US trading partners complain about Protectionism

America's largest trading partners are warning that protectionist moves by Congress could poison global trade relations, despite President Barack Obama's assurances that he wants to keep U.S. markets open.

Businesses in the European Union and Canada complain they have been shut out of U.S. markets because of the "Buy American" provision in the massive stimulus bill, passed in February, which requires the use of U.S.-manufactured products.

EU and Canadian officials worry the practice is widening, as Congress is considering adding similar measures to other spending bills.

Buy American supporters want to make sure that the billions of U.S. taxpayer dollars being spent to revive the economy create jobs at home. The U.S. unemployment rate is at its highest level in 25 years.

Many U.S. exporters fear the provisions will backfire, costing American jobs as other countries retaliate. Some municipalities in Canada have begun organizing boycotts of U.S. products, and EU and Canadian officials say they are reviewing their options.

The Obama administration is looking for ways to reassure trading partners as it prepares to detail its trade policy in coming weeks.

Though much of the trading partners' ire is aimed at Congress, there also is uncertainty about Obama's commitment to free trade. As a candidate seeking support from working-class voters, Obama had criticized some U.S. trade agreements.

The EU Commission's ambassador to Washington, John Bruton, said he would like to see the White House take a harder line with Congress on the issue.

"My concern is increasing because we are seeing protectionist measures being introduced under the guise of other measures," Bruton told The Associated Press. "I think it is something that arose from the presidential and congressional election. We saw heated election rhetoric, and I suppose that that is now reflected in Congress."

The Obama administration says it is committed to keeping the U.S. market open but has limited influence over Congress.

"We will continue to work closely with Congress to craft and implement the best trade policy possible," said Carol Guthrie, a spokeswoman for the U.S. trade representative, Ron Kirk. "President Obama has been very clear about the United States' commitment not to turn inward."

The Buy American provision in the stimulus bill favored U.S. steel, iron and manufactured goods for government projects financed by the bill. Obama negotiated a softening of the bill to ensure that trade agreements would not be violated.

However, the trading partners say that even without violating agreements, such legislation could spark tit-for-tat retaliation that could poison global trade relations and lead to rising protectionism. They argue that the United States, which has the world's largest economy, must lead the world out of its current economic troubles. They point to the role that protectionism played in deepening the Great Depression in the 1930s.

Canadian Industry Minister Tony Clement urged the United States to reverse Buy American during a trip to Washington last month and warned of repercussions for American businesses.

"If this continues, it's going to be injurious to us, but it's also going to be injurious to them," Clement said.

In response to the Buy American policy, Canadian mayors passed a nonbinding resolution Saturday that could shut out U.S. bidders from city contracts. Two weeks ago Ontario's city council passed a policy that prohibits American bids on local work after companies complained they were being shut out of American markets.

Bruton said he worries that Buy American is spreading. He cited bills being considered on improving water quality and improving environmental efficiency in public schools that would also favor U.S. companies.

"There is a real sense that this approach has now become the default position," he said.

Of course, the United States is not alone in seeking to protect its manufacturing industries. Tension has emerged recently within the EU as some countries have sought to bail out companies and guarantee local jobs.

In the United States, the Buy American provisions are supported by labor groups that have long been among the most important constituencies for Democrats, who control both chambers of Congress as well as the White House.

The Democratic lawmaker behind the Buy American provision in the schools bill, Rep. Pete Visclosky of Indiana, said it will be a big boost to U.S. steelworkers, whose industry has been hard hit.

"We must do everything possible to ensure that American taxpayer dollars are going to build American schools with American steel," Visclosky said in a statement he issued after the bill passed the House last month.

Some U.S. companies say they have been hurt by Buy American requirements. They say their foreign subsidiaries are unable to bid on projects, and confusion over what counts as a foreign-manufactured product has prevented some U.S.-based units from winning contracts.

"Good companies are hesitant to bid," said Dawn Champney, president of the Water and Wastewater Equipment Manufacturers Association, a Washington-based industry group. "Buy American has had a completely stifling impact for our market so far."

She added that many of the export companies she represents are cautious about expanding their payrolls because they fear impending retaliation by foreign governments.

By DESMOND BUTLER - Associated Press Writer

Posted – Knowledge Creates Power

Poverty of Imagination

Venturing out each day into this land of strip malls, freeways, office parks, and McHousing pods, one can’t help but be impressed at how America looks the same as it did a few years ago, while seemingly overnight we have become another country. All the old mechanisms that enabled our way of life are broken, especially endless revolving credit, at every level, from household to business to the banks to the U.S. Treasury.

Peak energy has combined with the diminishing returns of over-investments in complexity to pull the “kill switch” on our vaunted “way of life” — the set of arrangements that we won’t apologize for or negotiate. So, the big question before the nation is: do we try to re-start the whole smoking, creaking hopeless, futureless machine? Or do we start behaving differently?

The attempted re-start of revolving debt consumerism is an exercise in futility. We’ve reached the limit of being able to create additional debt at any level without causing further damage, additional distortions, and new perversities of economy (and of society, too). We can’t raise credit card ceilings for people with no ability make monthly payments. We can’t promote more mortgages for people with no income. We can’t crank up a home-building industry with our massive inventory of unsold, and over-priced houses built in the wrong places. We can’t ramp back up the blue light special shopping fiesta. We can’t return to the heyday of Happy Motoring, no matter how many bridges we fix or how many additional ring highways we build around our already-overblown and over-sprawled metroplexes. Mostly, we can’t return to the now-complete “growth” cycle of “economic expansion.” We’re done with all that. History is done with our doing that, for now.

So far — after two weeks in office — the Obama team seems bent on a campaign to sustain the unsustainable at all costs, to attempt to do all the impossible things listed above. Mr. Obama is not the only one, of course, who is invoking the quest for renewed “growth.” This is a tragic error in collective thinking. What we really face is a comprehensive contraction in our activities, especially the scale of our activities, and the pressing need to readjust the systems of everyday life to a level of decreased complexity.

For instance, the myth that we can become “energy independent” and yet remain car-dependent is absurd. In terms of liquid fuels, we’re simply trapped. We import two-thirds of the oil we use and there is absolutely no chance that drill-drill-drilling (or any other scheme) will change that. The public and our leaders cannot face the reality of this. The great wish for “alternative” liquid fuels (bio fuels, algae excreta) will never be anything more than a wish at the scales required, and the parallel wish to keep all our cars running by other means — hydrogen fuel cells, electric motors — is equally idle and foolish. We cannot face the mandate of reality, which is to do everything possible to make our living places walkable, and connect them with public transit. The stimulus bills in congress clearly illustrate our failure to understand the situation.

The attempt to restart “consumerism” will be equally disappointing. It was a manifestation of the short peak energy decades of history, and now that we’re past peak energy, it’s over. That seventy percent of the economy is over, especially the part that allowed people to buy stuff with no money. From now on people will have to buy stuff with money they earn and save, and they will be buying a lot less stuff. For a while, a lot of stuff will circulate through the yard sales and Craigslist, and some resourceful people will get busy fixing broken stuff that still has value. But the other infrastructure of shopping is toast, especially the malls, the strip malls, the real estate investment trusts that own it all, many of the banks that lent money to the REITs, the chain-stores and chain eateries, of course, and, alas, the non-chain mom-and-pop boutiques in these highway-oriented venues.

Washington is evidently seized by panic right now. I don’t know anyone who works in the White House, but I must suppose that they have learned in two weeks that these systems are absolutely tanking, that the previous way of life that everybody was so set on not apologizing for has reached the end of the line. We seem to be learning a new and interesting lesson: that even a team that promises change is actually petrified of too much change, especially change that they can’t really control.

The argument about “change” during the election was sufficiently vague that no one was really challenged to articulate a future that wasn’t, materially, more-of-the-same. I suppose the Obama team may have thought they would only administer it differently than the Bush team — but basically life in the USA would continue being about all those trips to the mall, and the cubicle jobs to support that, and the family safaris to visit Grandma in Lansing, and the vacations at Sea World, and Skipper’s $20,000 college loan, and Dad’s yearly junket to Las Vegas, and refinancing the house, and rolling over this loan and that loan... and that has all led to a very dead end in a dark place.

If this nation wants to survive without an intense political convulsion, there’s a lot we can do, but none of it is being voiced in any corner of Washington at this time. We have to get off of petro-agriculture and grow our food locally, at a smaller scale, with more people working on it and fewer machines. This is an enormous project, which implies change in everything from property allocation to farming methods to new social relations. But if we don’t focus on it right away, a lot of Americans will end up starving, and rather soon. We have to rebuild the railroad system in the U.S., and electrify it, and make it every bit as good as the system we once had that was the envy of the world. If we don’t get started on this right away, we’re screwed. We will have tremendous trouble moving people and goods around this continent-sized nation. We have to reactivate our small towns and cities because the metroplexes are going to fail at their current scale of operation. We have to prepare for manufacturing at a much smaller (and local) scale than the scale represented by General Motors.

The political theater of the moment in Washington is not focused on any of this, but on the illusion that we can find new ways of keeping the old ways going. Many observers have noted lately how passive the American public is in the face of their dreadful accelerating losses. It’s a tragic mistake to tell them that they can have it all back again. We’ll see a striking illustration of “phase change” as the public mood goes from cow-like incomprehension to grizzly bear-like rage. Not only will they discover the impossibility of getting back to where they were, but they will see the panicked actions of Washington drive what remains of our capital resources down a rat hole.

A consensus is firming up on each side of the “stimulus” question, largely along party lines — simply those who are for it and those who are against it, mostly by degrees. Nobody in either party — including supposed independents such as Bernie Sanders or John McCain, not to mention President Obama — has a position for directing public resources and effort at any of the things I mentioned above: future food security, future travel-and-transport security, or the future security of livable, walkable dwelling places based on local networks of economic interdependency. This striking poverty of imagination may lead to change that will tear the nation to pieces.

Regards,
James Howard Kunstler

Some of you may be familiar with Neil Lori of Maverick Freedom. Neil sends these thoughts in his latest missive…

“On the domestic front I think Dmitry Orlov and Jim Kunstler are two of the clearest thinking [and] common sense writers of this time period.  The Obama Nation is about to do what I detest which is build more Roads Roads Roads when in reality we need the 3 T’s (trains, tracks and trolleys) at breakneck speed. 

“Kunstler is right on about food: we need it local and less mechanized (more hand labor).  So let us put on our work jeans, tee shirts, belts hats and gloves to do some real work.  Ditch the couch, tv and computer.  Obama’s highway construction is money down the “rat hole” (drain). 

“Geez I thought Obama had a high IQ, but his biggest failure is that he thinks inside the box and is a bit too much of a conformist who wants to keep the economy the way it has been most of his and our lives!!!!!!!!!”

He continues later…

“We need local farms, local factories and local economies.  The global village is for idiots.  No more globaloney.  Buy Amercian. Grow American.  Make it in America.”

I would venture to say that the things you eat and use will be fabricated or grown not just within the nation, but very, very near to where you live. No more trucking meat and vegetables from industrial mega-farms on the other side of the continent, and a lot fewer doodads from China.

Some of you Shooters may take issue with anyone trying to direct us toward this outcome, and I don’t blame you. I would take issue with any bureaucratic direction myself.

It’s the market, however, that will be directing these changes. Business as usual for the past couple hundred years has been a result of an energy boom and state meddling. Both are on the wane.

Regards,
Gary Gibson
Managing Editor, Whiskey & Gunpowder

'Buy American' -- or Bye-Bye America

by  Patrick J. Buchanan

"British jobs for British workers!" thundered Gordon Brown, as he emerged from the shadow of Tony Blair to become prime minister.

His populist sloganeering has now come back to bite him.

Across Britain, thousands laid down tools in wildcat strikes in solidarity with a walkout from a French-owned oil refinery in North Killinghome -- to protest a $300 million contract to an Italian company that plans to bring in 400 Italian and Portuguese workers to fulfill it.

As Brown pleaded from the World Economic Forum in Davos, Switzerland, that Britain must not retreat into "protectionism," strikes spread to Scotland, Wales and Ulster.

Britain's commitment to let foreigners buy up its utilities and industries and bring in foreign workers to run them has backfired. Brown's own Labor Party is now angrily demanding that he live up to his pledge: British jobs for British workers.

"The Return of Economic Nationalism," wails the alarmed cover of The Economist. And understandably so.

For the stimulus bills of both Houses have a "Buy American" provision mandating that in "public works" only U.S. iron, steel and manufactures be used. The provision came out of the appropriations committee of the House on a 55-to-0 vote.

The Senate watered it down by declaring the Buy American provision must be consistent with all U.S. trade commitments. But Congress is sending a message: The rebuilding of America is to be a project of, by and for Americans, not outsourced. Sen. McCain's free-trade amendment, to strip all Buy American provisions from the bill, was routed 65 to 31

The reaction of Barack Obama, a NAFTA skeptic in 2008 with bumper stickers that read, "Buy American, Vote Obama," was to genuflect to the gods of globalism and recant his economic patriotism.

"I think it would be a mistake ... at a time when worldwide trade is declining, for the United States to start sending a message that somehow we're just looking out after ourselves," he told Fox News. We don't want to "trigger a trade war," he told ABC.

Apparently, Obama was unnerved by rumbles from Europe, which is threatening to drag us before a World Trade Organization tribunal and have "Buy American" banished forever.

But there is no easy way out now for a Democratic Party where economic nationalism is rampant. If Congress drops or Obama refuses to enforce the Buy American provision, and billions of stimulus dollars are spent on foreign iron, steel and cement, Middle America will know whom to blame. But if Americans get the contracts, and Europeans get nothing, Europe will have to decide whether to retaliate and start a trade war with a populist and nationalist America.

We may be at a turning point in history. For we are about to choose whether to fully and finally cast our lot with globalism, or to become again a nation and people who put Americans first.

We are about to decide, perhaps for all time, whether we believe in a deepening interdependence leading to one world government, or we restore the independence won for us by the men on Mount Rushmore: Washington, Jefferson, Lincoln and Theodore Roosevelt.

All four were economic nationalists. All would today be decried as protectionists. For all believed that the nation's independence and prosperity hung upon its ability to stand alone in the world, and that foreign goods should never enjoy as privileged access to America's markets as American goods made in the U.S.A.

All four put America first. And it was they who created out of 13 rural colonies the greatest manufacturing power in history. Is not their record superior to what Bush-Clinton-Bush left us: a hollowed-out industrial nation dependent on foreigners for the needs of our national life and for the loans to pay for them?

Even John Maynard Keynes came around in 1933 to believe in "national self-sufficiency."

Those who prattle about the perils of protectionism need to be asked: What has free trade produced, but a bankrupt America that must go hat-in-hand to Beijing to borrow the money to rebuild our crumbling infrastructure? Are we also to use Chinese iron, steel and cement because they, with their Third World wages, will work for less than our fellow Americans?

As for Europe's threat of a trade war, bring it on!

We would eat their lunch. As analyst Charles McMillion writes, in eight years of Bush, Canada ran up $500 billion in trade surpluses at our expense, Japan ran up $600 billion, the European Union $800 billion.

These three trading partners, often by imposing value-added taxes on U.S. imports, and rebating those taxes on goods sold here, racked up $1.9 trillion in trade surpluses, sucking jobs, factories and technology out of the United States. These trade deficits, and the even larger ones with China, says Paul Volcker, are behind our present crisis.

America is bust. It is shameful to have to go to China and Japan to borrow the money to rebuild America. But to go to China and Japan and borrow billions, and not spend the money here, makes zero sense.

We have indulged in free trade for a quarter century. And look where it has gotten us.    

Source:  The Daily Thought Pad/Human Events