Trump’s Showdown With Carrier Exposes Obama’s Weakness On Outsourcing

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BY: David Dayen 11.30.16

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Donald Trump is in negotiations with Carrier to keep two Indiana air conditioning and furnace plants from moving to Mexico, eliminating 2,100 U.S. jobs. A video of executives informing workers of the plant closures went viral in February, leading Trump to vow to stop the outsourcing. Now president-elect, he is exerting his new leverage to make that a reality.

But someone else already holds that power. His name is Barack Obama. He just doesn’t seem to care.

The most Obama has said about Carrier, at a June town hall in Indiana, is that some jobs “are just not going to come back.” He cited automation in manufacturing, enabling many fewer workers to staff a production line than in previous decades, though that’s a separate issue from Carrier’s outsourcing.

Later in the discussion, Obama challenged Trump’s promises to keep Carrier’s plant open. “He’s going to bring these jobs back. Well, how are you exactly going to do that, what are you going to do? There’s no answer to it.”

In fact, every tool Trump could possibly use to persuade Carrier to keep operations in Indiana has been available to Obama since the day of the company’s announcement. He has just chosen not to use them.

For example, Carrier is a subsidiary of United Technologies, an aerospace and defense firm and one of the 10 biggest federal contractors as of 2014. The company had $56 billion in revenues last year, and over 10 percent came from the U.S. military.

Obama could have used those lucrative contracts as a condition of maintaining the Carrier plant, just as Trump is now being urged to do by Senator Bernie Sanders. “I call on Mr. Trump to make it clear to the CEO of United Technologies that if his firm wants to receive another defense contract from the taxpayers of this country, it must not move these plants to Mexico,” Sanders said in a statement last week.

It’s precisely the kind of hardball Obama has consistently played with federal contractors in other contexts. He has signed executive orders to raise the minimum wage for federal contract workers to $10.10 an hour, ensure paid sick leave, and promote from within the company. He also signed an order to make companies ineligible for federal contracts if they violated employment and labor law over the past three years. He has no compunction against using the government’s leverage as a large purchaser of goods and services to get better outcomes for workers. But this power has been set aside with respect to Carrier — and outsourcing in general.

During the campaign, Trump vowed that he would slap a 35 percent tariff on any goods coming in from that Carrier plant in Mexico. Critics described this as the stirrings of a counter-productive trade war. But reducing the benefits of outsourcing is substantially similar to what President Obama tried to do to prevent corporate inversions, where companies merge with an overseas firm and shift their nominal headquarters to that country (though none of their workers) to avoid the higher U.S. tax rate.