Trade Wars Brewing in Economic Malaise; Even vs Those Pesky Canadians

First, the "alarmist" media is again talking about economic malaise when the stock market is clearly shouting "malaise over"... but notwithstanding that erroneous headline by the Washington Post, an interesting story here of protectionism. In my world view, as we move to a flatter world and voting citizens in many 1st world countries are increasingly threatened by "offshore" competition - this will be a growing trend in the coming years / decades. It is one thing to say a rising global boat of prosperity shall lift us all "in the long term"; it is quite another to live through the economic wreckage these dislocations create in the "near term". That said, you wouldn't think of Canada as being someone we'd be slamming the door on.

• Is this what the first trade war of the global economic crisis looks like? Ordered by Congress to "buy American" when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.
• Outrage spread in Canada, with the Toronto Star last week bemoaning "a plague of protectionist measures in the U.S." and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts -- the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.
• This is not your father's trade war, a tit-for-tat over champagne or cheese. With countries worldwide desperately trying to keep and create jobs in the midst of a global recession, the spat between the United States and its normally friendly northern neighbor underscores what is emerging as the biggest threat to open commerce during the economic crisis.
• Rather than merely raising taxes on imported goods -- acts that are subject to international treaties -- nations including the United States are finding creative ways to engage in protectionism through domestic policy decisions that are largely not governed by international law. Additionally, such moves are more likely to have unintended consequences or even backfire on the stated desire to create domestic jobs.
• Take, for instance, Duferco Farrell Corp., a Swiss-Russian partnership that took over a previously bankrupt U.S. steel plant near Pittsburgh in the 1990s and employed 600 people there. The new buy American provisions, the company said, are being so broadly interpreted that Duferco Farrell is on the verge of shutting down. Part of an increasingly global supply chain that seeks efficiencies by spreading production among multiple nations, it manufactures coils at its Pennsylvania plant using imported steel slabs that are generally not sold commercially in the United States. The partially foreign production process means the company's coils do not fit the current definition of made in the USA -- a designation that the stimulus law requires for thousands of public works projects across the nation.
• In recent weeks, its largest client -- a steel pipemaker located one mile down the road -- notified Duferco Farrell that it would be canceling orders. Instead, the client is buying from companies with 100 percent U.S. production to meet the new stimulus regulations. Duferco has had to furlough 80 percent of its workforce. "You need to tell me how inhibiting business between two companies located one mile apart is going to save American jobs," said Bob Miller, Duferco Farrell's executive vice president. "I've got 600 United Steel Workers out there who are going to lose their jobs because of this. And you tell me this is good for America?" (yes it is Bob - ask the politicians who in their wisdom are running central planning command)
• A slew of legislative proposals is also aimed at keeping jobs at home. In recent weeks, the House attached additional buy American provisions to a $14 billion clean-water fund that provides loans to local communities and a $6 billion program to finance environmentally friendly school construction projects. Other pending measures would require the federal government to buy 100,000 U.S.-made plug-in hybrid cars, mandate that the president's airplanes be made in the country by an U.S. company, and force several federal agencies, including the Pentagon and Department of Transportation, to use only domestic iron and steel.
• No one appears to be more concerned than America's largest trading partner -- Canada. ... in recent weeks as federal authorities drafted broad guidelines for implementing the law and hundreds of states and towns have begun preparing for stimulus-related projects, Canadian companies have been surprised to discover that while some federal contracts are still open to Canadian materials and equipment because of trade treaties, most of those issued by state and local governments are not.
• The Government Accountability Office estimates that state or local officials will administer about $280 billion in stimulus spending, including about $50 billion for transportation projects. But federal authorities have determined that construction projects even partially funded with stimulus dollars must also buy American, dramatically increasing the universe of affected contracts.
• "We're not China. We're not even Mexico. We have the same relative cost of labor as you do," he said. "If we have a better price, you should buy from us. That's what competition is supposed to be about." (Dear Canadian, we no longer "do" competition in America. Competition creates losers - in America, we all win. Losers are compensated with tax payer dollars or money created out of thin air. Now please.. go to your Canadian Central Bank and have them compensate you for any losses you might suffer... it's the American way. Good day sir)