Trump’s team in need of real grunt to make big deals
TRUMP would have to create 100 000 more jobs each month to bring growth up to an economic growth rate of 3 percent to 4 percent. Because of US industries’ dependence on components from Mexico, the US would not come out the winner in a trade war.
The impulse to rely on individual deals runs deep in the Trump administration. That’s how Trump, Mnuchin and Ross amassed fortunes.
President Trump does not have to deliver on all his campaign promises – even all the big ones – but he does have to rev up growth and create more jobs.
That is the only way for him to avoid a dramatic setback for Republicans in the mid-term elections and maximise his re-election chances in 2020.
Key elements of his economic programme – tax, regulatory and trade reform – are delayed by the considerable distraction of replacing Obamacare. For now, he can only tout progress by pointing, as he did in his recent address to Congress, to the deals with corporate leaders to move jobs back to America.
The list is impressive – United Technologies, Fiat Chrysler and other top companies have jumped on board – but the impact of those agreements pales in comparison to the task at hand.
The Obama recovery accomplished 2.1 percent annual economic growth and averaged about 186 000 new jobs a month. Trump would have to create at least 100 000 more jobs each month to raise growth and substantially improve living standards for ordinary working Americans.
Generally, company announcements include many jobs that were planned before the president’s surprise election. For example, Lockheed Martin chief executive Marillyn Hewson promised 1 800 jobs at its Fort Worth factory after meeting with the persuasive president, but those include some 1 000 that were announced in 2015.
Most deals announced only create 1 000 to 2 000 jobs. Calculating generously, Trump would need 50 new deals each month – a Herculean task – to hit his growth goals.
Even if Trump found the time for so much jaw-boning and enlisted treasury secretary Steven Mnuchin and commerce secretary Wilbur Ross, the administration would quickly run out of big companies who could afford to placate the president’s demands. As regards foreign government practices that inhibit US firms spreading their wings abroad, none is a bigger obstacle than China.
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It tightly regulates foreign investment and requires most US companies to take on joint-venture partners. Often, these deals entail shifting production and research and development to access the Chinese market.
Against that backdrop, it is hard to fathom that his new trade policy document emphasises lodging individual company complaints against foreign governments instead – for example, of taking on China to accomplish comprehensive compliance with its World Trade Organisation commitments.
All this notwithstanding, Congress and the president must recognise other countries have done a lot in recent years to become more competitive. For example, Mexico has negotiated an extensive network of free-trade agreements.
US and foreign car makers can make cars and parts there for sale duty-free throughout North America, Europe and Japan – that is not something car makers can do in the US. Given the dependence of the US industry on components from Mexico, it’s not at all clear that the US would come out the winner in a trade war.
As a result, the US definitely needs comprehensive free-trade agreements that accomplish fair market access, currency reform and balanced trade.
They are sorely needed to motivate scores more US businesses to keep manufacturing, research and development and administrative activities here without presidential attention.
Tax and regulatory reform, as envisioned by the Trump team, face multiple barriers: first, there are the divisions within the Republican Party in Congress, second is opposition from Democrats and finally there are the bureaucratic requirements of legislation that slow down rule changes.
Unfortunately, the impulse to rely on individual deals runs deep in the new administration – that’s how Messrs Trump, Mnuchin and Ross amassed fortunes.
As businessmen, they were great at exploiting the system – including controversial records of lobbying for protection and outsourcing jobs.
Now, they must try their hands at accomplishing radical systemic reform and need co-operation from Congress and foreign governments, where leaders have ideas of their own and can’t be fired by Trump.
Presidential blustering can motivate negotiating partners to offer some quick, token results, but it won’t work well for making the really big deals America needs to prosper again.
The impulse to rely on individual deals runs deep in the new administration – that’s how Messrs Trump, Mnuchin and Ross amassed fortunes