Carrier victory bolsters Trump’s economic objectives

Updated 5:58 AM ET, Thu December 1, 2016

Washington (CNN) Donald Trump staked his credibility as a negotiator — the underpinning of his grand entrance to politics — on a very specific claim.

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He wouldn’t just stop the trend of globalization and outsourcing. He’d convince Carrier — an Indianapolis-based air-conditioning manufacturer — to abandon its plans to eliminate more than 2,000 Hoosier jobs and shift its production to Mexico.
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Well before even taking office, he’s delivered — Tuesday night the company announced it would keep about 1,000 of those jobs in Indiana.
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And he’s shed light on how he might use the levers of government to pressure companies that plan to ship jobs overseas in the future, too.
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It was well-timed victory for Trump, who also rolled out his economic team, tapping Steven Mnuchin for treasury secretary and billionaire Wilbur Ross to head the Department of Commerce.
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Both Mnuchin and Ross come with public relations warts — including Mnuchin’s time as a Goldman Sachs partner and hedge fund manager and Ross’ “king of bankruptcy” nickname. But in securing a deal with Carrier, Trump is lending credibility to his claims that he’d put people he’d called “killers” — meant as a compliment — to help American workers.
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The details of the Carrier deal remain obscure. Trump’s campaign has deflected questions on exactly how the company was convinced to stay in Indiana — pointing reporters to the company and its much larger parent, United Technologies. The fate of Carrier’s plant in Huntington, Indiana, which employed 700, is also unclear.
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United Technologies — Carrier’s parent company — earns about 10% of its income through federal contracts for products including engines for F-35 fighter jets.
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Carrier released a few more details later Wednesday in a statement.
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“The incentives offered by the state were an important consideration” to staying, Carrier said, though the company didn’t specify what the incentives were.
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And while Trump’s campaign pledges to lower corporate taxes and ease regulations likely played a role, it was not Trump — but Vice President-elect Mike Pence — who was key to Carrier’s decision.
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His status as Indiana’s governor positioned him to offer Carrier tax breaks to stay in the state.
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It’s not a new strategy: State and local governments offer companies tax incentives to locate, expand or remain there all the time.
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In fact, Pence’s Indiana Economic Development Corp. has faced sharp criticism for handing millions of dollars to companies that sent jobs overseas even after receiving those tax breaks.
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Trump himself had even blasted the practice on the campaign trail, including in October remarks in Pennsylvania.
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“I’ve been watching these politicians go through this for years. I’ve been watching them give low-interest loans. I’ve been watching them give zero interest loans,” Trump said in Wilkes Barre, later adding that “the whole thing is crazy.”
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He made a similar case in Erie, Pennsylvania, in August.
“Our states — I watched. Remember, they’d give the low-interest loans,” Trump said, mocking state officials for handing out tax incentives. “‘Here’s a low-interest loan if you stay in Pennsylvania. Here’s a zero-interest loan. You don’t have to pay. Here’s a this. Here’s a tax abatement of any kind you want. We’ll help your employees,'” he said. “It doesn’t work, folks.”
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In Carrier’s case, it does appear to have worked.
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It’s the second time Trump has claimed credit for a company’s decision to keep jobs in the United States. But when a Ford plant in Louisville, Kentucky, said it would not produce a sport-utility vehicle in Mexico, the decision was a facade in terms of Trump’s involvement: No jobs were on the line, and none were saved.
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Trump’s strategy with Carrier might not be an exact model for his broader trade and manufacturing efforts.
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For one, it puts states and municipalities at risk of facing threats from other manufacturers that they’d leave unless offered major tax breaks of their own.
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Subsidizing businesses is also a practice protectionists in the United States have long decried from foreign governments including China, and risks provoking a trade war.
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Trump’s broader strategy appears to be his promise to cut taxes and make it easier for companies to shift profits earned overseas back into the United States.
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On the campaign trail, he has also threatened companies that manufacture goods in foreign countries with stiff tariffs — the types eliminated through trade deals like the North American Free Trade Agreement.
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But his willingness to use government incentives as muscle in negotiations offers a preview of how Trump might handle similar situations in the coming years.
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“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. Can’t remember the last time a president did that,” Mnuchin told reporters in the Trump Tower lobby Wednesday.
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United Technologies — Carrier’s parent company — earns about 10% of its income through federal contracts for products including engines for F-35 fighter jets.
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If tax breaks are Trump’s carrot, the threat of losing government contracts — risky as it is when national security-related products are involved — could be his stick.
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One Response to “Carrier victory bolsters Trump’s economic objectives”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

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