The Indicator from Planet Money - How Biden And Trump Plan To Reshore Jobs

Author and economics commentator Matt Klein joins the show to discuss the ways each presidential candidate plans to bring manufacturing jobs to the United States.

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hey mon is Cardiff. This indicator from planet money is a force election day and here on the indicator. We have already examined the big differences in the economic policy agendas of the 2K Donald Trump and Joe Biden today on the show. We're going to actually look at a goal that the two candidates actually agree on so ugly. They both want to compel us manufacturing company to move their operations out of foreign countries, most of all out of China and back to the us back to us Shores so that they end up hiring us workers into those manufacturing jobs. Both generous want to reassure as it's called those jobs. Now, there's a very contentious debate with an economics about whether getting companies to restore jobs is actually a good idea, but that's not what today shows about today show is about the different approaches to achieving that goal. That each candidate wants to pursue

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About what's at stake for the US economy us companies in US workers and to tell us all about that. I'm going to be speaking today with Matt Klein. He's the author of a book called trade Wars are class Wars any the economically commentator at Barons mad as a new article in Barron's that looks at the economics of reassuring jobs. And our chat about that topic is coming up right after a quick break.

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Mcklein, welcome back to the indicator. Thanks for let me start with this us companies have invested in awful lot in building factories in China setting up their operations in China. Give us a sense of just how much is at stake for those companies if they were to feel compelled to leave China and move their operations back to the US. So it's a lot of money according to analysis from the rhodium group American companies have since the early 1990s invested about 260 billion dollars in Chinese operations. And if there were to abandon China and set up somewhere else all of those assets will be worthless if they would have lost 260 billion dollars and then on top of that they have to spend a lot of money replacing those assets somewhere else. And on top of that chances are wherever they moved operations their profit margins wouldn't be as good as they were in China because otherwise they would have already be

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Turn up in the shyness organic perpetually losing money on that from being less profitable. So it's a would be a very expensive proposition to start voluntarily moving those jobs back to the US where they would have to rebuild all these things that they've already invested in building in China. That's right. So there was a server that was published. I'm over the summer by the US Chamber of Commerce in Shanghai and they found that abused manufacturers with operations and China 71% had no plans to move production at all and the remainder only 4% So they're going to move to the US and even then of those that were playing to move and you usually with the place is like Vietnam or Mexico or what-have-you. They weren't going to move all the Chinese production most weirdest and they're going to move, you know, sort of 10 to 30% of the Chinese production produces very little appetite Among Us businesses to move anything out of China.

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So it seems like given the expense for us companies in moving their operations out of China and back to the US they would probably need some kind of a monetary or a financial incentive from the government itself. Right? Is that a fair way to characterize is that somebody else needs to provide the carrot or the stick to get these companies to come back? I think that's absolutely right. I mean what I guess the simplest way of thinking about this is they spend a very long time sitting at their operations to be the way they are and so that's a very good reason to change them. And that reason is Ultimate going to be money one way or another. Okay. So now let's go through each of the two candidates plans for reassuring jobs back to the US from China. What do you start with Joe Biden? Basically the key things as I understand them is on the one hand the government will just spend a lot more money on us made manufactured goods just explicitly saying we want to know for sure hundreds of billions of dollars of stuff.

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We're going to make sure that we get them from American manufacturers. There's also going to be subsidies for research and development in the US and they're going to be changes to regulations and taxes to essentially discourage companies from moving jobs offshore and on a particular the federal government is buying something to make sure that there's a certain amount of whatever it is. They're buying that actually comes from American supplier. Okay, and the trim plan which I imagine includes maybe a bigger role for the stick and the carrot again, there's there's certainly at the mix on both sides with the thing that's been most prominent. It's been, you know Theatre of terrorists and we seen this particularly in the case of of China that where you're essentially are just saying if you're importing anything from China or some other countries that have been hit with tariffs and you'll government is going to add on some surcharge weather. It's going to 10% 25% 30% What have you and that obviously is going to change the start of the relative cost of goods so that there's a Macbeth definitely sort of on the stick side.

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Interesting point which is that these approaches to reshoring or bringing back u.s. Jobs are not just about the jobs themselves. They're also about getting the us back into high-tech manufacturing which appears to have stagnated for you know, maybe one or two decades even yeah, it's really striking actually that even with the growth of the US semiconductor industry, which is still among the top in the world over on manufacturing output in the u.s. Is essentially been flattened over the past 20 years manufactured passing the US has been flat over the past 20 years, eve of the US economy has grown a lot even though the global economy has grown tremendously. The manufacturing sector has been stagnant and you see that in all sorts of things in a new dimension with no high-tech with semiconductors or with Pharmaceuticals that production is actually really have been hit in a lot of ways that the sort of the u.s. Made ships are no longer the leaders that

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It's actually know Taiwan semiconductor or Samsung better at The Cutting Edge therapy Pharma us manufacturing production peak in 2006 has fallen 20% since then you seen that specifically been displaced might enforce from elsewhere so you can see plausibly that the extent that there's research showing the connection between being close to production and actually being at the technological Frontier research that in the back of your real problem long as ya and Matt I could imagine somebody listening to this conversation saying, you know what I understand that and I'm on board with like us high-tech. Well paying manufacturing jobs, but that the way to get those jobs is to change domestic policies like regulations or tax policies and that those might be just as effective as an approach that says, hey, let's get the jobs out of China and back to the US and what do you think about that argument?

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Is it a whole their elements of atom both sides? Whether it's supporting, you know, subsidizing researcher saying, you know, if the government going to support command or various tax incentives for investment and exchanges in dispensing change and regulation, you know, they both have our ideas and principles would make it more attractive to you know, create jobs and invest in United States, which of these approaches from Biden and Trump would be the most likely to succeed and actually bringing jobs back to the US had a couple of years to see the Trump strategy in action and that hasn't really had a major impact on manufacturing employment of manufacturing production. I think we can reasonably rule out it being tremendously effective. Maybe maybe you compare the alternative it was it was helpful, but it wasn't young Kumasi effective. So I think compared to that commitment to spend

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You're hundreds of billions of dollars additionally on us manufacturers when you know, total manufactured goods sales in the US are served in the order of Six Trillion dollars. I mean, that's the significant, you know percentage and so you can imagine that being, you know having a real impact her Matt Kline author of trade Wars are class Wars. Thanks so much, man.

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This episode of the indicator was produced by Jamila Huxtable and fact check by Sean Saldana our editors Patty Hearst and the indicator is a production of NPR.
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