Go Ahead, Donald. Dunk That Oreo.
Donald Trump's war on Oreo cookies makes no sense at all.
Trump is boycotting his beloved Oreos because Nabisco, a unit of Mondelez International (formerly the snack-foods division of Kraft), is supposedly closing a Chicago biscuit plant that makes the cookies, laying off 2,000 workers, and moving production to Salinas, Mexico. There, Oreos will join with Fig Newtons and Graham crackers, which were made in a Philadelphia plant until it closed a few months ago.
Viewed through the prism of a presidential campaign aimed mostly at older, angry, white, working-class Americans who resent President Barack Obama, it sort of adds up, even if Trump has his facts partly wrong. Nabisco isn't closing the Chicago plant, the largest bakery in the world; the number of jobs affected is 600, not 1,200; and Oreos will still be made in three U.S. states.
Nonetheless, Nabisco's move is exhibit A whenever Trump talks about how "Mexico is the new China" in sucking America dry.
It's reminiscent of Ross Perot's "giant sucking sound" of the 1992 presidential campaign, when Perot opposed the free-trade deal with Mexico that President George H.W. Bush was negotiating and that President Bill Clinton would later complete. Perot claimed it would cause the loss of 6 million jobs to Mexico.
That didn't happen, by a long shot. At most, the U.S. "lost" 850,000 jobs to Mexico and Canada (mostly Mexico) in the 20 years since the North American Free Trade Agreement took effect. This, at least, was the number of people who received federal assistance for job losses directly tied to the treaty, such as plants moving south of the border.
But the 850,000 only counts the number of jobs lost, not the number gained due to increased exports by more efficient and profitable U.S. companies, or because Mexicans' higher living standards allowed them to buy more U.S. goods and services. In 2013, U.S. goods exports to Mexico were greater than what the U.S. sold to Germany, France, the U.K. and the Netherlands -- combined. Almost 2 million U.S. jobs now depend on exports to Mexico. And on average, export-related jobs pay higher wages than other jobs do.
When U.S. companies expand foreign operations, the net effect is greater employment at home, according to a study released recently by the pro-free-trade Peterson Institute for International Economics. It says offshoring allows companies to improve competitiveness by shifting low-paying jobs that involve routine tasks to lower-wage countries.
When that happens, companies increase earnings, which allows them to divert resources to R&D and create more higher-paying, higher-skilled jobs. Needless to say, U.S. consumers have also benefited from cheaper retail prices as a result of all this shifting -- none more so than lower-income Americans.
By the way, 850,000 jobs over 20 years is a tiny, tiny number: The U.S. workforce includes 135 million people, of whom 4 million to 6 million lose their jobs, or voluntarily leave them, every single month. The jobs "lost" to Mexico are less than 0.1 percent of the total turnover.
And U.S. manufacturing jobs have been moving offshore since 1976, so Mexican transplants aren't new. Even when they don't go offshore, manufacturing jobs like those in the Oreo-making plant have also been disappearing, largely because technology has been reducing the amount of labor required.
Still, Trump might argue, who's going to help those 600 Nabisco workers? It's important to note that if Nabisco didn't move, it would be paying higher labor costs than rivals do, and possibly pricing its cookies out of the market. Ultimately, it would have to lay people off as earnings declined, investments were delayed and shareholders dumped the stock. So keeping Oreo production in Chicago would make no more sense than if Chicago had kept its stockyards and steel mills open.
For Trump to propose policies to shield workers would be like saying the U.S. should protect all jobs from competition or new technology, or prevent companies from moving from Northern states to Southern ones, for example, where unions are discouraged and wages are lower.
"It is unclear why someone who loses their job because digital photography replaces film, or because the taste for business-casual decreases demand for suits," another Peterson study on Nafta says, "is any less deserving of support than someone who loses their job because assembly of computers and flat-screen televisions moves to Mexico."
So the good news is that Trump can have his Oreos and eat them, too.
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