The new United States-Mexico-Canada Agreement (USMCA) went into effect on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA) that had been in effect for over 25 years. Predictably, the Trump administration’s United States Trade Representative, Robert Lighthizer, hailed the USMCA as an example of how President Trump has kept his campaign promise to “stop the outsourcing of U.S. jobs,” claiming that the USMCA’s enhanced country-of-origin requirements will increase U.S. auto manufacturing jobs in a July 1, 2020 op-ed. That op-ed followed a similar piece two months ago in which Mr. Lighthizer claimed that the economic upheaval triggered by the coronavirus pandemic would “accelerate” the reversal of “the offshoring of American jobs,” a reversal supposedly “started” by the USMCA and other Trump administration policies. In Mr. Lighthizer’s words:
The era of reflexive offshoring is over, and with it the old overzealous emphasis on efficiency and the concomitant lack of concern for the jobs that were lost. After we have defeated this disease and reopened our economy, we cannot forget the hard lessons learned from this misguided experiment. Over the long run, the path to certainty and prosperity is the same for our companies as it is for our workers: Bring the jobs back to America.
Mr. Lighthizer’s claims echo the President’s new “American Comeback” campaign ads, which tout industries and jobs returning to the U.S.
Unfortunately, the truth is far different. Not only have President Trump’s trade policies failed to curb most offshoring of American jobs, but his 2017 tax cuts have further incentivized such offshoring of countless operations, including call center and customer service operations. And Republicans in Congress continue to block long-stalled legislation designed to reverse such job-killing incentives by penalizing companies that offshore such operations.
The Trump administration has essentially limited its anti-offshoring efforts to manufacturing jobs, but even though increased domestic purchasing spurred by tax cuts and an expanded federal budget increased average employment per manufacturing plant between 2016 and 2019, the offshoring of manufacturing jobs continued throughout that period. Overall, the United States has lost more than 91,000 manufacturing plants and nearly 5 million manufacturing jobs since 1997, including nearly 1,800 factories that disappeared between 2016 and 2018. Moreover, the U.S. trade deficit in manufactured goods rose significantly between 2016 and 2019. Indeed, the real U.S. trade deficit has increased every year since 2016, reducing GDP growth by roughly one-quarter of one percent annually over the past three years.
But a far greater problem than the Trump administration’s trade policies are its tax policies, which have accelerated the offshoring of American jobs, including manufacturing jobs. In addition to enabling U.S. multinational corporations to continue to engage in massive, international tax avoidance, the 2017 Trump tax cuts on corporate profits incentivized offshoring of numerous types of operations by creating a new, lower corporate tax rate for “global intangibles income.” The results have been catastrophic for American manufacturing jobs; for example, the U.S. now has a massive trade deficit in pharmaceuticals because the industry has offshored plants to countries with the lowest possible corporate tax rate.
And the Trump administration has not even pretended to address the rampant offshoring of call centers and customer service operations, which has continued unabated despite the technological and compliance problems resulting from the COVID-19 lockdowns in many foreign countries. Notwithstanding the dangers and inadequacies posed by such overseas operations – and Americans’ desperate need for jobs in our pandemic-ravaged economy – U.S. multinational corporations continue to offshore such operations, in large part due to the offshoring incentives contained in 2017 Trump tax cuts.
Excluding the one-time revenue from a transition tax on accumulated earnings, those tax cuts will cost U.S. taxpayers an estimated $14 billion over the next ten years in additional lost taxes due to foreign outsourcing, on top of the billions already being lost to offshoring-caused tax avoidance under the prior tax code. Even more devastatingly, those tax cuts have enhanced, rather than reversed, the continuing loss of American jobs caused by U.S. businesses offshoring their operations – at a time when our citizens need jobs more than ever.
And worse yet, while they were passing and praising President Trump’s offshoring-incentivized tax cuts, Republicans in Congress have continued to bottleneck proposed federal legislation designed to halt the foreign outsourcing of American jobs, including the “United States Call Center Worker and Consumer Protection Act,” the “No Tax Breaks for Outsourcing Act,” the “Stop Tax Haven Abuse Act,” and the “End Outsourcing Act.” Most of those bills have been introduced repeatedly over the last several years, but none of them has ever advanced out of committee due to Republican opposition.
Mr. Lighthizer’s recent op-eds notwithstanding, the foreign offshoring of American jobs has not merely continued unabated but increased dramatically during the Trump administration due to Republican kowtowing to the profit-driven – and unpatriotic – motivations of U.S. multinational corporations. Change is both desperately required and long overdue.
Lauren Irwin-Szostak is the President of Business Processes Redefined, LLC, a call center solutions management firm headquartered in Fairfield, New Jersey which is certified as a woman-owned business enterprise by both the New Jersey Woman-Owned Business Enterprise (NJWBE) and the Woman’s Business Enterprise National Council (WBENC).
 https://www.bloomberg.com/news/articles/2020-06-10/work-from-home-isn-t-working-for-call-centers; https://www.bloomberg.com/news/articles/2020-06-10/india-s-it-services-industry-heads-back-to-work; https://www.bloomberg.com/news/articles/2020-06-14/philippines-outsourcing-sector-bouncing-back-with-jobs-on-offer.