The De-Stimulus Package(?): American Jobs and Trade Wars

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Ferrous Metals, Macroeconomics

Two weeks ago I had met with the CEO of a manufacturer of equipment used in the water management industry. We had chatted a bit about their metal spend and their use of price indexes to better manage costs. But the conversation inevitably led to demand in general and the stimulus package in particular. This CEO shared with me two specific stories. He noted that his firm had bid on several projects including one for a local municipality and had received verbal confirmation that he would receive purchase orders for at least one of those projects. But that was back in the fall, after the municipality had successfully financed its project completely via its own means (through a bond issue). Two months later, with no purchase orders received, the water management company discovered the municipality put a hold on its shovel ready (and already financed) project so that it could attempt to secure federal stimulus dollars. This manufacturer now finds itself with a pipeline of projects in which it has received a verbal commitment previously but now stands in queue waiting for stimulus dollars to trickle down through to keep its 40+ employees working. He doesn’t know how long he can keep his employees on the payroll without the projects starting.

This same equipment manufacturer tells a second story which involves the Buy American clause and how a new provision added by the House of Representatives mandates that any clean water project involve only ËœBuy American’ iron, steel and other manufactured goods ( here is a down-loadable copy of that mandate). In this case, the manufacturer has now lost some previously awarded business because some of his finished products contain imported items such as castings (never mind that the domestic casting manufacturer is not competitive and has shipped poor quality parts). These stories unfortunately echo the stories from this recent Washington Post article in which the company Duferco Farrell Corp (now a Swiss-Russian partnership that had taken over a bankrupt steel plant with 600 employees) that produces steel coil from imported steel slabs (because the slabs according to the Post are generally not sold commercially in the US,) will likely shut down because it’s products do not meet the Buy American standards (supported by domestic steel producers such as ArcelorMittal, among others according to these latest articles).

Canadians, already reeling from steel plant shutdowns by their American parent companies as MetalMiner has previously reported, have learned that many of the Buy American provisions, though stripped from some projects, remain intact at both the state and local government levels where Canadian firms compete as well.  Canadian firms can do nothing unless they retaliate banning American firms from competing for projects within Canada, which is exactly what they did in several Ontario towns, according to the Post article.

We’d like to hear from readers. What has your company experience been with Buy American provisions and stimulus dollars?

–Lisa Reisman

Comment (1)

  1. jgo says:

    Arcelor-Mittal is hardly a US steel firm, even though they took over and have been shutting down former Bethlehem Steel operations (eliminated in order to dodge pension obligations after decades of under-investment), even those which are profitable. Nor, as you pointed out, is Duferco Farrell.

    What it boils down to is that executives and government officials and union bosses and students and production workers respond to personal incentive profiles. They’ll do whatever fills their own pockets the most, or depletes them the least.

    Unfortunately, all too many will readily initiate force and fraud to accomplish their ends.

    The solution is not trade war, but to turn away from these phony, crooked “free trade” agreements and subsidies and bizarre regulations and free speech restrictions to genuine reciprocity, away from tariffs ranging from 2% on one side to 150% or more on others, to something close to 10% of value on all sides, and to end income tax and VAT kick-backs.

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