Dallas, TX –
Don't look now, but a major, global trade war is brewing. It started with the ill-advised "buy America" provision inserted into the stimulus bill last February - that is, a requirement that cities and states spending stimulus money need to use only American-made products.
While this may sound reasonable, it's potentially catastrophic - for several reasons. First, many products have components from various places around the world. For example, in the mid 90s, a Swiss-Russian partnership bought a bankrupt steel plant in Pennsylvania and put 600 people back to work making coils. But because they use steel slabs that aren't sold commercially in the U.S., their largest client, another U.S. company, can't buy the coils. So, management - the Swiss Russian partnership - had to lay off 80 percent of those employees. Our global economy and supply chain cannot be ignored or dismantled.
Second, other countries are beginning to retaliate. Canadian companies have lost a lot of business, and two weeks ago, a group of Canadian cities passed their own "Buy Canada" laws. Guess who's the target? You got it. American companies are losing customers - fast. Maybe you saw the long article in the Dallas Morning News last week about the trade disagreement between the US and Mexico. Mexican trucks can't bring goods into the U.S., so Mexico won't let U.S. trucks bring our goods into Mexico.
Mexico has also slapped additional taxes on imports from the U.S. It costs a lot more to ship Texas agricultural produce into Mexico and Mexican companies are buying less from Texas farmers and more from countries like Chile.
And here's the third, big reason why the "buy American" and protectionist attitude is crazy. Trade is a huge part of our overall economy, as much as a third by some estimates. For every American job that protectionist policies can claim to be saved, dozens or hundreds are lost. No state will be more affected than Texas. Just in agriculture - not even tackling other industry sectors, exports support more than 55,000 jobs. It's not just the farmers, it's processing, storage, transportation.
World demand has been increasing, and Texas has been doing very well, but competition has been increasing. Texas needs free trade and open access. If you want to see just how much Texas has benefited, log on to the Department of Agriculture's web site, and you'll see page after page about how exports from various segments - beef, cotton, vegetables, fruit - have soared country by country as trade agreements have been negotiated and tariffs and barriers have come down. The numbers make you a little blind, but the message is clear.
Finally, trade is more than trade and economic impact. In D.C., the geniuses in Congress have thrown road blocks in the way of important agreements with Colombia and South Korea. Unions claim that Colombia should have had a better record in the past in regards to protecting union leaders. Environmentalists criticize both countries' record for protection and enforcement of environmental laws. But both countries have made huge progress in these areas. A U.S. general said, "Don't let the perfect be the enemy of the good." Freer trade is an important part of national security. Do we want South Korea listening to us, or China, which has become their largest trading partner? Don't we want Columbia to continue to fight the drug cartels?
This is the time to repeal the "buy America" provision. All it "buys" us is trouble.
Merrie Spaeth is a communicationns consultant based in Dallas.
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