View Full Version : The End of Free Trade

29th Jan 2009, 21:02
The death of the WTO, at least for a generation.........

US-EU trade war looms as Barack Obama bill urges 'Buy American' (http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/4389597/US-EU-trade-war-looms-as-Barack-Obama-bill-urges-Buy-American.html)
The prospect of a trade war between the US and Europe is looming after "Buy American" provisions were added to President Barack Obama's $820 billion (573 billion) stimulus package.

The EU trade commissioner vowed to fight back after the bill passed in the House of Representatives late on Wednesday included a ban on most purchases of foreign steel and iron used in infrastructure projects. The Senate's version of the legislation, which will be debated early next week, goes even further, requiring that any projects related to the stimulus use only American-made equipment and goods.

The inclusion of protectionist measures has quickly raised hackles in Europe.
Catherine Ashton, the EU trade commissioner, said: "We are looking at the situation. The one thing we can be absolutely certain about, is if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore."

Despite the parlous state of the US economy, some major American firms, including General Electric, are also opposed to the Buy American stipulations, fearing reprisals from overseas and further damage to the global economy. Bill Lane, government affairs director for Caterpillar, which has just laid off nearly a fifth of its 112,000 work force and is the tenth largest US investor in Britain, warned it was a dangerous step. He said: "We are the first to recognise that if the US embraces Buy American then the whole notion of buying national will mestastasize and limit our ability to take part in overseas projects. We are students of history. A major reason a very deep recession turned into the Great Depression was the fact that countries turned inward."

Countries in Europe and Asia are planning major injections of cash into infrastructure to boost their economies, and US firms don't want to be left out of potentially lucrative contracts. "We would be a primary beneficiary of any type of infrastructure project in the US, but at the same time we are one of the country's largest exporters," he added.

Some industrial giants also question whether the Buy American laws would contravene US obligations reached in various World Trade Organisation agreements. They also point to the 1930s as a lesson in the perils of protectionism. Congress passed the Buy American Act in 1933, allowing the government to favour US products for government contracts. Restrictions were eased in 1982, but the plans currently working their way through Congress would bring the new law close to its forebear of 75 years ago.

Foreign steel would only be allowed if using US steel drove up the cost of a project by more than 25 per cent, while the bill passed on Wednesday required that the Transportation and Security Administration use American-made uniforms. Supporters of Buy American argue that tighter measures are required to protect American jobs and point out that the US steel industry is losing out to Chinese imports subsidised by Beijing. "As we are losing jobs in record numbers, we obviously need to devote these funds to direct creation of American jobs," said Sherrod Brown, a senator from Ohio, part of the struggling industrial heartland.

Unemployment in his state has risen to 7.6 per cent, up from 5.8 per cent in December 2007.

"To do that, we must ensure that federal funds are used to buy American products and to help promote manufacturing in our country. Ultimately I want taxpayers to know where their dollars are being spent. Are they being spent on American products or products coming from Germany or Mexico?"

Mr Obama has sent mixed signals on free trade throughout his campaign and the early days of his presidency. He has argued that the North American Free Trade should be recalibrated in favour of American workers, but has stressed the need for a co-operative international approach to the economic crisis.

Though fellow Democrats in the house and senate drafted their versions of the stimulus bill, the new president and his advisers had major input and influence over the contents.

The bill failed to win a single Republican vote in the house, despite a major charm offensive by Mr Obama, which included a visit to Congress and an invitation to Congressional leaders to drinks at the White House.

It passed thanks to the Democrats' healthy majority, but the senate bill could see a tougher fight. Each rendering of the bill will be merged at a process known as conference, before being returned to both chambers for a new vote. The president has asked that a final bill be presented to him by February 13.

29th Jan 2009, 21:12
Well, President Obama's honeymoon with Europe didn't last long.

29th Jan 2009, 21:15
Well, President Obama's honeymoon with Europe didn't last long.

Well it was good while he kept Robert Peston off the small screen...

Metro man
30th Jan 2009, 04:13
They will harp on about free trade and competition for as long as it is in their interest. When their own industries can't compete in the system they have been preaching to the rest of the world, different matter.

Unsubsidised US industrial sector (one that doesn't have the resources to buy votes in Washington) competing with subsidised foreign competition, how terrible, how unfair.

Subsidised US agricultural products, bailed out car industry competing with private foreign companies, different matter.

They whine on about government support for AIRBUS, but what state would Boeing be in without those padded out military contracts ?

Health care system an unaffordable mess due to the lobbying power of the American Medical Association and insurance companies.

I buy American products when they offer quality and value for money. I value my freedom to choose and don't want restrictions on buying American because they are restricting choice at home.

Let their companies stand on their own feet giving quality, value and service. If they can't then let someone else do it.

Do they really want an American British Leyland losing billions of taxpayer dollars to produce inferior cars ?

Roger Sofarover
30th Jan 2009, 04:54
This year the whole financial situation is going to get very very bad. We aint seen nothing yet. If you have any money then stick it under your mattress!

Loose rivets
30th Jan 2009, 05:00
It's very hard to buy anything here in Texas that's not made in China...the kind of things I buy, anyway. So much of it is absolute [email protected] I have a feeling that this is what the Americans are worried about, not European stuff.

Mind you, the sale of MB and BMW kit here is fairly high, but nothing like the proportion back home.

China has been buying metal from America for years. The price of scrap has rocketed. Electrical wiring is being stolen from unfinished houses...to be sold to dealers who sell it to China. Meanwhile, China buys the mining rights to a 'copper mountain' in South America and the final product cost them $400 / tonne. The market price when I heard this a while back, was $8,000 / tonne. A nifty move.

I know this is off topic really, but it's all part of the madness. I once watched a British 'politician' answer a question from a member of a t/v audience. It was about taking cloth to the far east to be sewn, then flown home to be sold. "That's commerce." the prat replied, almost in passing, waving his hand dismissively at the young questioner. Crazy :mad: irresponsibility. There are thousands of reasons why this shouldn't be happening, and many of them are on the dole. It's the same here. If Obama is able to make a change without offending the Europeans, then that would be good. Well, good luck with that one, as they say.

30th Jan 2009, 05:04
Protectionism is myopic and will not solve the problem :=

Further it is very dangerous.

Let's hope that the newly elected Leader of the free world is exactly that and not one to pander to domestic short term pressure - oh but hasn't he already done this re the automotive industry :suspect:

henry crun
30th Jan 2009, 06:02
Free trade is a joke, very few countries practise it unless it suits the conditions they are experiencing at any particular time.

Europe has nothing to crow about when it comes to free trade, they have just, or are about to, re-introduce export subsidies on milk/butter/diary products.

30th Jan 2009, 07:45
Couple of thoughts here:

a) Think of Washington post-inauguration (in this instance) as a sort of very large Greek Wedding Bash. Party has been running for a week and some, the booze is still flowing but unsteadiness creeps into the gait of certain revelers, and there might be a fight or two in the parking area... festivities to continue for awhile, but reality slowwwly beginning to impinge on the revelers as their pockets empty and livers go into coma.

b) Sometimes the House of Representatives (earnest souls they are, and many) is more inclined to vote for popular wants and needs than for unpopular realities and pragmacalities. This helps the older-wiser (and less numerous) folks in the Senate feel useful and stately, because it gives them the chance to "do the right thing" by passing legislation on the same subject that bears little or no resemblance to what the House has noisily ratified inbetween courses of "When the Saints Go Marching In".

c) When this sort of impasse develops between the Houses of Congress (seems to happen about 98.9 percent of the time) there is no actual result in law... just some very fine posturing and position-taking and an implicit reminder to lobbyists and supporters to bring nice candy when they come calling.

d) With Congress going off in two non-converging directions, the Executive (President) gets to spout off at length about Unity and Purpose and Necessity and Flag things so as to appear to be accomplishing something.

e) the Moles take over. They are the secret nervous system of the political side of US Government-Washington-style. They are staffers, wives, mistresses, barkeeps, nannies, pool-boys, administrative assistants, lobbyists, "old hands", sports stars, titans of industry and certain schizophrenic journalists who dare to play fast and loose in the wrong "estate". What the Moles do is compare and contrast the House, Senate and Administration positions on a bill, take some input from the real world, and determine how to craft a workable compromise. The beauty of this system is that the politicians are able to appear to do exactly what pleases their supporters of the moment (very important for those who want to be elected another time) while the Moles actually grapple with the realities of push and pull and devise a compromise sufficient to elicit a consensus of votes in both houses of Congress AND the Exec's office as well.

f) Staffers in House and Senate take inspired input in an immaculate manner (see Vestal Virgins, Ancient Rome, for elaboration). They "confer" with leaves and entrails and settle on language changes for revised House and Senate Bills which are more similar (per Mole guidance) and yet still not totally objectionable.

g) iterate b thru f until House, Senate, and Prexy agree on same language. Pass it in relative quiet. Sign it, make it law. The confusion about the much-discussed precursor versions and the little-discussed final bill leaves nearly everybody in the voting public thinking their needs have been addressed - but seldom is that true in the sence of the frothy exaggerations the Press broadcasts for popular consumption.

Bottom Line:

US over 09-10 will pull in oars some to support the appearance of creating domestic jobs. When that doesn't work particularly well in specific categories, ("PUSHBACK" is the golden epithet) free-traders will reassert themselves & return the course to a modified but substantially similar "open trade" policy - (excepting in near-perpetuity things that adversely affect Pennsylvania and Michigan).


Everyone will work much, much harder to accomplish similar and lesser results in trade and commerce.

30th Jan 2009, 09:00
probably very sage advice.

Sure free trade is difficult to achieve. However it is the course to steer despite the hypocrisy.

30th Jan 2009, 09:05
It's a smack in the eye for the world's 'leading economist' in Downing St. didn't he ban that sort of thing! := :}

30th Jan 2009, 12:59
This is probably the Law of Unintended Consequences kicking in. As I said in another post; this part of the 21st century may well be known as the "Oh Bummer" years.

Whiskey Oscar Golf
30th Jan 2009, 13:34
The idea of free markets is a crock as others have already pointed out. Euro/U.S./Nippon agricultural industries have been subsidised on a constant basis even after the WFTA. It is hypocritical to suggest we have free markets and Australians have borne the brunt of this for a fair while, given our strong agricultural production. We get hammered by foreign products that are protected in more and more subtle ways and have cost more to produce yet somehow end up cheaper at market.

While I am not an economist and don't fully understand the consequences of overt protectionism I think the main people who will suffer are the weaker, cheaper producers ie: third world, or developing nations as we like to call them now. If Obama thinks this will help reclaim the U.S. status as a producer of quality goods then he has to begin domestically. I also think giving rebuilding money to other countries rips off his own constituents. He deserves a fair go when he's spending other peoples money.

One thing I'd like to see is products that are made to last. These days when I want to buy my standard lawn mower I get a choice of a $200.00 Chinese replica or a $250.00 Korean replica. I went to my local fix it man and got an old school cast iron head non disposable Aussie built one that will no doubt last more than 2 years. That is what developed countries producers should look at in their products, quality and reliability. While the price consumers may reject it the loyalty is stronger in customers who buy quality. Something that seems to be lacking in our advertising saturated world.

Sorry for the verbosity but I've always thought free trade was a joke. That and quality consumerism.

30th Jan 2009, 13:45
could someone please explain........

" whole notion of buying national will mestastasize "

30th Jan 2009, 14:33
What happens if only domestic airlines are allowed to operate?

30th Jan 2009, 16:06
could someone please explain........

" whole notion of buying national will mestastasize "

Think he means it will spread to other countries, they may do likewise.

30th Jan 2009, 16:31
All Empire seeks to expand. Wars are fought over allowing or preventing expansion.

As any politician will tell you, Power is local. Influence is global. "Free" trade is the goal of the descendants of those whose motives were less than admirable. Any attempt to locate Power away from its source is an attempt to steal sovereignty from the source of wealth, the people (small business, actually). The larger the entity, the more elaborate and superficial the Code (Law). This fits right in with "regulation" (sic), the entity appoints its own "police".

As nature differentiates, the less honest of we humans pushes "Homogenization".

Any politician, again, will tell us that given a choice, influence trumps power.

The "Power" ? Barack, Gordon, Tony, et al.

The "Influence" ? The ones whispering into the ears of (above).

The UN? EU? NAFTA ? Merely the "chronic" stage of the "acute" stage of warfare. And there ARE casualties: the "downside" of "peace-keeping".

30th Jan 2009, 16:53
Despite the parlous state of the US economy, some major American firms, including General Electric, are also opposed to the Buy American stipulations, fearing reprisals from overseas and further damage to the global economy. Bill Lane, government affairs director for Caterpillar, which has just laid off nearly a fifth of its 112,000 work force and is the tenth largest US investor in Britain, warned it was a dangerous step. He said: "We are the first to recognise that if the US embraces Buy American then the whole notion of buying national will mestastasize and limit our ability to take part in overseas projects. We are students of history. A major reason a very deep recession turned into the Great Depression was the fact that countries turned inward." It's the last sentence that grinds, just a little bit: "...countries turned inward." Let me get it straight. For decades, these multinationals had no fear in offshoring production to wherever it was convenient. For decades, these same multinationals also established multiple offshore operating companies or 'profit centres' for want of a better term to explain maintaining paying less taxes in their home countries...?!

Suddenly ostensibly, they're faced with what some call 'protectionism' or 'national preference'. The reality is that these multinationals 'past successes' have mainly relied on their opportunities to run rings around most of the national tax regimes in the markets they operate within.

So it's a real crunch time for them at the present I imagine. Whether it's American, UK, European, Asian or whatever governments that have today established programmes in order to safeguard jobs etc., how can these same multinationals reasonably argue that because the US taxpayer won't subsidise their operations in some other country...automatically means that 'protectionism' is becoming increasingly prevalent? Caterpillar and the rest were perfectly aware of the practical consequences ever since they offshored their very 1st manufacturing facility. Is Caterpillar truly still just an American company? If they're seeking government loans, shouldn't they be widening the countries to which they address these requests...?!

In theory, the answer should be practical and envisagable: the managers would sell off all the manufacturing know-how and whatnot to a Chinese investor immediately after touching the 1st bailout funds - shareholders be buggered...?! :uhoh:

30th Jan 2009, 17:13
It is my belief that much of the TARP "money" is being used to pump and dump the American exchanges. As any penny trader knows, when you buy, buy "big", the price climbs and you sell, with a profit, depending on your nerve. These 200, 300, point fluctuations are preceded with a "pump" of taxpayer money, and then a dump of "profit" into the arms of the "broker" who made the play. My guess is that the actual "value" of the DJ is around 2500. The rest is Helium.

Want to take your money to a place where your presence is valued? Where you can have fun, with complete freedom to risk or recoup? Where the "money" is kept on the premises, is available at a moment's notice and all plays can be learnt (riskwise) by reading a brochure for 5 seconds?

Las Vegas beckons.