US Politics

Protectionism Rears its Head

By Ben Bull
Published January 29, 2009

As the global recession deepens, it appears that good old trade protectionism is returning to our shores. The Spectator reports today that the US $800 billion economic stimulus package is looking to ban imports of foreign steel.

The $819 billion US stimulus plan approved last night would bar the use of foreign steel in any infrastructure projects.

A Senate version, yet to be acted upon, goes even farther, requiring, with few exceptions, that all stimulus funded projects use only equipment and goods made in the United States.

That could have a direct effect on Canadian steelmakers, particularly Hamilton's US Steel and ArcelorMittal Dofasco operations.

It remains to be seen whether this will pan out, but it certainly can't be the last we'll see of such protectionist measures.

Ben Bull lives in downtown Toronto. He's been working on a book of short stories for about 10 years now and hopes to be finished tomorrow. He also has a movie blog.

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By Frank (registered) | Posted January 29, 2009 at 13:16:00

I wonder if that's taken into account the fact that the majority of steel companies are now owned by American companies?

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By jason (registered) | Posted January 29, 2009 at 14:00:20

give me protectionism over off-shoring any day of the week, especially when taxpayers are the ones footing the bill.

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By jason (registered) | Posted January 29, 2009 at 14:23:04

give me protectionism over off-shoring any day of the week, especially when taxpayers are the ones footing the bill.

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By A Smith (anonymous) | Posted January 29, 2009 at 14:51:31

Jason, so as a taxpayer, you think it makes sense to pay higher prices for inputs, thereby decreasing the number of infrastructure projects that can get built? However, if producing jobs is the goal of this spending bill and not actually maximizing infrastructure, why not just pay people to sit at home. You can call these new jobs, domestic tranquility associates.

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By Rusty (registered) - website | Posted January 29, 2009 at 14:56:30

Frank, I was wondering the same thing. I guess the US government will do whatever they can to protect the US workers, so I would imagine they'll find a way to factor in where the steel was actually made into the equation.

Jason - I think we'll hear more of that sentiment as the recession deepens. I watched Buzz Hargrove on the CBC, vouching for the auto sector. He was asking the government to subsidize Candian auto production and levy tariffs on foreign imports.

To the extent that global markets were ever 'open' during the rise of globalization I think we'll see more of these protectionist measures come into play. I think there's going to be a lot of re-tinkering with our methods of global trade.

Ben

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By Berhal (anonymous) | Posted January 30, 2009 at 17:23:35

Ah, now that steel industry is affect, not so much for the buy local movement any more are we?
Buy green! Don't ship your stuff in from other countries*!

*except Canada

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By Frank (registered) | Posted February 03, 2009 at 11:31:37

Berhal, that's impossible for many things where it's just not feasible to purchase something from Canada or even the States. In fact the green option might very well be to ship it in from another country.

Protectionism is a good idea however as a blanket policy it's simply not practical.

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By Ted Mitchell (registered) | Posted February 05, 2009 at 14:29:42

Protectionism as a response makes the error that the problem is cheap imports, trade deficits etc.

That's the wrong problem. It's just a symptom of the real problem, which is passing the buck by externalizing costs.

This is the engine that drives globalization: in pursuit of lower prices, anything goes, and that includes whatever costs can be externalized, generally by exploitation that would be illegal in the importing country: -wages (artificially low by means of state control, unions not permitted, multinationals throwing their weight around in unfair contracts), -unsustainable drawing on resources (forest and crop practices in underdeveloped countries), -environmental degradation (air, water pollution, soil degradation rampant in the absence of laws limiting this), Don't forget the great facilitator of all this , cheap oil.

Yeah, there will be comments from the free market fairy talers that somehow this benefits the 3rd world countries, but you can guarantee they don't know the half of what really goes on and don't care to know.

So protectionism, if aimed at reducing the harm of externalized costs, while leaving those countries who have similar social and environmental standards as free trading partners, has merit. But it has to be surgical, consistent, and in cooperation with other nations.

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By A Smith (anonymous) | Posted February 05, 2009 at 16:29:16

Ted, what is wrong with letting individuals decide if they want to purchase goods from third world countries? If you feel strongly about the issues you mentioned, nobody is forcing you to buy imports. However, for those who like cheaper products, why do you feel you have the right to tell them what they can and can't purchase?

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By jason (registered) | Posted February 06, 2009 at 10:32:43

In following this story, I don't think you can call it protectionism. They aren't changing any trade policies with other nations...they are simply looking to employ a 'buy-American' preference with this taxpayer-funded stimulus package. I agree wholeheartedly. If I was a US taxpayer I would want to ensure that my money is being used to stimulate MY economy.
After all, it's a US stimulus package being funded by US taxpayers. It's meant to stimulate their own economy, not someone else's. Protectionism has been thrown around by the media in an attempt to scare people....not one single change has been proposed to US trade policies with any of their partners. This is not protectionism, it's a common sense approach to ensure the biggest US bang for the US buck.

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By A Smith (anonymous) | Posted February 06, 2009 at 10:36:38

Jason, >> This is not protectionism, it's a common sense approach to ensure the biggest US bang for the US buck.

Option A - Buy steel on the open market to build bridges, etc.

Option B - Buy steel from domestic producers at higher prices, thereby limiting the amount of bridges that get built and workers employed building bridges.

How is this common sense?

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By ducks (anonymous) | Posted February 06, 2009 at 10:44:35

"Option B - Buy steel from domestic producers at higher prices, thereby increasing the number of workers employed making steel and cycling more money through the productive economy."

Fixed that for you.

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By A Smith (anonymous) | Posted February 06, 2009 at 13:18:40

Ducks, why not just give out stimulus checks then? If the goal isn't to maximize the amount of public infrastructure that gets built (which according to Obama, is vital to the U.S. economy), but rather to promote employment, just give the money to the consumer and let them spend it. That way, the increased consumption will not go to propping up the unproductive steel sector, but to all sectors of the economy.

If you are concerned that people will only spend a portion of the money and save the rest, then just increase the amount given out. This way, you can stimulate spending and also increase national savings. Money saved by individuals will offset additional debt taken on by the government, so in the end, the net new debt will only reflect what the consumer spent.

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By A Smith (anonymous) | Posted February 06, 2009 at 14:17:21

Jason, >> I agree wholeheartedly. If I was a US taxpayer I would want to ensure that my money is being used to stimulate MY economy.

Whatsoever a man soweth, that shall he also reap.

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By jason (registered) | Posted February 07, 2009 at 11:53:30

Galations 6:7

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By A Smith (anonymous) | Posted February 07, 2009 at 12:19:09

Jason, does this mean that your spirit doesn't derive pleasure from helping people in less developed countries, mine does.

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By jason (registered) | Posted February 07, 2009 at 14:48:36

it depends on your definition of 'helping'. Are we really helping people in other nations by exploiting them and their resources for our greed??

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By A Smith (anonymous) | Posted February 07, 2009 at 16:14:21

Jason, if the workers that build the products we use are slave labourers, then I agree with you completely. However, if they willingly choose to work for wages less than Western nations, then how are we helping them by not buying their offerings? It's quite likely that they see the jobs in the factories as a step up the economic ladder, otherwise why would so many people be moving to the cities from the countryside?

However, as a consumer, if you feel better buying goods from "certified" producers, who can ensure quality working conditions (safety, etc) that sounds like a great idea. This may add to the cost of the products, but if it makes people sleep better at night, it may be worth the cost.

I just think it's better if you give individuals the choice.

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By jason (registered) | Posted February 08, 2009 at 08:49:33

certainly, there's probably some actual slave labour in foreign plants, and many others who willingly come to work. Although, a good portion of those who willingly come are willing to be paid virtually nothing out of desperation. The coffee industry is a good example. It is the second highest traded commodity in the world after oil, yet many farmers live in shacks or roadside 'homeless shelters' in front of their farms. they have jobs and they willingly show up each day and provide the worlds coffee, but are exploited horrendously. Not to paint a completely sad picture...I'm sure there are other plants that provide jobs with an honest wage in foreign nations as well....but far too much of the former exists for my liking.

I buy organic,fair trade coffee (if you find a good supplier it tastes far superior than any other coffee you'll try). It's a small gesture, but nice to know that somewhere in the world a coffee grower is being paid a living wage due to this simple choice.
So to answer your question, absolutely I love doing what I can to help people in other nations. The US clearly needs the money to circulate through their own economy instead of being spent by consumers in one or two stores before flying overseas. Lord knows we do enough of that.
My kitchen table/chair set used to be my grandparents...all the furniture is solid wood and stamped 'Made in Canada' on the bottom.
It's like a novelty piece now when this conversation comes up when guests are over. I end up flipping over one of the chairs and saying "get ready to see something you haven't seen in ages". Lol. Hopefully one positive thing out of the current economic situation will be more local trade eventually....it'll be tough to ever end globalization, and I'm not sure that's a good answer anyhow. Re-tooling it and making it fair for all would be a great goal.

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By daryl (anonymous) | Posted March 27, 2009 at 12:19:31

Since I pay taxes I hope the stimulus we helped fund works.

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