Diary

Obama Administration Set on Igniting Trade War

One of the most odious provisions of Porkulus is the “buy American” provision. I know “buy American” tugs at the heartstrings of a lot of people but it is nothing other than a jingoistic version of the class warfare slogans the Obama Administration has been shoveling out for the past four months. And it is going to have dire effects for American jobs and the American economy all the while ensuring that a good crisis doesn’t go to waste… even if it has to be extended.

The Washington Post reports today that the buy American provisions inserted into Porkulus by a bipartisan caucus of idiots is having its predicted effect:

Ordered by Congress to “buy American” when spending money from the $787 billion stimulus package, the town of Peru, Ind., 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.

And naturally, Canada, our largest trading partner, isn’t happy about this.

This week, 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.

But the effect isn’t hitting only foreigners. The Administration has made sure that the pain is also felt by American workers.

Take, for instance, Duferco Farrell Corp., a Swiss-Russian partnership that took over a previously bankrupt U.S. steel plant near Pittsburgh in the 1990s and employed 600 people there.

The new buy American provisions, the company said, are being so broadly interpreted that Duferco Farrell is on the verge of shutting down. Part of an increasingly global supply chain that seeks efficiencies by spreading production among multiple nations, it manufactures coils at its Pennsylvania plant using imported steel slabs that are generally not sold commercially in the United States. The partially foreign production process means the company’s coils do not fit the current definition of made in the USA — a designation that the stimulus law requires for thousands of public works projects across the nation.

In recent weeks, its largest client — a steel pipemaker located one mile down the road — notified Duferco Farrell that it would be canceling orders. Instead, the client is buying from companies with 100 percent U.S. production to meet the new stimulus regulations. Duferco has had to furlough 80 percent of its workforce.

Heckuva job, Barry.

At this point one has to wonder if we are witnessing a stratospheric level of incompetence on the part of the Administration in dealing with the economic crisis, or we are simply seeing the crisis used as a smoke screen for an all out assault on any previously unregulated part of the economy. By using a populist “buy American” provision to erect trade barriers, the Administration is on the verge of setting off latter day version of the trade wars brought on by the Smoot-Hawley Tariffs.

While this will be devastating to America and to world trade as other countries are forced to enact their own trade barriers, it will have the effect of extending the economic crisis by some years while allowing the Administration to blame that extended crisis on the machinations of foreigners and undoubtedly the Bush Administration.