NEW EPI REPORT CONFIRMS THAT TRUMP’S POLICIES HAVE EXACERBATED FOREIGN OFFSHORING
On August 3, 2020, President Trump issued yet another executive order trumpeted as another bullet in his alleged battle against foreign offshoring of American jobs, requiring federal contractors to report whether outside contractors and subcontractors on contracts awarded during the last two years “performed in foreign countries services previously performed in the United States.” Trump claimed that this executive order conveyed “a warning to any federally appointed board: If you betray American workers, you will hear two words: ‘You’re fired.’” This is just the latest in a series of recent claims by Trump and his U.S. Trade Representative, Robert Lighthizer, that their policies are bringing jobs home.
Just one week later, however, the Economic Policy Institute (EPI) put the lie to those claims. In a detailed report issued August 10, 2020, the EPI established that “while the Trump administration has claimed that the era of U.S. offshoring is ‘over,’ the reality is that the United States has not begun to address the root causes of America’s growing trade deficits and the decline of American manufacturing.” After noting that “decades of trade, currency, and tax policies that incentivized offshoring, combined with an utter failure to invest adequately in infrastructure and good jobs at home, have contributed to growing inequality and an eroding middle class,” the report found that “President Trump’s erratic, ego-driven, and inconsistent trade policies have not achieved any measurable progress, despite the newly combative rhetoric.” The report warned that “unless steps are taken now – to reform our trade policy, to curb dollar overvaluation, to eliminate tax incentives for offshoring, and to rebuild the domestic economy – there won’t be a comeback.”
I have written previously about the extent to which the 2017 Trump tax cuts further incentivized, rather than penalized, foreign offshoring, especially the offshoring of call center and customer service operations. While instead focusing on the offshoring of manufacturing operations, the EPI report confirms that failing:
America’s trade problems have been exacerbated by mistakes and/or malfeasance in Trump’s tax policymaking. U.S. multinational corporations continually engage in massive, international tax avoidance – with some paying no U.S. income tax at all. The 2017 tax cut exacerbated this problem by creating a new, lower corporate tax rate for “global intangibles income.” The pharmaceuticals industry has since reaped major rewards and has moved plants to countries with the lowest possible corporate tax rate. As a result, the U.S. now has a massive trade deficit in pharmaceuticals, which exceeds the trade surplus in aerospace products, the strongest U.S. export industry. Leading suppliers of pharmaceutical imports – many produced by U.S. firms, such a Pfizer, which had no taxable U.S. income over the entire decade from 2007 to 2016 – include Ireland, Germany, Switzerland, India, and China.
The U.S. trade deficit is likely to shrink during COVID-19 simply because of the decline in consumer income and spending. But unless steps are taken to address dollar overvaluation and the tax incentives that encourage offshoring, these deficits will simply reemerge when recovery occurs.
I have also written previously about several pieces of proposed legislation designed to redress this problem that have been proposed and supported by Democrats but opposed and bottlenecked by Republicans. Rather than address those proposals, the EPI report offers a more bipartisan criticism of past policies supported by both parties, concluding as follows:
For the past three decades, mainstream Democrats have tied their fates to the twin mantras of free trad and globalization, which have cost millions of jobs ad many thousands of factories. Bill Clinton campaigned for and signed NAFTA in 1993. He also negotiated and signed the agreement that created the World Trade Organization in 1994. And he negotiated the agreement that resulted in China’s entry into the World Trade Organization in 2001. Barack Obama negotiated and campaigned for the failed Trans-Pacific Partnership agreement. It is time for progressives to own and reject these failed policies, and to build and campaign on a plan to develop a 21st-century New Deal for the domestic economy.
In 2016, Donald Trump campaigned against globalization and these failed trade deals – which have clearly hurt U.S. manufacturing. It worked. He captured nearly 80% of the electoral votes in the top 25 manufacturing states, as shown above. But he has since failed to deliver for working Americans. Now the wheels are coming off. It’s time for a meaningful rewrite of failed U.S. trade and economic policies – all urgently needed to revive the U.S. economy at a critical time.
Wherever the blame lies, the foreign offshoring of American jobs not only persists but continues to accelerate. And now, this problem threatens to tank our pandemic-devastated economy. Trump promised to fix this problem. Instead, corporate greed and political indifference have trumped economic patriotism, harming our citizens, our reputation, and our future.
Lauren Irwin-Szostak is the President of Business Processes Redefined, LLC, a call center solutions management firm headquartered in Fairfield, New Jersey which is certified as a woman-owned business enterprise by both the New Jersey Woman-Owned Business Enterprise (NJWBE) and the Woman’s Business Enterprise National Council (WBENC).