The False Perception of “Free Trade” and “Buy American”

Editor's Note: The word protectionism has become a four letter word with distinclty negative connotations. However, protectionism does not mean closing up U.S. borders to all trade, it simply means that the U.S. has to protect itself from the predatory practices that other countries already have in place through their mercantilist practices.

Although the debate over the “buy American” clause in the $787 billion stimulus package is long over, CBS’s 60 Minutes re-aired a segment from February highlighting the potential effects of the provision on our economy.

Caterpillar CEO Jim Owens told 60 Minute’s Lesley Stahl that the “buy American” clause was certain to spark a trade war that would further drag down the American economy.    

Yet, it has been three months since the stimulus package was passed - with a modified version of the “buy American” clause intact - and there are no signs of an escalating trade war.   

Perhaps this is because the U.S. has been bogged down in a trade war for years now.  Since the implementation of the North American Free Trade Agreement and the era of unfettered “free trade” that agreement brought to America, millions of manufacturing jobs have been lost, factories have been shuttered, America’s trade deficit has exploded, arming our competitors with the means to purchase American assets at-will and America’s population has been put at risk by contaminated imports including food products, pharmaceuticals and children’s toys.  We are in a trade war and we have lost.

"People can say what they want. What we have around the world is a trade war against the United States that we have not showed up for," Dan DiMicco, CEO of Nucor Steel, told Stahl.  Nucor is the largest steel manufacturer in the nation and has achieved that designation by recycling scrap iron and steel rather than using the more expensive iron ore as an input.  

During DiMicco's interview, Stahl labels DiMicco a “protectionist” when all he is doing is demanding that other nations adhere to the agreements and commitments that they signed. The fact is that nations around the world, particularly China, India, and Russia illegally subsidize their steel industries and dump material into the market.  American producers are unable to compete with prices and are driven from the market.   Chinese steel should cost much more than it currently does. China has very few of the resources needed to be a low cost producer of steel, China is one of the world's highest cost steel makers. The region imports virtually all of its iron ore, which is the basic virgin raw material used to make steel.

DiMicco told Stahl that his company, with 18 plants nationwide, is unable to compete with Chinese manufacturers because of illegal trade practices that skew the playing field and make Chinese products cheaper and more attractive.  

"It won't be cheaper from China if it's not dumped and it's not subsidized, okay?  Which are both illegal according to international trading practices. In today's environment, when you're running your operations at 50 percent of capacity, do you really think you're not going to be competitive?" DiMicco said.  

Huge multinational companies such as Caterpillar and General Electric have vigorously fought against any and all legislation that would curtail their overseas profits for years - and the “buy American” clause was no exception.  Owens told Stahl that a “buy American’ clause would simply allow foreign nations to discriminate against American exports and force them to enact their own procurement policies to protect domestic industries.   

Yet, all of those things have been going on in plain sight for a very long time.  The U.S. has had a procurement policy for government-funded projects since 1933.  The law was actually strengthened in 1982.  In addition, the American exports are regularly discriminated against through unfair trade practices such as the VAT tax, arbitrary regulations and other informal barriers.  Finally, nearly every one of America’s existing trading partners already or recently implemented procurement policies of their own to protect their domestic industries. 

The bottom line is, there is no such thing as “free trade,” only the false perception of “free trade” perpetuated by multinational corporations that are more concerned with their bottom line than their country.   “Free trade” is a catchphrase that has allowed foreign entities to do the most mercantilistic self serving practices accompanied with corresponding propaganda effort to destroy our manufacturing base.

"I am a person who says there's no such thing as free trade.  Free trade is an academic luxury the real world doesn't enjoy.  If you want to study it at Harvard, study it at Harvard. It doesn't work in the real world. It has no application,”  DiMicco told Stahl. 

The U.S. must reexamine the reasons why our manufacturing base is allowed to disintegrate at the whims of foreign companies and governments that use destructive principles to render us incompetent and bankrupt.

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