William Watson: Why we should worry that Trump wants more jobs in China
Do you figure the Chinese hacked Donald Trump’s Twitter account? How else to explain his tweet on Sunday: “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”
“Too many jobs in China lost.” This is the same Trump who ran for president arguing that China — or as he called it, “Jye-na” — had eaten America’s lunch and stolen all its manufacturing jobs. Now, after his Commerce Department put ZTE in jeopardy by banning American companies from selling it technology (this in retaliation for ZTE having traded with embargoed countries like North Korea) he’s suddenly concerned about the loss of Chinese jobs. Not all of them, just “too many” of them. According to Reuters, ZTE employees have been taking to social media to cheer the news and, so far, President Xi Jinping hasn’t stifled their tweets, although he probably could.
“Too many jobs in China lost.” You’ve got to think that will feature prominently in Democratic party ads leading up to November’s congressional elections. Party leaders were already tweeting Trump to say he should worry about American jobs, not Chinese. In fact, voters probably won’t buy the argument that he’s not worried about American jobs. To the extent he’s got a consistent political brand, that’s it. But the tweet hardly helps his reputation for flightiness.
Do you think we’ll ever see him tweet: “Too many jobs in Canada lost”? He says he likes Prime Minister Justin Trudeau, even though he admits to trying to con him with made-up numbers about the U.S. trade deficit. But President Xi is a much bigger player that any Canadian prime minister and one sure trait of bullies is that they’re more aggressive with small opponents than with big ones.
To ordinary folk it may seem reassuring that Trump and Xi are “working together” to come up with a solution to the problem presented by Trump’s own Commerce Department’s decision. Eventually they seem likely to work out some sort of deal, first for the telecommunications and technology company ZTE and then maybe even for China-U.S. trade and investment in general.
The charitable interpretation of Trump’s sudden empathy for Chinese workers is that it’s part of a long-term strategy to get China to play more by the international rulebook than the country has been doing since its accession to the WTO in 2001. Granted, when you’re playing good cop/bad cop it’s more usual for the same person not to be the good cop one day (or hour) and the bad cop next. But these are changing times and Trump, as Conrad Black’s new book puts it, in glorious understatement, is “a president like no other.”
But what seems more likely than a new resolution to play by the WTO rules is some sort of ad hoc deal in which the two leaders work out a more or less formal job exchange: so many thousand for you in restored ZTE jobs versus so many thousand for me in steel and aluminum, plus guarantees from you to limit exports to the U.S. from your burgeoning auto industry and so on and so on.
Judging by reports about the NAFTA negotiations, which are winding down to a Thursday deadline for congressional action this year, this kind of jobs-toting mercantilism drives the U.S. negotiators, who seem mainly interested in keeping X-number of auto sector jobs in the northeastern states that were key to Trump’s electoral college victory.
Various superficially non-discriminatory formulas have been devised to get this done, the latest of which focuses directly on wages, with the stipulation that a certain percentage of the work on a car must be done by people making more than US$15 per hour if it’s to qualify as North American content.
That’s neutral on its face but because assembly wages are lower in Mexico than in Canada or the U.S., it binds Mexico more. No one argues that Mexican wages below US$15 aren’t competitively determined — Mexico has a bigger supply of lower-skilled labour than either Canada or the U.S. — or that auto companies haven’t raised wages in Mexico by making investments there. It’s just that lower-paid Mexicans now do work higher-paid Americans and Canadians used to do. But lower-wage labour is Mexico’s only advantage. It’s not going to out-compete the U.S. or Canada in terms of investment or R&D or infrastructure. What else would we expect?
Co-operation among leaders is nice. Many times it’s better than the alternative. But we don’t want trade patterns determined by President Trump and President Xi. We want trade patterns determined by which country’s workers and investors can do which jobs and projects better than other countries’ can. What we really want is to get politicians out of these decisions.