Why 'Buy American' Hurts America 23 comments
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The "Buy American" provision contained in the federal economic stimulus package continues to cause problems for the Obama Administration both at home and abroad. As Max Showalter wrote in Indiana, it has become a political football that Caterpillar Inc. (CAT) would like to see kicked completely out of the legislation.
Without a change, the world's largest mining and construction equipment manufacturer fears its operations -- including the Large Engine Center in Lafayette -- could be severely and negatively impacted.
Spokesman Jim Dugan said:
Our position is that, while 'Buy American' may sound good, in fact we're very concerned that if this stimulus legislation contains the 'Buy American' provision, other nations and regions of the world would follow our lead and pass similar provisions. Suddenly, we could find ourselves with an old-fashioned trade dispute similar to the 1930s, and soon global trade could grind to a halt. We are very, very concerned that this 'Buy American' provision could end up leading to a similar set of circumstances that would be detrimental to Caterpillar, and more importantly, to the U.S. economy and the global economy.
Obama has compounded the problem by making claims about that are untrue.
President Obama today repeated the claim we asked about yesterday at the press briefing that Jim Owens, the CEO of Caterpillar, Inc., "said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off." Caterpillar announced 22,000 layoffs last month. But after the president left the event, Owens said the exact opposite. Asked if the stimulus package would be able to stop the 22,000 layoffs or not, Owens said, "I think realistically no. The truth is we're going to have more layoffs before we start hiring again."
While it may delight Obama's pro-union backers, it is clear to me that this provision is indefensible in terms of saving jobs. In fact, it is expected to cost jobs. Read this analysis by Gary Hufbauer and Jeff Schott of the Peterson Institute. Based on economic and legal analysis, the authors conclude that the Buy American provisions would violate US trade obligations and damage the United States' reputation, with very little impact on US jobs. They estimate that the additional US steel production fostered by the Buy American provisions will amount to around 0.5 million metric tons.
This in turn translates into a gain in steel industry employment equal to roughly 1,000 jobs. The job impact is small because steel is very capital intensive. In the giant US economy, with a labor force of roughly 140 million people, 1,000 jobs more or less is a rounding error. And as for America's reputation in the world, Hufbauer and Schott conclude: On balance, the Buy American provisions could well cost jobs if other countries emulate US policies or retaliate against them. Most importantly, the Buy American provisions contradict the G-20 commitment not to implement new protectionist measures--a commitment that was designed to forestall a rush of "beggar-thy-neighbor" policies.
Disclosure: no positions
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This article has 23 comments:
Our short sighted attempts to save a dollar are costing us dearly in the long run.
Yet another Globalist Cornucopian spouting the same ol' tired lines about the 1930's.
International trade leading up to the Great Depression was already dropping before Smoot-Hawley. Smoot-Hawley did not create the depression. Unsound and unregulated banking practices, and a surplus of goods and real estate caused the crash and depression.
Read again this character's words....the same words that all the Globalony Cornucopians spout.....
"On balance, the Buy American provisions could well cost jobs if other countries emulate US policies or retaliate against them. Most importantly, the Buy American provisions contradict the G-20 commitment not to implement new protectionist measures--a commitment that was designed to forestall a rush of "beggar-thy-neighbor" policies."
These same dolts who claim we are the strongest country on the planet, who say we are winning the war on terror, who claim we will never decline like every other culture and empire before it, who say that while things may be bad for our economy and currency here it's worse over there. Yet they are afraid of a little ol' trade war.
Why?
They know like we all know, if only instinctively, that because of their globalist schemes, we hardly make anything anymore. And if we do, it is either so infested with other countries' parts and designs or the manufacturing has been outsourced to other countries, that it is de-facto reality.
For instance, the great "American" car company G.M. More than half their models are rebranded Toyota's, Daiwoo's, Isuzu's and Opel's.
Finally, I remember hearing recently on CNBC' Kudlow and Co. one of those blathering, idiotic Globalist Cornucopians reply to someone like me lamenting the fact that we have pissed away our manufacturing base for Globalist Dreams, and this guy had the gall to actually say....
"Yeah that's right. We don't need to manufacture things. You know why? We make decisions!"
Oh, yeah....that's real comforting to know that we made the "decision" to trade manufacturing real things for the manufacturing of MBS's, CDO's and CDS's.
The real answer to our problems is to decide that we are going to eliminate the trade deficit and rejuvenate U.S. manufacturing.
On Cat, yes, they do sell a lot of heavy machinery. But do they sell products in Japan that compete with anything Japan makes? Not hardly. Japan doesn't allow it. But, of course, Japan can freely compete here.
Americans are locked into a September 1945 mentality...they think no one is better...but they are so far into decline they have no idea...this kind of thing was the subject of several episodes in the original Star Trek series. Kirk and company would come across a more primitive civilization who thought they were advanced until Kirk et al showed them otherwise!
At this point in our economic malaise, I urge everyone to spead this message: Buy American, Hire an American.
So called "free trade" is really a game of poker. Let's see if the rest of the table is bluffing. Let's see if they are using marked cards or dealing from the bottom of the deck.
So, can someone please explain to me how buying American.......and ending our trade imbalance......could possibly be a bad thing.
At the Macro economic level for the US.......any steps to balance trade strikes me as a good thing.....for the nation.
Somehow, asserting the buy American is associated with the union movement doesn't pass the common sense test....just more ideological BS.
Since when is the working class an enemy to the nation? It is the working class that built this nation and that sends its sons and daughters to the front lines.......a lot more so than the "fat cats".
We traded freedom and a way of life, for people like you to collect record profits and the government to enjoy record tax revenues.
This "stimulus" bill will stimulate more Chinese jobs, which I guess is good since China is the only nation on earth that can fund this disaster.
Some day, China is going to want a return on their investment (bought with our consumer dollars by the way) and all of a sudden, this country will not be able to pretend sovereignty.
And, the "experts" are just too stupid to see it coming. Just like they failed to see the housing bubble, or predict that Y2K was a multi-trillion dollar industry for a one second problem, or see that dotcom companies with no customers and no profits could really have stock worth $300.
Thanks for your help in our countries demise. Hope you are practicing your lie to tell your grandchildren as the horror of their lives hits you.
We traded cheap socks for free credit, soon we won't have either.
How about a free trader describe what America's piece of the cookie should like, according to the theory, and what it looks like in reality. To me it now seems smaller than promised, and that all the chocolate chips are in someone else's piece.
On Feb 13 01:30 PM pearl2k wrote:
> If there's a a PROFESSIONAL economist out there please chime in.
> I seem to remember the models I studied in International Trade were
> very simple, bi-lateral models, the results of which were entirely
> quantitative. Free trade means a bigger chocolate chip cookie for
> everyone to share, and more is better. That's it.
>
> How about a free trader describe what America's piece of the cookie
> should like, according to the theory, and what it looks like in reality.
> To me it now seems smaller than promised, and that all the chocolate
> chips are in someone else's piece.
>
>
"Buy American" is no longer actually possible as most things with an "American" name or label are wholely or partially made overseas now anyway. Globalism has become an insidious virus that seems to have no cure.
Dear Senator Richard G. Lugar,
American jobs are being devastated by trade from low wage labor countries.
To be GATT legal and pass WTO muster, the Stimulus Bill, instead of requiring US content, should instead require that all products that are paid for by any benefit of the Stimulus Bill, be certified by their sellers (US manufacturers, importers, wholesellers, retailers, et cetera), that X percent (say 50%, 70%, 90% or whatever) of the labor hour content of their products consisted of labor content that was paid for at Y percent (say 100%, 120%, 150%, 200% or whatever) of the US federal minimum wage base. This can further be fine tuned by product sectors (GATT categories or other product category method) and allocated different wage factor multipliers (but administration and compliance tracking costs may increase.
Such a wage-content criteria should be GATT legal and pass WTO muster because it would not be based on geography, would not be based on domestic versus foreign content, would not be based on tax or customs factors, would not be based on import export distinctions, and so bypass the common tests as to prohibited "domestic preference" laws.
Such a provision would eliminate the labor benefit of low wage countries and be a disincentive to sourcing products from low wage countries. Products from high wage countries would not be affected and they would not be affronted – such products have their own cost disadvantages (such as freight) making them economically non-competitive in the US. Marginally lower wage countries may be benefited by manufacturers incentive to boost their wages to US federal standards.
If lower wage countries were to retaliate by enacting mirror wording, that will be toothless.
Since higher wage countries are not affected, they have no "retaliatory incentive" to enact mirror wording; however it is true that some may be "inspired" to enact similar wording to protect themselves from lower wage countries.
The problem of "Phantom GDP" where labor content is outsourced to low wage countries and a hollowed out GDP statistic is substituted would also be reduced.
> jack
We need to crank up our American entrepreneurial engine, reinvigorate our engineering, applied science, skilled manufacturing base and again produce things that we and the world need. There is a mother lode of opportunity presented by peak oil and the transition from a debt/consumption oriented society to a conservation/sustainab... oriented one. I have no doubt that transition is coming, because it is an absolute necessity.
As long as cheap stuff comes at the price of exploitation of labor and trashing of the environment, regardless of where these things may occur, cheap stuff is really no bargain.
quote*Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China. *end quote!
Now! if there be 182 country’s making items for the world to buy and they have only 5% of the pie in China…duh! This company makes the nice people of China support their currency(yuan) by keeping it in their country working for the people there…. but with the “yuan” going up in value and the US dollar going down…all the foreign items that the American consumer buys thinking it is cheap has went up in price.
People…its all about the currency and to keep a currency strong you got to keep it floating around the country you live in so it can work for you. For the past 12 years all them US dollars are being shipped overseas to a foreign bank and with the American worker not making anything for the foreigner to buy the “we the people” have to turn to the “second” largest employer in America(Uncle Sam) to sell “we the people” debt in order to get all them dollars back!
50 years ago a foreigner would had given their left nut for a US dollar or a Hershey’s chocolate bar and today the same foreigner has got Uncle Sam and the American consumer by both all the while Hershey is moving the chocolate factory to Mexico. Wake up! America and think “MADE IN AMERICA.”
quote*”Considering that there are over 30,000 ships at sea this morning,” writes James Carlton, director of the Williams College-Mystic Seaport Maritime Studies Program, in an e-mail, “the total number of organisms and species in this global ‘bioflow’ on the morning your readers read your piece could be staggering - billions of individuals, and thousands of species.”
Indeed, scientists have long considered ballast water the primary way invasive aquatic organisms are introduced. From the zebra mussel’s arrival in the Great Lakes, to an American jellyfish severely disrupting Black Sea fisheries, the potential costs of accidental introduction of a species to new homes can be tremendous. Aquatic invasives cost the US $9 billion yearly, according to estimates by David Pimentel, professor emeritus of ecology and evolutionary biology at Cornell University in Ithaca, N.Y. Zebra and quagga mussels (a cousin to the zebra) alone cost the $1 billion annually.*end quote!
tat is $9 billion a year in hidden taxes to all Americans…
cheap ain’t chic and it cost America…………jobs!
“Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what’s in the best interests, and we should make sure that trade is not only free, but fair too.”
www.worldthinktank.net...
and when it comes to all them ther turnips in D. C. ….they all need to red…oops! read George Washington’s farewell address after only eight years of serving his country…
Retail makes nothing! ….and until the American people get off their lazy @ss and start to demand…”made in America”….all the retail jobs will be sitting in a foreign land.
The dang government makes only debt…like all it knows is spend…spend…spend. The turnips ain’t never past a dang “saving” bill. They go up on tat big hill and play banker with my dang tax dollars and every dang one of them is one sandwich short of a picnic when it comes to balancing their dang check book.
National Debt from 1776 to 1910 wus only $2.6 billion and tat wus without a income tax. After the stiff-shirt “my sh!! don’t stink” bankers met in 1910 at Jekyll Island tat debt wus put in high gear in 1913 and even with a income tax and now a tax for every dang thig a person touches…even the air he/she breaths tat debt has mushroom to over $10 trillion in 2008.
Now….we the people in the past 7 months has taken on another $1 trillion and tat person in tat big white house is saying the car is going to slow…well…maybe he needs to get out of the dang thig and walk.
dailybail.com/home/the...?
And with America being over $57 trillion in debt….a little walking wouldn’t hurt them either. People….it ain’t no place in the Constitution tat states the government is suppose to take care of you….not one dang sentence. The word “cheap” ain’t no place to be found either. If you don’t buy American made…you don’t have jobs cause RETAIL makes nothing.
Quit thinking in terms of a jack@ss and elephant….they the ones tat put US in tis mess….think in terms of character, faith in God, love of Country, your State, your town, your family and your dang job. Spend a month…maybe two red…oops! reading Michael Hodges “Grandfather Economic Report” series and learn how the people in government has pull the wool over the eyes of “we the people” for the past 96 years.
“Our constitution was made only for a moral and religious people. It is wholly inadequate for the government of any other.” - John Quincy Adams, 6th President of USA.
“I hope our wisdom will grow with our power, and teach us, that the less we use our power the greater it will be.” - Thomas Jefferson
“No generation has a right to contract debts greater than can be paid off during the course of its own existence.” - George Washington to James Madison 1789.
“support your town…shop around.” - madmilker