Bringing Back Manufacturing Jobs Would Be Harder Than It Sounds

Aug 18, 2016
Originally published on August 18, 2016 8:52 am

It's a line that draws thunderous applause at Republican presidential candidate Donald Trump's campaign rallies, one that can sometimes even bring the crowd to its feet: Let's bring back America's lost manufacturing jobs.

And is there any question why? The United States has lost nearly 5 million manufacturing jobs since 2000 alone, hollowing out factory towns all over the country and leaving countless working-class Americans struggling.

Getting those jobs back is a goal that politicians of all stripes eagerly line up behind. But the plain truth is that, legally speaking, there's not a lot that Trump or any other president could do to bring those jobs back, without an act of Congress.

Presidents simply don't have the power to tell companies whom to hire or where to manufacture, says Jeffrey Bergstrand, professor of finance at the Mendoza College of Business at the University of Notre Dame.

"Firms are going to make the decisions for their shareholders. If he wants to do this, he is going to have to use government institutions and laws to restrict the decisions of firms," Bergstrand says.

And it's not at all clear Congress would support such an effort.

What presidents can do is try to make it tough for companies that ship jobs overseas to make money in the United States, by imposing tariffs on their products. Trump has often talked about doing so.

At a rally in Pennsylvania last Friday, Trump talked about slapping heavy tariffs on the air conditioners made by the Carrier division of United Technologies, which recently decided to move part of its Indiana manufacturing operations to Mexico.

"Every single unit you make that crosses our now very, very strong border, we're going to charge you 35 percent of the cost of that unit," Trump told the crowd.

He has also talked about imposing even larger tariffs on goods imported from China.

Presidents do have the power to impose tariffs unilaterally in the interest of national security, although it's rarely been done, says Chad Bown, senior fellow at the Peterson Institute for International Economics.

The last time was in 1971, when President Nixon imposed a surcharge on imports to prevent a run on the dollar after the U.S. went off the gold standard.

Bown notes that just because a president can impose tariffs doesn't mean doing so is a good idea.

"We would lose the tens of billions a year in soybean exports we send to China, and corn and wheat and autos, and all of the people that work in those sectors now all of a sudden are going to be losing their jobs," Bown says.

Such a move would almost certainly invite retaliation by other countries, hurting U.S. companies that export.

"China's going to respond by raising tariffs on us and restricting goods," Bergstrand says. "Then other actors and other countries around the world are going to start raising tariffs. And that's actually what pushed the world economy ... into the Great Depression."

The long-term ramifications of a tariff war would be hugely disruptive to businesses all over the world, casting a pall over the entire superstructure of international trade.

"If I'm running a business and it's unclear to me if Donald Trump is going to allow me to be able to import parts and components to allow me to make my particular good, I don't know what to do," Bown says.

"In the end, because we're all tied together, what's going to happen is there's going to be a huge reduction in demand for goods and services, and it's going to cut off the entire global supply chain of economic activity," Bergstrand says.

Presidents can take a lot of steps to make it easier for companies to manufacture domestically, by addressing tax and regulatory reform, for instance, says Aric Newhouse, senior vice president of policy and government relations at the National Association of Manufacturers.

He says presidents can also open talks with foreign countries to encourage them to open their markets to U.S. goods.

"It's really, unfortunately, not one magic bullet," Newhouse says. "It's not, if you do this one thing, manufacturing is going to come back to the United States. You have to do a little bit of a lot of things."

But such efforts would take time, and even if they succeed, they won't necessarily mean the return of a lot of jobs.

The common perception is that manufacturing jobs have disappeared because they've been sent to low-wage countries in Asia and Latin America. The truth is that a lot of work has been lost to automation.

U.S. manufacturers have become a lot more productive and simply don't need as many workers as they once did, Bown says.

"It's a lot more robots and computer equipment and many, many fewer people," Bown says. "So what you see is, there still is, even today, a lot of manufacturing activity in the United States. It's just done with many, many fewer workers."

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RENEE MONTAGNE, HOST:

The U.S. has lost nearly 5 million manufacturing jobs since 2000. Donald Trump says that if elected president he'll bring a lot of those jobs back. NPR's Jim Zarroli looks at some of the steps a President Trump might take to restore factory jobs.

JIM ZARROLI, BYLINE: It's a line that almost always generates loud applause for Donald Trump at his rallies - he will bring back the factory jobs that have been sent overseas. Here he was at a rally in Pennsylvania last Friday.

(SOUNDBITE OF ARCHIVED RECORDING)

DONALD TRUMP: What we're going to do, folks, is going to be so special. We're going to bring it back. We're going to bring back our jobs. We're going to bring back our companies.

ZARROLI: Legally speaking, there seems little that a President Trump could do to bring jobs back or to stop companies from sending them overseas. Without an act of Congress, it's simply not within his authority. Jeffrey Bergstrand is a professor of finance at Notre Dame University.

JEFFREY BERGSTRAND: Firms are going to make the decisions for their shareholders. If he wants to do this, he is going to have to use government and institute laws to restrict decisions of firms.

ZARROLI: What Trump does promise to do is scrap existing trade agreements and begin the lengthy process of renegotiating them. And in the meantime, he says, he would slap steep tariffs on U.S. companies, such as United Technologies' carrier division, that export jobs.

(SOUNDBITE OF ARCHIVED RECORDING)

TRUMP: Every single unit that you make that crosses our now very, very strong border, we're going to charge you 35 percent of the cost of that unit.

ZARROLI: Could a President Trump impose tariffs unilaterally? Chad Bown of the Peterson Institute for International Economics says it would be pretty unusual. But he says tariffs can be imposed in the interest of national security. That doesn't mean it would be a good idea, Bown says. For one thing, he says, if the U.S. imposed tariffs on, say, China, then Beijing would almost certainly file a complaint with the World Trade Organization. And in the meantime, it would retaliate against the U.S.

CHAD BOWN: We would lose the tens of billions of dollars a year in soybean exports that we send to China, in corn, in wheat, in autos. And so all of the people that work in those sectors are now all of a sudden going to be losing their jobs.

ZARROLI: Beyond that, he says, it would be hugely disruptive. It would be a time of immense uncertainty for businesses around the world.

BOWN: If I'm running a business and it's unclear to me if Donald Trump is going to allow me to be able to import parts or components that I need to be able to make my particular good, I don't know what to do.

ZARROLI: There are other less dramatic steps the White House can take to boost trade, says Aric Newhouse of the National Association of Manufacturers. It can initiate talks with countries that have closed their markets to U.S. goods. It can also address tax and regulatory reform, issues that Neuhaus says make it harder for manufacturers to operate in the U.S..

ARIC NEWHOUSE: So it's really unfortunately not one magic bullet. It's not if you do this one thing manufacturing is going to come back to the United States. You have to do a little bit of a lot of things.

ZARROLI: And there's another reality about factory jobs today. Chad Bown says manufacturers have become a lot more productive and simply don't need as many employees as they once did.

BOWN: So it's a lot more robots, computers, equipment and many, many fewer people. So what you see is there is still even today, you know, a lot of manufacturing activity in the United States. It's just done with many, many fewer workers.

ZARROLI: A President Trump might be able to coax or even bully manufacturers back to U.S. soil, but that doesn't necessarily mean they'll be bringing a lot of jobs back with them. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.