Donald Trump is still weeks away from taking the presidential oath of office, but a deal he championed with an Indiana manufacturer is already threatening to endanger longstanding trade rules intended to prevent public contracts from being targeted to only domestic firms.
On Thursday, Trump and Vice President-elect Mike Pence attended an Indianapolis event to celebrate Carrier’s decision to quash its plan to shift up to 850 manufacturing jobs from Indiana to Monterrey, Mexico. Carrier officials said that new state tax incentives were an “important consideration” in their decision to keep some of the jobs in the United States.
However, a top Indiana economic development official said the resolution was based more on the firm’s fear that if it moved the jobs out of the United States, Trump’s administration would punish Carrier’s parent company, United Technologies, by restricting its access to billions of dollars of federal government contracts. United Technologies annually gets roughly $5.6 billion in federal contracting generosity, according to the Indianapolis Star.
“Companies are not going to leave the United States anymore without consequences,” Trump said during a speech at the company. “It’s not going to happen.”
Trump’s new administration could follow the Carrier deal by seeking to systematically leverage its power over federal contractors to get companies to preserve domestic jobs. But that would run up against key provisions in age-old U.S. trade deals that—if broken—could subject the United States to international sanctions.
Under those pacts—which Trump and many progressive public officials have campaigned against—federal, state and local governments face restrictions on efforts to award or rescind government contracts on the basis of where a company is located, or where its workforce is domiciled. In practice, those rules effectively prevent government officials from having a preference over U.S.-based companies in their decisions to award government contracts. In 2015, roughly $13 billion federal contracts went to foreign firms or foreign-based subsidiaries, according to data from Bloomberg Government.
“The policy tool Trump just used, conditioning procurement contracts on U.S. employment, is one of the policies forbidden in our current trade agreements,” said Lori Wallach of Public Citizen, a left-leaning group that has pressed public officials to alter United States current trade policies. “As part of Trump changing those trade agreements, he could announce to our trade partners that getting rid of those procurement rules are one of the things he is going to negotiate.”