Trump intervenes to keep 1,100 jobs from moving to Mexico

President-elect Donald Trump speaks during a stop at US Bank Arena on Dec 1, 2016 in Cincinnati, Ohio.
President-elect Donald Trump speaks during a stop at US Bank Arena on Dec 1, 2016 in Cincinnati, Ohio. PHOTO: BLOOMBERG

He gets Indiana to offer incentives to company; analysts doubt deal can be replicated across US

Stopping some 1,100 jobs at a gas plant in Indiana from being moved to Mexico is only the beginning, United States President-elect Donald Trump, who will take power on Jan 20, told cheering crowds in Indiana and Ohio.

Mr Trump, who intervened to get the Indiana state to promise incentives to a Carrier gas furnace plant to keep the jobs, told the plant's workers that "companies are not going to leave the United States any more without consequences".

"We're saving 1,100 jobs in the Carrier plant... and we will work to make America a better environment for workers and businessmen and we will crack down on all foreign trade abuses that undermine your companies' ability to compete," he told workers on Thursday.

He added that he planned to lower business tax from 35 per cent to 15 per cent hopefully, slash red tape and raise taxes on goods made outside the US by American firms.

Jobs was also a key theme hours later at a rally in Cincinnati, Ohio, where Mr Trump told a capacity crowd: "The era of economic surrender is over, we're going to fight for every American job."

Analysts also question Mr Trump's plan to cut business taxes and regulations, and slap high tariffs on goods made by US companies in Mexico. They say this would not only burden American taxpayers as more firms demand tax breaks, but also drive up the prices of such goods in local stores - hurting the people he wants to help.

It was the first of a 10-stop "thank you" tour of key states that helped deliver his Nov 8 victory.

While Mr Trump has touted the Carrier deal as a victory, analysts doubt this can be replicated across the US manufacturing sector.

A threatened loss of US government contracts would have played a bigger part in the deal, Mr John Mutz, chairman of the Indiana Economic Development Corp, told the Indiana Business Journal. After all, Carrier had been set to save US$65 million (S$92 million) a year by moving the jobs to Mexico, he noted.

Last year, a typical factory employee in the US earned US$37.71 an hour, including benefits, while a Mexican worker got US$5.90 an hour, with comparable productivity, Wall Street executive Steven Rattner wrote on Thursday in The New York Times.

Carrier officials said the state of Indiana offered it a US$7 million package over multiple years, with conditions including job retention and capital investment, to get it to keep the jobs at the plant.

Carrier's parent company, United Technologies, employs about 200,000 people, about one-third of them in the US. Its products include jet engines and Otis elevators. The US military alone accounts for about 10 per cent of its US$56 billion in annual sales, the Wall Street Journal reported.

"United Technologies is a gigantic international company with many different divisions and subsidiaries, many of which do substantial amounts of business with the US government," said Mr Mutz.

Analysts also question Mr Trump's plan to cut business taxes and regulations, and slap high tariffs on goods made by US companies in Mexico. They say this would not only burden American taxpayers as more firms demand tax breaks, but also drive up the prices of such goods in local stores - hurting the people he wants to help.

During his campaign, Mr Trump himself spoke against offering incentives to firms to retain jobs.

Senator Bernie Sanders wrote in The Washington Post on Thursday: "In essence, United Technologies took Trump hostage and won."

Mr Steve Weitzner of Ohio-based Silverlode Consulting, a site-selection firm, told USA Today: "It's a potentially dangerous policy where you reward a company that threatens to leave. It's a dangerous precedent. Why wouldn't every other company make the exact same pitch?''

While the deal may be touted as a victory, it is largely symbolic. Carrier will still be transferring several hundred jobs to Mexico from its own as well as allied plants in Indiana. "In this case, you're rewarding a company that is actually cutting a lot of jobs in the state," Mr Weitzner told USA Today.

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A version of this article appeared in the print edition of The Straits Times on December 03, 2016, with the headline 'Trump intervenes to keep 1,100 jobs from moving to Mexico'. Print Edition | Subscribe