Car­rier deal raises ques­tions about what Trump of­fered

Baltimore Sun - - FRONT PAGE - By Noah Bier­man and Jim Puz­zanghera

WASH­ING­TON — Pres­i­dent-elect Don­ald Trump’s newly an­nounced agree­ment to save more than 1,000 jobs in In­di­ana gave him the kind of tro­phy he cov­ets: a tan­gi­ble vic­tory that matches his cam­paign prom­ise to serve as deal­maker in chief.

But its long-term value will de­pend on what Trump gave up to keep those fac­tory jobs from go­ing to Mex­ico and whether he is able to craft a suc­cess­ful fis­cal pol­icy that has a broader im­pact on the econ­omy.

“This is an un­ques­tion­ably pos­i­tive development for the work­ers who oth­er­wise would have lost th­ese good jobs,” said Jared Bern­stein, a se­nior fel­low at the Cen­ter for Bud­get and Pol­icy Pri­or­i­ties and for­mer eco­nomic ad­viser to Vice Pres­i­dent Joe Bi­den.

“But to try to pick off jobs firm by firm with tax breaks and reg­u­la­tory good­ies, it won’t work,” he said. “That’s just not sus­tain­able.”

Through­out his cam­paign, Trump railed re­lent­lessly against Car­rier Corp.’s de­ci­sion to ship1,400 man­u­fac­tur­ing jobs to Mex­ico, us­ing it as an ex­am­ple of all that was wrong with the U.S. econ­omy and all that he would set right when he took of­fice. He threat­ened to im­pose 35 per­cent tar­iffs and rene­go­ti­ate trade deals with Mex­ico to stop Car­rier and other com­pa­nies from out­sourc­ing jobs.

Trump be­gan speak­ing di­rectly with Car­rier’s par­ent com­pany, United Tech­nolo­gies Corp., after he won elec­tion, se­cur­ing a brief an­nounce­ment late Tues­day from both Car­rier and Trump that most of the jobs would no longer be shipped abroad.

But de­tails of what Trump and Vice Pres­i­den­t­elect Mike Pence may have given up, or the threats they may have lodged, re­mained elu­sive. Trump’s team and Car­rier de­ferred such ex­pla­na­tions un­til a for­mal an­nounce­ment in In­di­anapo­lis to­day.

Steve Mnuchin, Trump’s newly an­nounced pick to be Trea­sury sec­re­tary, called the deal a “ter­rific op­por­tu­nity” for the in­com­ing ad­min­is­tra­tion and said it came about be­cause Trump and Pence were will­ing to Steve Mnuchin, Trump’s choice to be Trea­sury sec­re­tary, called an agree­ment to save In­di­ana jobs a “ter­rific op­por­tu­nity.” lis­ten to busi­nesses.

“The pres­i­dent-elect and the vice pres­i­dent[-elect] picked up the phone and called the CEO of the United Tech­nolo­gies and told them we want to keep jobs here,” he told re­porters at Trump Tower in New York on his way to meet with Trump on Wed­nes­day.

But the jobs saved are a tri­fle for a U.S. econ­omy adding an av­er­age of 181,000 jobs a month this year — and a tiny per­cent­age of the 197,000 em­ploy­ees of United Tech­nolo­gies.

Car­rier said Wed­nes­day that “in­cen­tives of­fered by the state were an im­por­tant con­sid­er­a­tion, along with the in­com­ing ad­min­is­tra­tion’s prom­ises of a bet­ter business cli­mate,” in keep­ing its gas fur­nace production in In­di­anapo­lis. The com­pany added that it still be­lieves “in the ben­e­fits of free trade” and that busi­nesses need broader solu- tions to keep the coun­try com­pet­i­tive.

The show of strength might send a sig­nal of re­solve to other com­pa­nies con­sid­er­ing off­shoring, and it buys Trump time to craft a pol­icy to match his top cam­paign prom­ise.

In a sim­i­lar vein, Trump of­fered sketchy de­tails Wed­nes­day about his lat­est ef­forts to wall off his busi­nesses from the ap­pear­ances of con­flict of in­ter­est that have dogged him.

“Le­gal doc­u­ments are be­ing crafted which take me com­pletely out of business operations. The pres­i­dency is a far more im­por­tant task!” he tweeted.

Trump promised to pro­vide new de­tails on his plans dur­ing a Dec. 15 news con­fer­ence, but of­fered few an­swers to how he would pre­vent a con­flict, given that his chil­dren plan to re­tain full con­trol. Trump and his aides did not say whether he would re­lin­quish own­er­ship.

The Car­rier deal’s mer­its will de­pend heav­ily on specifics as well. Trump’s staff said Wed­nes­day that Pence, who re­mains gov­er­nor of In­di­ana and has a his­tory of of­fer­ing eco­nomic in­cen­tives to pri­vate in­dus­try, was heav­ily in­volved in ne­go­ti­a­tions with Car­rier, which makes heat­ing and cool­ing equip­ment. Pence’s of­fice de­clined to an­swer ques­tions.

As the in­com­ing pres­i­dent, Trump has sig­nif­i­cant lever­age with United Tech­nolo­gies, a ma­jor de­fense con­trac­tor. In 2015, the com­pany had $5.6 bil­lion in sales to the fed­eral gov­ern­ment, 10 per­cent of its to­tal sales, ac­cord­ing to United Tech­nolo­gies’ an­nual re­port.

That fed­eral business might have been a fac­tor in Car­rier’s de­ci­sion to keep jobs in the U.S., said John Eade, direc­tor of port­fo­lio strat­egy at in­vest­ment re­search firm Ar­gus Re­search.

“My guess is that the new ad­min­is­tra­tion of­fered some car­rots — po­ten­tial for lower taxes, a po­ten­tial change in trade poli­cies, etc. — as well as a stick: less cer­tainty on U.S. gov­ern­ment con­tracts, which are sig­nif­i­cant for sev­eral of United Tech­nolo­gies’ other busi­nesses,” he said.

The Car­rier deal could prompt other com­pa­nies to try the same tac­tic, pre­dicted Dan Iken­son, direc­tor of the Cen­ter for Trade Pol­icy Stud­ies at the lib­er­tar­ian Cato In­sti­tute think tank. “It cre­ates a short­term po­lit­i­cal vic­tory for the pres­i­dent-elect, but it opens up a Pan­dora’s box in the sense that other com­pa­nies are go­ing to want the same sort of handout,” he said. “It’s bet­ter to have an over­all pol­icy that com­pa­nies can bank on.”

Ju­dith Goedeke took part in a Johns Hop­kins study in­volv­ing a psy­che­delic drug and can­cer.

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