Why tech jobs will be a key battleground for Trump and Xi
Jack Ma this week visited and joined the moveable feast of VIPs at Trump Tower in New York meeting the US president elect.
The founder of Alibaba Group Holdings laid out a plan where the company intends to create an estimated one million American jobs through his e-commerce platforms.
It’s an ambitious plan.
To put the plan in context, consider that Amazon’s worldwide payroll employs 222,400 staff, General Motors Corp has 209,000 workers around the world, Ford Motor Company has 199,000 while McDonald’s Corp has 1.9 million workers.
On the same day, Bernard Arnault, chairman and CEO of LVMH, promised to produce more luxury goods in the US, probably to avoid being hit with tariffs.
Admittedly these potential jobs offered by LVMH and Alibaba are more retail than technology, but we can be sure that technology jobs will become the key battleground between Trump and his Chinese counterpart Xi Jinping.
Why is that so? Firstly, it’s a matter of unequal market access.
The prevalent American view is that Chinese tech companies have been able to freely do business outside China and in the US, while US firms have been heavily and unreasonably restricted in China.
Fifteen years after China joined the World Trade Organisation, US companies are still complaining about how the Chinese government blocks their growth in the world’s most populous nation, compared with seemingly unfettered access given to Chinese products in America.
Trump can readily take a stand for American technology in China, without provoking a broad trade war. He can simply curb the acquisitions and investments by Chinese companies in the US, until American businesses are allowed the same level of freedom and access in China
Some of the scenes at Trump Tower look like the opening shots of the first Godfather movie where supplicants swear loyalty to Marlon Brando’s Don Corleone, in exchange for vague promises of friendship.
You can be sure Trump will be haranguing American corporations and their CEOs on a project by project basis.
He’s already done that to a number of companies at home. Part of Trump’s “Make America Great Again” slogan involves scoring victories, just like what he did by claiming to save local jobs at Carrier. He claimed to have convinced the Indianapolis air-conditioning manufacturer to abandon a plan to eliminate more than 2,000 jobs and shift its production to Mexico.
He is not a policy wonk who is bothered with the minutiae of trade treaties.
Will it be a surprise the if Trump were to ask for deals and favours from Xi, to open the Chinese market further to American tech companies?
Granted, technology is a unique industry quite unlike manufacturing or consumer services. It comprises intellectual property, service, research and development and manufacturing.
Most of all, it depends on the global mobility of talented people. This brings up another issue between the world’s two most powerful leaders: work visas.
The H-1B visa, a non-immigrant visa to the US, was once regarded as a key competitive advantage for American technology companies. Now it has become a controversy.
The US issues around 85,000 H-1B visas every year, 65,000 of which go to foreigners hired out of their home countries, while the remaining 20,000 are issued to those who are already in the US and enrolled in schools, colleges, and universities.
H-1Bs are hot commodities for foreigners: last year, demand was three times more than the annual limit of 85,000, according to CNN.
Silicon Valley firms are adamant in protecting their ability to bring in as many H-1B workers as they deem necessary, and they regard the import of talent vital to their industry.
Clearly, there are a lot of Chinese tech workers employed in the US. In Trump’s reasoning, this is tantamount to tech companies discriminating against American workers in favour of cheaper or easier-to-coerce foreign workers.
During the election campaign, Trump pledged to rewrite the H-1B visa system, and raised awareness of the hundreds of IT workers who have been displaced by H-1B guest workers.
Hillary Clinton on the other hand supported an increase of the H-1B visa limit from 65,000 to 195,000.
Studies claim that there has been no shortage of qualified American citizens to fill US computer related jobs, while erroneous data had been offered in support of H-1B visa needs.
Microsoft Corp’s founder Bill Gates has already warned of “dangers to the US economy if employers can’t import skilled workers to fill job gaps”.
Other studies showed that only about half of those in the US with undergraduate STEM (science, technology, engineering and mathematics) degrees actually work in the related fields after college. After 10 years, only about 8 per cent still do.
Trump has said he would not allow Americans to be replaced by foreign workers.
“During the campaign I also spent time with American workers who were laid off and forced to train the foreign workers brought in to replace them. We won’t let this happen anymore,” said Trump to wild cheers and applause from his audience.
The question remains whether the thousands of Chinese tech workers employed in the US are welcome and can stay, or are likely to be forced out, leaving what would inevitably be a yawning skills gap in the US tech industry.
Peter Guy is a financial writer and former international banker