The Candidates, the Issues and the Future of Manufacturing
Manufacturing, domestic and international, is poised to be a key issue for the 2020 election. Whoever holds the Oval Office on January 21 will guide the United States’ response to economic recovery from an unprecedented pandemic, establish trade policy with China and the rest of the world, and influence the domestic availability of strong manufacturing jobs and skilled workers to fill them.
And, as was also the case in 2016, many of the states seen as competitive for either primary political party are home to legacies of manufacturing—Michigan, Minnesota, Pennsylvania, Wisconsin, Arizona, Iowa and Ohio are known electoral battlegrounds in 2020. Fittingly, each of the presidential candidates from the two major U.S. parties has cast himself as the right person to lead the country politically for the sake of all its industrial workers and producers—but, of course, each has different ideas on how to do that.
The front-runners—the incumbent, President Donald Trump, and former Vice President Joseph Biden—are miles apart on a host of issues, and reflect priorities that might not be realized, depending on down-ballot results. But their current platforms and their political records contain clues to what the presidential election of 2020 might mean for the next four years of manufacturing in the United States.
International TradeIn a curious shift of political tides, both candidates agree, broadly, on the difficulties of maintaining a trade relationship with China.
“Traditionally, the Democrats have been harder on China than Republicans,” says Chris Kuehl, managing director and co-founder of Armada Corporate Intelligence and the economic analyst for the Fabricators & Manufacturers Association. “Republicans used to be the ones going, ‘How about doing business in China?’ and the Democrats would be concerned about human rights and political issues that would get in the way.”
Keith Belton, founder and principal of Pareto Policy Solutions and former director of the Manufacturing Policy Institute at Indiana University, said in a phone interview that Joe Biden has become “a harder, harsher critic of China than he’s ever been before,” to the point where the candidates’ attitudes on the People’s Republic are mostly in sync.
While both Trump and Biden share similar concerns with the rise of China as a formidable rival in trade, their perspectives—and proposed solutions—differ on ideological lines based on the candidates’ differing approaches to negotiating trade agreements. The current president prefers to make discrete trade deals between the U.S. and one or two other countries at a time, using his signature combative approach. Biden, on the other hand, based on his past support for the TPP, would favor trade agreements in which the U.S. seeks to build a coalition with a larger group of countries for more comprehensive trade rules.President Trump is fond of describing his own approach towards international trade as placing “America First.” For Trump, who has always fashioned himself as a businessman and dealmaker, trade deals are the result of hardball negotiation between a country and its competitors. Tariffs are a way to get those competitors to the table and work out a deal.
In four years, Trump’s trade strategies have resulted in the signing of two significant trade deals. The first, signed January 15, 2020, was his “Phase One” China trade deal, which saw China agree to substantial imports of U.S. manufactured and agricultural goods, stricter intellectual property standards, and a dispute-settlement mechanism that aims to stabilize U.S.-China trade relations. While the deal was hailed by some manufacturing groups—Jay Timmons, CEO of the National Association of Manufacturers, said the deal should have been passed 25 years ago—critics, like Scott Paul of the Alliance for American Manufacturing, said it didn’t solve some of the more serious problems with China, including state-sponsored manufacturing operations.The second trade deal, the United States-Mexico-Canada Agreement (USMCA), was a renegotiated and updated version of the North American Free Trade Agreement (NAFTA) that Trump excoriated on the campaign trail as one of the worst deals in American history. It included increased de minimis trade values, stricter rules of origin, changes to intellectual property laws and new labor regulations.
To get a sense of Biden’s trade instincts, it’s helpful to look back at the Trans-Pacific Partnership. The TPP, a proposed trade deal drawn up by President Obama and scuttled shortly after President Trump’s inauguration, would have tied 12 countries on the Pacific into one trade group with shared rules. Notably, the TPP did not include China. Although Biden has distanced himself somewhat from the TPP—in June 2019, during a primary debate, he said he would “not rejoin the TPP as it was initially put forward”—the deal illustrates Biden’s belief in broad partnerships with many countries all agreeing to cooperate under one set of rules.
Biden’s trade policy, then, unlike Trump’s, focuses on coalitions of countries that can collectively trade with each other and deny China greater influence on the world economy. At the June debate referenced above, Biden clarified that his Pacific trade policy would involve “renegotiating pieces of that with the Pacific nations” in order to “bring them together to hold China accountable.”
Biden, said Belton, “clearly wants to see the [World Trade Organization] succeed. And he’s still for the U.S. leading the world, setting the rules for international trade.” The U.S. under Biden would take a softer touch to trade: “His druthers are to kind of gauge with other countries to try and push other countries towards rules that everyone can agree to.”
One advantage of Biden’s more coalition-based trade philosophy is ease of access for small manufacturers. Trump’s approach, Kuehl says, runs the risk of establishing a complex web of trade relationships that smaller firms can’t keep up with. “I think what both parties tend to forget is that 75% of the manufacturers in the U.S. have 20 employees or less,” he says. “You look at them and say, ‘Okay, all you have to do is figure out the trade rules for these 16 countries.’ And the CEO goes, ‘How many people do you think work here?’”But Trump’s criticisms of the trade organizations Biden believes in are not insubstantial, according to Kuehl. “Biden has a great deal more faith in the international institutions than Trump has,” he said. “And I think that’s an area where the criticisms that have been lodged against the IMF and the World Bank and all the others, they’re legitimate. I mean, these organizations have been politicized.” Trump, he said, by eschewing those institutions entirely, has provided an alternative way of trading with the world.
On September 9 at a speech in Warren, Michigan, Biden announced his most detailed plans to date on domestic manufacturing. In order to dissuade companies from building overseas, Biden’s platform offers companies a 10% advanceable tax credit for investments meant to create manufacturing jobs or modernize manufacturing facilities. There’s a stick to the carrot, too—companies that offshore production and then sell products or services back to the United States will have to pay a cumulative 30.8% tax penalty on their profits.
There’s stuff to praise in Biden’s plan, according to Belton, in particular Biden’s promises to invest heavily in infrastructure and R&D, and by focusing talk of reshoring less on “bringing back jobs” and more on cultivating cutting-edge manufacturing. “Investing in in nascent technologies or products of the future is probably a better investment than trying to bring back an industry that left the United States a while ago,” despite being less politically splashy than reshoring itself, Belton said. “In terms of federal R&D and manufacturing-related R&D, Biden seems to be promising a lot more than Trump is.”
And yet, that “promising” is key: Down-ticket ballots may hamper the former vice president from delivering as much as he might like to, including a higher corporate income tax, which Biden proposes raising 7 points to 28% but would need congressional approval to get that through. Trump’s approach to supporting domestic manufacturing is more hands-off. “Trump is probably more inclined to let the market do what it wants … he wants to say, yeah, let’s not regulate, let’s not tax manufacturers, and let’s give them freedom to operate,” Belton said. According to the Trump campaign website, the Trump administration’s growth policies have resulted in half a million new jobs in the manufacturing industry, a half-century low in the unemployment rate, and a GDP over 3% for four quarters.
The stats are somewhat sobering in retrospect of what followed. Each statistic references growth that took place during the long, slow boom enjoyed by the economy during the first three years of President Trump’s term. The current state of economic affairs—as the novel coronavirus continues to depress economic activity—is much different from then. But the argument is clear: Trump, according to his campaign, enabled the market to soar by getting out of the way of its growth, and if re-elected, he could make it happen again.
Despite both candidates’ emphasis of the importance of securing jobs in domestic industry, according to Kuehl, both tend to neglect a messier issue that still plagues manufacturers: Filling the jobs that already exist.
“That’s the frustration on the part of most of the companies,” said Kuehl. “Their number one concern, and it still exists, and neither one has said anything about really doing much to address that. Saying, ‘we need more trade schools,’ well, yeah, we do. What do you plan to do about it?”
To the candidates’ credit, both have at least the beginnings of policy that could help upskill workforces. As with his philosophy behind promoting domestic manufacturing, Trump’s method has been to prod the private market to develop its own training or apprenticeship programs. His “Pledge to America’s Workers,” which companies sign and pledge to train a given number of employees, is emblematic of this approach.
Biden’s own plans to alleviate the skills gap, as per his campaign website, involve investing in community colleges and working with unions to “bring forward a new generation of registered apprenticeships.” Specifically, Biden plans to make community college free for families earning less than $125,000 a year and make it easier for workers to unionize.
While both of the front-running candidates are focused on similar issues—China and trade, encouraging domestic manufacturing, and improving the availability of skilled workers—they don’t see eye-to-eye on how to solve them.
For China and world trade, Donald Trump should be expected to continue unilateral dealings with no more than a handful of countries at a time: Kuehl told IndustryWeek that South America might be a promising next move, as Trump and President Jair Bolsonaro of Brazil have good rapport. For the same issue, Biden will continue to oppose China, but he’ll likely normalize relationships with the WTO and broader coalitions in order to do it. When it comes to domestic manufacturing and skills, you can expect Biden to support subsidies in exchange for stricter regulations and higher taxes; Trump, meanwhile, tends to prefer that the private sector take the lead on these issues.
As the industry navigates a fourth industrial revolution, strained trade relations and an unprecedented pandemic, the consequences of the 2020 election on manufacturing are plainly huge.
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