Just a few day ago I posted on the fallacy of global free trade and the need for tariffs, and predicted that a global reversion to protectionism and tariffs was inevitable. Now look what’s happening:

“The stimulus bill passed by the House last night contains a controversial provision that would mostly bar foreign steel and iron from the infrastructure projects laid out by the $819 billion economic package. A Senate version, yet to be acted upon, goes further, requiring, with few exceptions, that all stimulus-funded projects use only American-made equipment and goods.”

Proponents of expanding the “Buy American” provisions enacted during the Great Depression, including steel and iron manufacturers and labor unions, argue that it is the only way to ensure that the stimulus creates jobs at home and not overseas. Opponents, including blue-chip names in American industry such as Caterpillar, General Electric and the domestic aerospace industry, say it amounts to a “declaration of war against free trade”. That, they say, could spark retaliation from abroad against U.S. companies and exacerbate the global financial crisis. The measures, they argue, could violate trade deals the United States has signed in recent years.”

American companies are angling for a piece of the stimulus money pies that China and the EU nations are cooking up, and fear retaliation. This week, a European Commission spokesman threatened countermeasures if the Buy American provisions are approved.

“There is no company that is going to benefit more from the stimulus package than Caterpillar, but I am telling you that by embracing Buy American you are undermining our ability to export U.S. produced products overseas,” said Bill Lane, government affairs director for Caterpillar in Washington. More than half of Caterpillar’s sales — including big-ticket items like construction cranes and land movers — are sold overseas.”

“Any student of history will tell you that one of the most significant mistakes of the 1930s is when the U.S. embraced protectionism,” Lane said. “It had a cascading effect that ground world trade almost to a halt, and turned a one-year recession into the Great Depression.”

That was the Smoot-Hawley Act, and that’s not true. Protectionism was only a small part of the Great Depression. Our money supply was shrinking back then, not hugely expanding like now, our international trade back then was minor and there was no massive trade deficit, in fact exactly the opposite, a big trade surplus, and our mid-west food basket was wiped out by dust storms in 1930 and stayed that way for many years, causing the closure of many banks through mortgage faiures, the closing of businesses and creation of many new ghost towns, the loss of personal savings of all those farmers and shopowners and bankers and so on, and the loss of hundreds of thousands of jobs. All because of a drought, not because of the stock market crash or protectionist tariffs.

The Smoot-Hawley Act put tariffs on about 200,000 items and it was protectionist overkill, but we’d never had our stock market crash before, either. Anyway, the Market rebounded only a year later, in 1930. It was the Dust Bowl that brought us the most misery, and while the world blames us for the Great Depression, it was the same then as it is now when it comes to everyone else playing fast and loose with their economies. Back then, our portion of world trade was very small, not like it is today.  They brought themselves down.

Now let’s be clear on this. This is only about the money in the stimulus package. This is NOT about all steel or other imports, only the money that our government spends on projects included in the stimulas package, which is a tiny part of our total manufacturing economy. Is Caterpillar then in on the take here? Why do they need bailout money, and if they’re getting it, how dare they complain about spending it in America only?

“There are early signs that nations are putting up trade barriers to protect domestic companies as the global downturn worsens. Despite promises offered during a major economic summit in November to refrain from taking such measures, countries from France to Indonesia have done so.”

For us not to do the same is suicide. I agree that a conservative approach is wise, but we must start reversing our massive trade deficit. If all our wealth goes out and doesn’t come back in, we go bankrupt. Then you’ll see a Great Depression, in spades. That last minute load of tariffs by Bush on EU products turns out to have been retaliation for a European Union ban on imports of U.S. beef containing hormones. This is nothing new. Retaliatory tariffs have always been with us. That’s how trade agreements are worked out. How can you reach fair agreements if you have global Free Trade? You can’t, and someone ends up getting screwed.

“Two months ago, leaders of the G-20 nations convened in Washington to develop policies aimed at mitigating the impact of the global financial crisis. In addition to other commitments, world leaders pledged not to put in place new protectionist tariff and non-tariff barriers to trade.”

“Today, as the new WTO (World Trade Org.) report indicates, some nations are backtracking on their G-20 pledges. Breaking the trade barriers promise threatens to undermine the global trading system and the credibility of the G-20.”

The global trading system is just Communism with another name. Small wonder it’s caused such a mess and is failing.

Increasing tariffs on foreign goods will reduce our trade with them. This will negatively impact their economies and have a dampening effect on global trade. True. It will also reduce the amount of our exports and hurt some of our manufacturers, who are therefor against it. This will also cause job losses in those industries.

Yet look at the massive layoffs we’re having right now with Free Trade and without tariffs. The whole financial bubble that popped was built on the false prosperity of Free Trade and now our economy is failing. Those lost jobs will be regained as we once again start making, ourselves, what we buy at the stores. By buying only American steel with the bailout money, we’ll be creating tens of thousands of jobs. We’ll still need, and import, foreign steel.

We will still be importing a lot of stuff we don’t make here, and if those countries raise the price too high, we won’t buy. The same applies to us selling to them. Trade will still go on, just that with the end, the death, the utter Thank God demise of Free Trade, we can all go back to working out trade deals that are beneficial to our nations as a whole. This is why most of the “third world” nations never got in on Free Trade to begin with. Things are bad enough with them already without that and they need their tariffs to protect what little they have.

Likewise, this is why Asian nations are already increasing tariffs on imports. Even those nations in the WTO are doing so, though still within WTO limits. That won’t last much longer.

Not long ago we took great pride in Made In USA labels on our products. I’m sick to death of seeing Made In China on everything, it disgusts me. That’s the CHANGE I want to see and the CHANGE most of us true Americans want to see. MADE IN AMERICA!

We can expect to see higher prices for imported goods as our import tariffs increase along with their export tariffs. Hang with it, this is only a temporary thing. Our manufacturing will pick up on this and soon similar but better Made In USA items will line the shelves at the same or a little lower prices, and YOU will have new job security and AMERICA will go back to work.

This entry was posted on Friday, January 30th, 2009 at 6:18 pm and is filed under Commentary, News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.