Now, Mr. Trump, Tell Us about Carrier

Between yesterday and today, and perhaps because of a fairly high readership of yesterday's piece, I decided to ask another question of Donald Trump to clarify something he has been saying on an ongoing basis.  Yesterday, we'll note, I had a clarifying question regarding the border wall with Mexico, which I thought was reasonable to ask.  I even offered to write his speech answering the question, at least for a modest fee.

Today, I thought we might slip over to another item in the news that he mentions often.

First, though, is an obligatory disclaimer.  I am not writing this out of any specific feeling toward Donald Trump, whom I may or may not have voted for in the Virginia primary a week back.  For the record, if he is the nominee of the Republican Party, I will vote for him.  That is assured, almost no matter what happens between now and then.  I won't be voting for Hillary, whether or not she is in prison by then.

So the news item at issue today is the Carrier Air Conditioning plant moving its operations from Indiana to Monterrey, Mexico, and the associated loss of most or all of the 1,400 jobs that were there, employing people at the plant.  We have all read the story, all heard the outrage, and all heard Trump raise it as an example of the loss of jobs here to other countries.

That won't happen, Mr. Trump has been saying, and the jobs are coming back to the USA.  We all applaud, and we all support American products being made and sold in the USA.  I agree.  We're Americans, and the president should be acting first based on what is good for us -- he works for us.  And surely, losing a thousand jobs of an American company to Mexico is not a good thing.

Or at least it sounds like it is not a good thing.

But Carrier, it should be told, did not move the manufacturing plant to Monterrey, Mexico because of the palm trees and warm weather.  It's not even near the coast, for God's sake.  No, they moved for one simple and unalterable reason.

The cost of manufacturing in the USA was and is too high to manufacture a product that could be sold at a competitive price.  But it is affordable to do so in Mexico.

It is Economics 101, unfortunately for the employees in Indiana.  They have mortgages and kids' college bills and food, clothing and life in general.  To pay for that, they need a certain wage, and that wage, times 1,400, produced a cost to Carrier too high to make a competitively-priced product.  If Carrier couldn't break even, or could barely break even to the point that its shareholders could not earn on their investment, they would have to raise their air conditioner prices beyond what Americas would pay, because they had alternatives.

Knowing that, you have to look at it as Carrier not having a choice.  And essentially, they didn't, at least not one that would allow them to keep manufacturing in Indiana.  So they're moving.

The obvious question to Mr. Trump, then, is this --  

"Carrier was forced to move because they would lose money if they stayed.  The underlying problem is not the greed of Carrier, but the costs of manufacturing here.  If you try to make it illegal for them to leave, or tax them when trying to bring the products back to the USA to sell, you're not fixing the cost problem, you are simply changing the cost of producing an air conditioner that is ready to sell in a store, from a high-cost basis in Indiana, to a lower-cost-plus-a-high-import-tax basis manufacturing in Monterrey.  Carrier still cannot make an air conditioner to sell here on which they can make money.  And they will close.

"Just the economic impact of trying to legislate to bring jobs back here is going to be to raise prices on goods and services.  So please, Mr. Trump, first take us through the Carrier example and explain in simple terms what legislation will apply, what incentive will be there for Carrier to move manufacturing back to Indiana, and how the whole process results in air conditioners Carrier can sell at a competitive price and make a fair profit.  Then, use that Carrier example to explain how that "competitive price" will be comparable to the competitors and affordable by Americans -- neither of which is true now and is what has forced Carrier to Monterrey."
 

I think that is a pretty straightforward question, and I absolutely believe that Mr. Trump has, in his mind, an answer.  He is an astute businessman.  I hope it involves something that allows us to manufacture competitively here, but if it's so, I'd really like to hear it.

I'd like to hear it, so I can then explain it to others.  Fair enough?

Copyright 2016 by Robert Sutton
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