Rethinking Free Trade

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Well, the cat is out of the bag so to speak as my husband publicly aired my own misgivings on the subject of free trade.   I won’t mention at this juncture when these misgivings started (because that is the subject of another long blog post) but suffice it to say that the rhetoric and in some cases fear-mongering from both sides of the argument have been weighing on me.

So rather than post an argument pro or con with regard to free trade, Stuart and I have decided to write an in-depth white paper covering the main issues and pull hard data (not opinion pieces) and facts on both sides of the argument. We’re going to look at detailed exchange rate data as well as fixed vs. floating methods of dealing with currencies. We’ll examine the issue of subsidies both on foreign produced goods (let’s get specific here, we’re going to focus on steel) and US subsidies (because there are some, trust us)! Relying on cost build-up models that we have done for some of our US clients, we’ll examine cost structures in detail as compared to US cost structures. The steel industry makes some compelling cases in terms of OSHA regulation and other labor standards and rules that US companies must comply with that simply don’t exist in other steel-producing nations.

We will examine the history of anti-dumping cases and the steel industry’s argument as to why they file these cases. We’ll look at the recent section 421 tire case and speculate on additional steel cases which we anticipate will become the next test of that legislation passed when China was admitted to the WTO back in 2000.   We’ll look at the impact Cap and Trade legislation would have on the US steel industry if passed and even review some future scenarios on the domestic steel industry should that come to fruition.

No analysis would be complete without a comprehensive review of the various trade pacts in place and our current account deficit (or surplus) with each of our key trading partners.   We will work with the steel industry directly (and not merely through trade organizations) to obtain the data that we feel ought to be examined. If your company buys steel and you buy from both domestic and global producers, we’d love to hear from you. We’re interested in understanding some of the challenges you have faced working with a global supply base (including domestic producers). If you have a story to share, a cost model you think we might find interesting or an analysis you’ve done, please drop us a line at lreisman (at) aptiumglobal (dot) com.

–Lisa Reisman

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