Friday, May 15, 2009

Pretectionism Trade Wars Have Begun, Great Depression Deja Vu

The Washington Post reports today that the town of Peru, Ind, was ordered by Congress to "buy American" when spending money from the $787 billion stimulus package. The town "stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto". "After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA."

So what happened next? The Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts -- the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.

The Washington ost article also goes on to explain the case of an american company about to shut down plants and layoff American workers because of the the Buy American provisions. Duferco Farrell Corp. is on the verge of shutting down. With production among multiple nations, it makes coils at its Pennsylvania plant using imported steel slabs that not sold commercially in the US. Therefore the company's coils do not fit the current definition of "made in the USA". Its biggest client, a steel pipemaker located one mile down the road, told Duferco Farrell that it would be canceling orders. Duferco has had to dismiss 80 percent of its workforce.

"You need to tell me how inhibiting business between two companies located one mile apart is going to save American jobs," said Bob Miller, Duferco Farrell's executive vice president. "I've got 600 United Steel Workers out there who are going to lose their jobs because of this. And you tell me this is good for America?"

Stop this! This is the last thing we need.

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