, from technology to cheap labor, from necessary but uncomfortable regulation to tax matters and each company’s labor policy. The solution is quite complex because it is not about addressing only one factor.
For that reason, the Carrier agreement sets a bad example. It shows other companies that it only takes threatening to leave to receive special presidential attention that adapts to their special stipulations. That looks more like extortion than government policy.