Thursday, April 28, 2016

How would President Trump stop a business from moving overseas?


Let me agree with Mr. Trump, and supporters, that it's a very bad idea for U.S. companies to move overseas and take those jobs elsewhere.    
I have personally seen the consequences of these moves in Mexico.    
You can see all of these companies in the industrial sectors of Monterrey, Queretaro, Tijuana, and other Mexican cities.  
They are down there hiring Mexicans, from floor sweepers to engineers to lots of people with university degrees. They are hiring professionals from the top schools south of the border.
Again, I don't like it but what can a U.S. president really do about it? What legal authority does a U.S. president have to stop it?     
Back in 2013, Ryder published a great post detailing the reasons that US companies move to Mexico. This is the one that caught my attention:
Duty-free imports, tax credits & incentives: maquiladoras operate in free trade zones, enabling companies to import materials and equipment without paying taxes or duties, then re-exporting finished products. 
The Mexican government also offers a variety of incentives, from capital equipment grants and help with infrastructure to real estate grants, the Aerospace Training Center in Querétaro and tax credits.
How does a U.S. president stop this? He can't unilaterally, no matter how much pressure he puts on the executives not to make the move.
Furthermore, renegotiating NAFTA would mean undoing the economic infrastructure that ties Mexico, Canada, and the U.S. It would likely mean that Congress would be involved because this is how we do it in the U.S.
It takes me back to one point. The best way to keep companies here is to make the U.S. the most profitable place in the world to do business. You can do this with a new tax code and the elimination of many regulations.  
Again, any change in the tax code or end of regulations will require Congress again.
Sadly, Trump is raising a lot of expectations rather than proposing solutions to fix the problem of jobs going overseas.
Again, I hate jobs going overseas as much as Trump. At the same, all I've heard so far are slogans rather than solutions. In other words, this is a lot more complicated than we've heard from Mr. Trump.
P.S. You can listen to my show (Canto Talk) and follow me on Twitter.



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