News Analysis: G.M. Job Shift From Mexico Tests a Trump Premise

News Analysis: G.M. Job Shift From Mexico Tests a Trump Premise

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“Broadly speaking, the trends that have hurt communities here in terms of trade and trade deficits are very much ongoing, and if that gets turned around, it’s not going to be about bringing all the old jobs back,” he said. “It’s going to be about forging new sectors like advanced manufacturing.”

Which is to say, sectors where a handful of highly skilled people with degrees and technical prowess earn a good deal of money. And lesser-educated workers — the ones who lost jobs to China and Mexico and are now embracing Mr. Trump — continue to be left behind.

Far from representing a reversal of course, the G.M. deal then underscores how multinationals are fine-tuning their approach to making things. They are increasingly differentiating between more labor-intensive manufacturing — tasks like stitching bluejeans and snapping together cellphone cases — and more advanced, machine-intensive pursuits that rely on automation and software.

Given that state-of-the-art products fetch a higher price, it is presumably worth paying a premium to the limited numbers of humans involved in their creation — and especially since this buys proximity to the minds that dream up lucrative new visions. The Canadian plant getting the jobs sits near Waterloo, the birthplace of the BlackBerry, which is something like Canada’s Silicon Valley.

The union in Canada won something headline-grabbing — jobs retrieved from Mexico. But it also relented on a major objective sought by G.M.: Workers gave up the fight to retain old-fashioned pensions that pay out fixed amounts. They accepted newfangled plans that see benefits fluctuate with the markets.

Video

Bill Clinton on Activist Investors

The former president said that activist investors, rather than trade deals like NAFTA, are partially at fault for U.S. corporations sending jobs to Mexico.


By CNBC on Publish Date September 20, 2016.


by CNBC.

Watch in Times Video »

Far from proof that Canadian workers have somehow recaptured the upper hand in jockeying for the spoils of globalization, this deal is just the latest evidence that companies have effectively used international factories to permanently tilt the power dynamics in their favor.

For decades, global automakers have been on the march for lower costs. In the United States, they shifted factories from union strongholds like Michigan and Wisconsin to Southern states like South Carolina and Alabama, where union ranks were weak and local rules limited labor organizing.

Then, they kept moving south, to Mexico, exploiting a series of trade deals — not least the North American Free Trade Agreement. A quarter century ago, the then-American presidential candidate, Ross Perot, spoke of a “giant sucking sound” in warning that factory work was being vacuumed up by Mexico, with American communities abandoned.

For workers in Canada and Mexico, the impacts were evident. They had to satisfy the demands of auto manufacturers locked in an increasingly global competition. They had to make concessions. Otherwise, the car companies could employ their demonstrated power to leave them behind, moving the work to places where labor was cheaper and more pliable.

The G.M. deal affirms this reality. Labor paid a price for gaining jobs in Canada — downgraded retirement.

Above all, the deal underscores the potency of markets in shaping what happens in commercial life, a force far more powerful than demagogues making dubious promises about tearing up trade deals.

Years ago, Ross Perot spoke of a “giant sucking sound” in warning that factory work was being vacuumed up by Mexico.

Credit
Andrea Mohin/The New York Times

Canada’s unions are relatively strong, and the nation’s currency is relatively weak, making Canadian-made goods cheaper in the global marketplace. G.M. was willing to pay for access to highly skilled working hands, provided it got a break on its pension contributions.

These factors coalesced into a negotiated result. The jobs did not come back to Canada because of the sort of edict Mr. Trump has promised to unleash, somehow compelling global companies to stop making things in Mexico and resume making them in the United States.

“The central Trump fallacy here is that the president can tell multinational companies what to do,” said Mr. Bernstein, the former Obama administration economic adviser.

“That’s completely wrong, I’ve seen that firsthand. President Obama was constantly exhorting companies to create more jobs, and they’ll only do so if they want to,” he added. “Simply calling multinational C.E.O.s from the Oval Office and yelling at them isn’t going to do anything.”

If Mr. Trump really did seek to dictate to General Motors (or any company) where it can make its wares, that would risk undermining the company’s competitiveness.

If, under threat of political action, a company had to buy steel from an American producer instead of China, that could make its cars more expensive than competing models from Honda or Hyundai.

If they had to use American workers for final assembly instead of Mexicans, that could damage their business and undercut sales for many suppliers, from glassmakers in Ohio to auto parts manufacturers in Indiana.

“Then,” said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics in Washington, “those jobs that came back from Mexico aren’t going to be any jobs at all.”

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