Buy American

China Mocks U.S. Over Subsidy Investigation

by Brian McGraw on October 18, 2010

in International, Trade

An update to Friday’s post:

Bloomberg (and the The New York Times) reported this weekend on China’s response to U.S. accusations over Chinese green energy subsidies. Zhang Guobao, a top energy official in China, directed a number of blunt comments towards the Obama administration:

Should the Americans pursue the subsidy issue with the World Trade Organization, Mr. Zhang said, “the only ones who will be humiliated are themselves.”

“What America is blaming us for is exactly what they do themselves,” Mr. Zhang said. “Chinese subsidies to new energy companies are much smaller than those of the U.S. government. If the U.S. government can subsidize companies, then why can’t we?”

Mr. Zhang accused American trade officials of repeatedly delaying talks over the same issues that the White House now wanted to investigate and suggested the administration was playing election season politics.

Mr. Zhang called the Steelworkers’ complaint unfounded, saying the Obama administration had proposed subsidies totaling $60 billion for clean energy industries, adding that the American government had placed domestic-content provisions — so-called Buy American clauses — on certain clean energy products.

“I have been thinking: What do the Americans want?” said Mr. Zhang, the vice chairman of the government’s National Development and Reform Commission. “Do they want fair trade? Or an earnest dialogue? Or transparent information? I don’t think they want any of this. I think more likely, the Americans just want votes.”

He makes a number of very obvious points: this case is likely without merit as the U.S. heavily subsidizes our domestic green energy industry, and that the Obama administration is misdirecting U.S. anger over the economy towards China.

The New York Times also published this weekend a China bashing op-ed by Senator Sherrod Brown (D-Ohio). Senator Brown, no stranger to criticizing U.S. trade policy, has written a book — Myths of Free Trade — covering it. Departing from the almost universal consensus of economists across the political spectrum, Brown argues that no one outside of rich investors benefit from what he calls “unregulated trade” and that  free trade has led to global economic stagnation. Despite what the Times might tell you, denying reality is a time-honored tradition shared by politicians across the political spectrum.

Regulation of the Day 36: Buying American

by Ryan Young on August 20, 2009

in Deregulate to Stimulate, Economy, Regulation, Regulation of the Day, Stimulus to Nowhere, Trade

The $787,000,000,000 stimulus contains a provision requiring the Department of Homeland Security to buy US-made textiles. Basically, that means TSA uniforms will go up in price.

Let’s look at the logic behind this. If DHS would just pay more money for the same product, leaving less money left over for purchasing other goods, we can stimulate the economy. Jobs will be created or saved.

Amazing that some people still think that restricting trade and voluntarily paying higher prices will increase prosperity.

“Millions of jobs are at stake on both sides of the border”

by Marc Scribner on August 10, 2009

in Deregulate to Stimulate, Economy, International, Trade

So says British Columbia Premier Gordon Campbell. At a meeting of Canada’s provincial premiers held in Regina, Saskatchewan, last week, slapping retaliatory tariffs on U.S. goods was barely averted.

Harper and his Trade Minister Stockwell Day scored an important victory Friday when provincial premiers finally agreed not to retaliate. “We’ve made it clear we won’t ask the U.S. for anything we are not willing to give the U.S.,” said British Columbia Premier Gordon Campbell, who attended a meeting of premiers held in Regina, Sask. this week.

For months Canada’s premiers, who are that country’s equivalent of state governors, have spoken out forcefully against the Buy-American clause, which requires that stimulus-financed public works projects use American materials. But until now they have been unable to agree on reciprocity. Since most government procurement happens at the provincial and municipal levels, this lack of consensus has allowed Washington to easily deflect Ottawa’s efforts to secure an exemption from its Buy-American position.

Failure to make a deal on procurement has already cost Canadian companies billions of dollars, and spread pain far beyond the stimulus business. “Buy American has created a trade chill,” says Jayson Myers, president of Canadian Manufacturers & Exporters, the country’s largest trade and industry association, noting some U.S. companies are dropping Canadian suppliers to avoid filing waivers that prove they are playing by the new rules.

While a trade war with Canada doesn’t seem to be on the immediate horizon, Canadians are rightfully upset by the Obama administration’s and Congress’s belligerent and idiotic trade agenda. This week, President Obama is meeting with Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon in Guadalajara to discuss the future of North American relations. Unfortunately, the press and most observers are already declaring the chances of progress on trilateral trade dead on arrival.

As the global recession drags on, expect more outrage from the United States’ global trade partners. CEI’s Ryan Young mentioned a few potential future trade flashpoints in a post this morning. For a good crash course on the absurdity of “Buy American,” see Reason.tv’s short video, Is Your iPod Unpatriotic?, which brilliantly debunks the tired, baseless claims of protectionists.

No “hysteria” about trade — just some facts

by Fran Smith on March 19, 2009

in Odds & Ends

I admire Dan Ikenson’s work on trade issues at Cato. Usually I agree with his views. A notable exception is his post yesterday on Cato’s blog – “Too much hysteria about trade.”

No, Dan wasn’t hitting the current climate of China-bashing or the Teamsters’ on-going campaign against Mexican trucking and NAFTA or the “Buy American” provisions in the stimulus bill. Dan instead was taking to task newspapers like the Washington Post that have been warning readers about the rising tide of protectionism in this world economic downturn.

He writes:

The fact of the matter is that there isn’t any discernible trend toward protectionism in the United States or in the world right now. World leaders issue warnings about the consequences of protectionism, but there are not trends. There are incidences, but no trends.

He uses now-US Trade Representative Ron Kirk’s Senate testimony as evidence of the Obama Administration’s support for open trade and for enforcement of trade rules.

I beg to differ. Kirk’s testimony, of course, reiterates President Obama’s Trade Agenda, which, while including some good rhetoric about the importance of open trade, strongly endorses the need to focus on non-trade issues in trade agreements, such as those involving labor and the environment. Here’s what Kirk said:

I respectfully submit that two strong steps toward restoring domestic confidence in open markets are a real and renewed commitment to enforcement of our trade rules, including those addressing labor and the environment,

And –

. . . to ensure that the way we promote trade reflects our country’s values about economic progress and justice, including through the advancement of internationally recognized labor and environmental standards.

Such issues, as Jagdish Bhagwati has often written, really act as non-tariff trade barriers and force poorer countries to adopt our regulatory schemes in these areas (to “level the playing field”) even when they don’t have the resources.

Dan may not realize that U.S. policymakers such as the Energy Department Secretary and others are seriously considering imposing carbon tariffs on countries (read China and India) that aren’t taking appropriate steps to restrict carbon emissions. Again, that would be a good way to level the playing field and improve U.S. competitiveness. Not protectionism?

Food safety is another area where protectionism may rear its ugly head under the guise of protecting consumers but actually setting detailed standards that may rely more on procedures than the safety of the end product. A bill recently introduced in the House could easily be used to block foreign competition.

And let’s not forget the stimulus package and the infamous “Buy American” provisions, which mandate that any company receiving government funding has to use “made in America” goods, such as iron and steel. The stimulus legislation also restricts companies receiving bailout funds from hiring foreign workers and restricts those firms receiving Trouble Assets Relief Program (TARP) funds from hiring foreign nationals holding H-1B visas unless they can prove they could not hire U.S. citizens instead.

The Obama Team’s emphasis on enforcement issues seems benign to Dan. But take a look at what Rep. Sander Levin, head of the trade subcommittee of the House Ways and Means Committee is cooking up on trade enforcement. Besides promising lots more WTO complaints, the legislative plan is to put back in place provisions on U.S. antidumping and countervailing duties that were changed under President Bush because they weren’t WTO-compliant. But don’t interpret that as protectionism, Levin was quoted as saying, since its purpose is to “enforce the rule of law and the openness of markets.”

“Hysteria” about trade protectionism?  Think it’s not coming from the media, Dan, but from trade protectionists.

More protectionism on the horizon?

by Fran Smith on February 20, 2009

in Economy, International, Trade

Good article today by Bloomberg columnist Michael Sesit, who lays out the protectionist actions many countries are taking in the midst of the worldwide economic slump and warns that accelerated trade protectionism would plunge the world into a depression.

Unless governments get serious about arresting the trend soon, the chatter about 2009 morphing into a replay of the Great Depression will become a self-fulfilling prophesy. The U.S. Smoot-Hawley Tariff Act of 1930 increased duties on more than 20,000 goods, inviting retaliation by other countries. Within two years of the law’s enactment, global trade declined 70 percent.

One of the signs of increased protectionism in the U.S. comes on the tail of the stimulus bill’s “Buy American” provisions, which mandate that public projects funded by the package must use goods, including iron and steel, manufactured in the U.S. Not satisfied with that, now the steel industry wants to protect the rest of its market by increasing tariffs on imported steel. According to today’s Wall Street Journal, expect to see steelmakers file anti-dumping complaints this spring. They’ll have to wait a bit, ‘though, because their profits during the first three-quarters of 2008 were healthy, and one can assume that wouldn’t make a strong case.