Monthly Archives: May 2009

The cost of Teflon

Gary of Trinity expresses frustration at a series of articles I have written about perfluorinated chemicals. Some background can be found here. The nutshell is that for more than a decade Decatur Utilities has been using sludge from its wastewater treatment plant as fertilizer on area farms. Much of that sludge comes from area industries, and some from industries that use or produce perfluorinated chemicals. The PFCs ended up in two places: the Tennessee River and the farmland. EPA had not banned the chemicals, in large part because they seemed to be limited to a DuPont factory in West Virginia. No regulation was necessary because EPA used litigation and a court order to limit DuPont’s discharge of the chemicals.

All that changed in November when EPA discovered that DU’s land-application of the PFC-contaminated sludge was creating huge concentrations in soil used for crops and livestock. PFCs do not degrade in the environment, so every land application increased the concentrations. Now EPA has issued a health advisory for PFCs in drinking water, and is considering more stringent limitations that might restrict the discharge of PFCs.

DU stopped land applying its sludge, and it is trying to come up with ways to keep industries from discharging the synthetic chemicals into its treatment plant. These efforts are costing DU lots of money, which DU customers will end up having to pay. If EPA imposes regulations on PFCs, consumers will get hit. PFCs are used to make Teflon and other nonstick products.

“You will receive a huge fine and instructions to start a remedial plan,” complains Gary, “which will cost the Decatur citizens millions of dollars (a million here, a million there…who minds? it is only numbers).”

pfoa

PFOA

PFCs are harmful to humans and the environment. That means they exact a cost. The cost (I’ll gloss over some scientific debates for the purposes of this discussion) is in increased cancer rates, increased rates of birth defects and infertility, and dying largemouth bass. When I buy a Teflon pan, I am paying some costs — the cost of manufacturing, of materials, of a profit margin — but because the PFCs are unregulated, I am paying nothing for the toll its production had on humans and the environment. Those costs are external to my transaction.

The fact that I am not paying those costs, however, does not mean nobody is. Cancer victims are paying, defective babies are paying, fishermen on Wheeler Lake are paying.

One solution is to ban PFCs. I tend to think a better solution is to regulate PFCs. Regulations, if enacted prudently, shift some of the environmental costs of Teflon production to the consumer. When I buy a Teflon pan with regulated PFCs, I am paying a portion of the cost involved in limiting the environmental harm from its production. What was an external cost borne by those who received no benefit from my Teflon pan becomes a part of the transaction cost.

Regulations are annoying and, to the consumer, expensive. Carefully crafted regulations do not create new costs, however. They merely acknowledge an existing cost and make sure the right person is paying it.

Eric Fleischauer, eric@decaturdaily.com

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A PETITION From the Manufacturers of Candles…

A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.

You are on the right track. You reject abstract theories and little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.
We come to offer you a wonderful opportunity for your — what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, as for principles, you deny that there are any in political economy; therefore we shall call it your practice — your practice without theory and without principle.
We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us [1].
We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.

Be good enough, honourable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support.

First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.

The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.

But what shall we say of the specialities of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.

There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.

It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.

We anticipate your objections, gentlemen; but there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade. We defy you to utter a word against us that will not instantly rebound against yourselves and the principle behind all your policy.

Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense?

We have our answer ready:

You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too.

Indeed, you yourselves have anticipated this objection. When told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles, “Yes,” you reply, “but the producer has a stake in their exclusion.” Very well, surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction.

“But,” you may still say, “the producer and the consumer are one and the same person. If the manufacturer profits by protection, he will make the farmer prosperous. Contrariwise, if agriculture is prosperous, it will open markets for manufactured goods.” Very well, If you grant us a monopoly over the production of lighting during the day, first of all we shall buy large amounts of tallow, charcoal, oil, resin, wax, alcohol, silver, iron, bronze, and crystal, to supply our industry; and, moreover, we and our numerous suppliers, having become rich, will consume a great deal and spread prosperity into all areas of domestic industry.

Will you say that the light of the sun is a gratuitous gift of Nature, and that to reject such gifts would be to reject wealth itself under the pretext of encouraging the means of acquiring it?

But if you take this position, you strike a mortal blow at your own policy; remember that up to now you have always excluded foreign goods because and in proportion as they approximate gratuitous gifts. You have only half as good a reason for complying with the demands of other monopolists as you have for granting our petition, which is in complete accord with your established policy; and to reject our demands precisely because they are better founded than anyone else’s would be tantamount to accepting the equation: + x + = -; in other words, it would be to heap absurdity upon absurdity.

Labour and Nature collaborate in varying proportions, depending upon the country and the climate, in the production of a commodity. The part that Nature contributes is always free of charge; it is the part contributed by human labour that constitutes value and is paid for.

If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun, which is, of course, free of charge, does for the former what the latter owes to artificial heating, which necessarily has to be paid for in the market.

Thus, when an orange reaches us from Portugal, one can say that it is given to us half free of charge, or, in other words, at half price as compared with those from Paris.

Now, it is precisely on the basis of its being semigratuitous (pardon the word) that you maintain it should be barred. You ask: “How can French labour withstand the competition of foreign labour when the former has to do all the work, whereas the latter has to do only half, the sun taking care of the rest?” But if the fact that a product is half free of charge leads you to exclude it from competition, how can its being totally free of charge induce you to admit it into competition? Either you are not consistent, or you should, after excluding what is half free of charge as harmful to our domestic industry, exclude what is totally gratuitous with all the more reason and with twice the zeal.

To take another example: When a product — coal, iron, wheat, or textiles — comes to us from abroad, and when we can acquire it for less labour than if we produced it ourselves, the difference is a gratuitous gift that is conferred up on us. The size of this gift is proportionate to the extent of this difference. It is a quarter, a half, or three-quarters of the value of the product if the foreigner asks of us only three-quarters, one-half, or one-quarter as high a price. It is as complete as it can be when the donor, like the sun in providing us with light, asks nothing from us. The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production. Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

Frédéric Bastiat (1801-1850), Sophismes économiques, 1845

Notes:

[1] A reference to Britain’s reputation as a foggy island.

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Ragging on Nucor

I’ve been ragging on Nucor, to the frustration of many. I do so not out of animosity to the company; far from it. Going into the future, Nucor may well be the most important company in Morgan County. It is exceptionally well run, it values its community and — most importantly — it values its employees. Those employees are a remarkable team. I’ve met many and am friends with several, and you won’t find a higher quality group anywhere.

So why am I messing with Nucor? Because I think the company is exerting more control over over foreign-trade policy than it should. The United States is at a tipping point on foreign trade, for two main reasons.

One, we have a Democratic administration, and Democrats have shown themselves much more willing to restrict global trade than have Republicans. Former President Bush had to cater to a fiscal conservative group that has consistently opposed trade restrictions; President Obama receives no such free-trade input. I think he grasps the importance of free trade, but politics constantly push him toward restricting it. His campaign was illustrative. He spoke against NAFTA regularly, but simultaneously tried to reassure Canada that he supported the treaty. He is in an ugly dilemma between politics and logic, and companies like Nucor could push him toward politics.

Two, we are in a recession. When the economy struggles, the United States and other nations become protectionist. It happens every time. This adds to the political pressure on Obama, and increases the public sentiment opposing free trade.

I find some arguments for restricted international trade compelling. The most significant is that free trade tends to undo advances in the way we treat employees. Maintaining high wages, 40-hour work weeks, overtime and workers compensation is tough when we are competing with foreign companies that do none of those things. A national debate on whether we should be in the World Trade Organization, whether we should open our borders to imports, would be reasonable.

Nucor, though, is too smart for a head-on debate. It dresses up protectionism as “fair trade.” It complains about a handful of economic advantages enjoyed by China in manufacturing steel, and ignores the many advantages enjoyed by U.S. companies. It does so because it mainly serves the domestic market. If one day its steel exports become more significant to its profits, its disposition will slide from “fair” trade to free trade. Its goal is to maximize profit — as it should be — and right now it can best do so through protectionist policies.

Protectionist policies help Nucor, but they hurt many other segments of the U.S. economy. The best solution for Nucor’s ills is steel that it can produce at low cost but sell at high cost, and foreign imports cause it problems. Foreign imports increase supply, increase competition and therefore reduce prices. Thus, protectionist policies increase the price of steel for all domestic manufacturers, even those that do not buy from Nucor.

If Nucor wants to debate whether our nation would be better off with protectionist policies, great. It’s a debate we need to have. Wrapping itself in a U.S. flag and slamming the Chinese for being unfair, however, is no way to have that debate. Nucor should be honest about its goals, or it should seek to win at free trade by producing the best product at the lowest price.

eric@decaturdaily.com

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Filed under Free Market, steel

Nucor and free trade: addressing my detractors

So are you saying that Nucor should be more like the rest of the companies in this country that are holding their hand out for taxpayers hard earned money and then allow those companies to become apart of the socialism that is slowly ruining our country. The only rhetoric involved is from the liberal media and maybe you should think about union legacy cost as a reason for higher car cost. You should not print such trash about a company that is committed to their communtiy as Nucor is i.e. Habit for Humanity, Relay for Life… You could list more than you could print to have filled this spot.

RESPONSE: This comment is fascinating, and not unusual. The common thread is not ideological, but what Victor dislikes. He dislikes socialism — even though the policies he incorrectly labels socialism are helping Nucor — and he dislikes Nucor critics. Nucor is an excellent company. Nucor employees, at least the ones I know, are fantastic. Nucor corporate, though, is the one that seeks governmental intervention. It wants tariffs on Chinese goods, it wants stimulus packages with ‘Buy American’ provisions, it wants local subsidies for factories. It is not an advocate of the free market, at least when it comes to international trade.

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Why don,t you move your china loving butt over there and live, thats whats wrong with America now Idiots like you at the daily.

Nucor is a good (American) company , Bett you buy all your goods and groceries at that mega chain chinese mart that starts with

a big W like the Idiot president that got us headed into this mess in the first place, they should fire Idiots like you . As many good plants and jobs as we have lost in this community and you want to put down a surviving local plant providing good for the community and jobs for our families and contributing to the local economy in many ways . You sir should be fired and you should be ashamed of yourself. Tarred and feathered and rode out on a rail would be too good for you

RESPONSE: Actually I’ve only been in WalMart twice in the last year, but it doesn’t sell much steel anyways. Obama pushed through a stimulus package and Bush promoted credit-easing legislation, both designed to help Nucor and similarly situated companies. The  stimulus package also helped keep railroads open, bad news for me if I am tarred and feathered.

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Wow Eric, you are serious aren’t you? Couple of key points you glossed over “pays its workers too little. It lacks the safety laws” where not addressed any futher. What about China manipulating their yen?

RESPONSE: See Franklin’s comment, below, although I do not agree with him completely. Unpegging the yuan from the dollar would provide some global benefits, provided we eased up on our efforts to manipulate currency.The underlying problem with Nucor’s advocacy of fair-but-not-free trade is that, if adopted, it would effectively end international trade. If every law in every WTO nation was made consistent in its impact on manufacturers, we would have a global version of the European Union. Not likely in the United States, where most of us are not even happy with the United Nations.

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Ronald, so what if China manipulates the yuan (not yen)? The U.S. manipulates the dollar, or haven’t you not noticed how much value the dollar has lost just in the past decade? By linking the yuan to the dollar, China sought to eliminate any advantage the U.S. might gain by devaluing the dollar. China’s currency manipulations have largely been a response to ours.

Also, phrases like “pays too little” have little meaning. Too little compared to what? China’s wages are low because China’s productivity is low — at least for now. China is where Japan was in the 1950s — a maker of cheap (in every sense) goods. Today, Japan makes high-quality goods and, not coincidentally, pays high wages.

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Nucor employs many people in our area.Despite the slow down at their plant they have not layed one person off.If Eric had to get out there and actually work instead of sitting on his can writing articles for a liberal slanted rag like the Decatur Daily he might have a different attitude.

RESPONSE: Again, the oddity of accusing me of being a liberal when I am objecting to Nucor’s call for trade restraints. I have lots of liberal tendencies and get lambasted for them frequently. In this case, though, Jerry needs to criticize me for being too wedded to a free market and, by extension, “writing for a conservative slanted rag like the Decatur Daily.” Wow, that sounds weird.
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Eric:

I wonder what prompted this tirade in a space where usually offer insightful comments. Nothing like kicking a company when its down (and aren’t they all right now?). I am sure the 700 Nucor-Decatur employees that help pour millions into the local economy appreciate your analysis. Nucor is one of the few American industries that puts its employees and their well being at the top of its priority list, right above productivity and profitability. That’s because Nucor realizes its workers are the backbone of the company.

Let me just say a couple of things about those “whiners” in Nucor’s executive team and then ask a few questions about the comparisons you make to government subsidies here and abroad.

First: Your premise is that Nucor’s management’s complaints about an unfair playing field are prompted by a desire for profit. Is this not what Mr. DiMicco and Mr. Ferriola are paid to do? Nucor’s top executives are responsible first and foremost to Nucor’s stakeholders: its employees, stockholders, suppliers and customers. Making quality products (or providing quality services) profitably is the main goal of capitalism, is it not? So what you characterize as “whining” is in fact the company’s top executives doing exactly what they are being paid to do: trying to assure Nucor is the best, safest most profitable steel company in the United States. If you had ever spoken in person to either Mr. DiMicco or Mr. Ferriola, I doubt you would characterize what they say as “whining.”

But I also take exception to your assertion that Nucor’s government subsidies are on par with those of Chinese steel companies.

Yes, Nucor Decatur received a few hundred thousand dollars in tax breaks to take over bankrupt Trico and build a $180 million galvanizing line. It’s not as if the EDA just gave that money away. Nucor Decatur now has about 700 employees all making excellent wages and pumping that money back into the local economy. But those tax breaks are miniscule compared to Nucor’s costs. Do you have any idea how much money it costs just for Nucor to operate? I suspect it takes the local plant about two minutes of operation to burn through that government subsidy you give so much weight.

An analogy: Two produce merchants try to sell apples on the free and open market. The first gathers his bushels and opens a stand at the farmer’s market. In exchange for operating locally, the government gives him one apple. The second merchant, however, is given an entire orchard (and the labor to pick them). Do you think the first can hope to compete with the second on the open market?

As far as Nucor getting a break for buying Trico out of bankruptcy (although Nucor got no preferential treatment; anyone, including Chinese investors, could have done the same): Thank heavens it’s true! 700 jobs paying an average of $75,000 annually kept in the local economy.

Eric, saying Nucor gets a government subsidy just as the Chinese steel companies do is like saying you make a wage just like Bill Gates makes a wage. Its true, but there is a massive difference in scale. The two cannot reasonably be compared. Would you call your purchasing power vs. Mr. Gates’ a “level playing field?”

As far as the “buy American” provision of the stimulus plan: Do you really think it is a bad thing for the U.S. government to support American companies and American jobs with American tax dollars? Certainly the government should purchase goods and services prudently. But how does it help Americans to buy inferior steel products from China? The result is just more of our economy being shipped across the ocean and more Americans out of work. Is that really what we need to stimulate our economy?

A question about your facts: How does Nucor benefit from government subsidies to Boeing? I do not believe the two do business together.

Your “painful truth” that Nucor wants to be able to charge domestic customers more for its steel is true, but I fail to see the pain. Nucor has for decades been a responsible company, providing quality products while operating safely and responsibly. As noted above, it has a responsibility to employees, stockholders and other stakeholders to be profitable. What Mr. Dimicco and Ferriola are saying, I believe, is that, if we don’t try to level the playing field by providing some assistance to allow the domestic steel industry to compete with foreign companies that pay no wages and have no environmental regulations and are willing to dump their products in the U.S. at a loss (because they are subsidized), there may soon BE no domestic steel industry.

I guess all those American steel workers could go out and flip hamburgers, but then again there may not be anyone to buy them.

RESPONSE: Good comment, Bob, but unfair. I nowhere criticized Nucor employees; far from it. My point and yours are the same: that Nucor corporate is seeking restraints on trade to increase profits. If they are honest about that, no problem. They wrap it up in a flag, though, and get on governmental boards to espouse it. They are affecting U.S. policy, even though the policies they advocate hurt many American companies and consumers.

You seek to compare the amount of subsidies Nucor receives to the cost of its operations, but that’s not the issue. Instead, if any comparison is relevant, it should be between subsidies Nucor receives and subsidies Chinese steelmakers receive. The comparison is impossible. Nucor can pick out isolated benefits that are higher in China, but what about the infrastructure in a developed versus a developing country? What about the training and literacy of the workforce available to Nucor? What about differing military priorities and the resulting difference in tax burdens? That, Bob, is my point. Nucor’s argument for “fair trade” is really an argument for no trade at all. We cannot even identify, much less correct, all the disparities facing companies in different nations.

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Franklin: Why should the yuan be pegged to the dollar? Is China’s economy identical to ours? Shouldn’t Chinese currency fluctuate with the Chinese (or global, if we had a global currency) economy? And what about the environment? Should the U.S. abandon all environmental regulation and let companies foul the earth, water and air so that they can compete with companies in countries that allow that? Because, lacking some global organization that places a monetary value on environmental responsibility, it becomes an either/or situation. How can we expect domestic companies to spend hundreds of millions of dollars on scrubbers and smokestacks and disposal and treatment and still compete with companies that make the same product while killing the earth, air and water?

Eric: Why don’t you call Mr. DiMicco and Mr. Ferriola and present these arguments to them for a follow-up? You just might find that people out in the world running companies that make products and circulate tens of billions of dollars in the economy annually have a better grasp of what will work and what will lead to failure than some economics professor in an ivory tower or some columnist sitting at his computer.

RESPONSE: Always happy to speak with them, Bob, but I’ve heard their arguments against free trade for several years.
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Your a jackass.

RESPONSE: Ouch.
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Why be a hater of a company that brings so much economic and community service to not only Decatur but also Morgan County. I wish you could possibly, by a miracle, write a postivie article on Nucor someday as the Decatur Daily seems to be very negative and one sided on the issue of Nucor as well as most other issues. In my opionion good journalism is about giving both sides of the story and allowing a reader to make up his or her own mind. Can you imagine the economic impact on this area if Nucor only cared about profit and laid off its 700 team members or closed down the mill, gosh that might mean that you would actually suffer the economic and social effects. Nucor is a wonderful company and has done many things to support Decatur and Morgan County. If you really want to write a good article, talk to the people that work at Nucor in Decatur, learn Nucor’s culture, and try to be positive for your own city’s sake and well being. Negativity breeds hate and more negativity which we really do not need in our country. As another reader stated, why not research how China treats their steel employees and check into their safety record.

RESPONSE: I don’t hate Nucor. Check out, for example, www.decaturdaily.com/detail/33892.html. Or even look closely at the jacket I’m wearing in the photo on this page.

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Thanks for the objective article. The same people railing against socialism can not see the protectionism and corporatism “American” companies commit right in front of their eyes.

Wendy: It is not a black and white world. While I am not a socialist and certainly am not one of those who rants about how our country is headed in that direction, I am also not a total “free market” capitalist. I am a “fair market” capitalist. Until the WTO establishes a level global playing field, U.S. manufacturers are going to be trying to compete with one hand behind their backs. In the meantime we must try to do all we can to support American companies by buying American-made products. I, for one, refuse to shop at the big-box Mart that sells cheap Chinese goods. Those products may save the consumer a few pennies at the store, but they’ll cost a whole lot more in terms of environmental and economic damage. I am proud to support America’s manufacturers. “Protectionism” is a dirty word only to those who haven’t been out there making products and trying to compete with the likes of India, Brazil, China and Turkey.

For some, like me, it is, Bob. A FAIR market in my opinion is a completely FREE market….where all individuals are given equal access to sell, produce and buy goods and services at a value two parties agree to voluntarily. Don’t the citizens of Brazil, India, Turkey, etc…. have the right to produce (at a wage they voluntarily agree to work for) and sell an item to a consumer who is willing to pay that agreed upon price? I am proud to buy the best product at the best price, regardless of where it is made because I know my purchase is going to a worthy individual/ business.

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An economics class would be good to take if you believe that a completely FREE market is the only fair thing to do. If you look at some of the countries, like China, as far as their child labor laws, environmental regulations, trade agreements, etc., you would probably change your mind. Some of these people in factories in other countries work long hours for little pay and still live in extreme proverty, is that FAIR? Our environmental regulations in the US are much more stringent than China and many other countries. It isn’t just about who can make a product cheaper, it is about child labor, safe working conditions, environmental issues, etc. When one says that they that they are proud to buy the best product at the best price, regardless of where it is made, well how do you know that is true. Are you researching how that product is made, how that country treats its citizens, what do they do to protect the environment, etc. It isn’t just about price, you have to look deeper. It is about having a fair playing field, not protectionism.

RESPONSE: I’m not sure about Wendy’s view — although I really appreciate her comments given the venom in many of the others — but my thinking is we cannot achieve a perfectly fair market. The closest we can come is a free market. Effectively, Nucor is arguing that its presence in the United States handicaps it relative to its competitors in China. Think about that. It exists in a capitalist market, and believes companies in a quasi-Communist market have an advantage in production. That’s backwards. Nucor can pay its management as much as it wants. Nucor has employees who make more if they produce more, as opposed to “from each according to his ability, to each according to his need.” Nucor has a well-educated workforce from which to choose; China steelmakers do not. Nucor benefits from TVA and Decatur Utilities, while Chinese steelmakers are stuck with a third-world infrastructure. Nucor employees are strong because they benefit from good food and a healthy environment, unlike Chinese workers.

In its effort to block competition and increase the price of its steel, Nucor is selecting a handful of disparities that tend to favor Chinese companies. That is my objection. If it was possible to create “fair trade” — trade that balanced every characteristic faced by manufacturers in different nations — I might favor the effort. Realistically, though, that is not possible. Free international trade is the closest approximation of “fair trade” possible. If capitalism is indeed the best economic system, we should not fear free international trade.

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Filed under Free Market, steel, stimulus

Nucor’s anti-China talk aimed at profit

Nucor Corp. is an awesome company, and we are fortunate to have it in Decatur. But geez, I wish its corporate officials would quit whining.

“We can compete in innovation, on costs and productivity, but we cannot compete with governments,” Chief Executive Officer Dan DiMicco said last week. “Law enforcement is the job of the government, and we have to have a government that works with us and not against us.”

A year ago, it sponsored a massive rally in Decatur — one of several throughout the nation — designed entirely to pressure Congress to raise trade barriers on Chinese steel.

“Given a level playing field, do you fear competition with China?” yelled John Ferriola, chief operating officer of steelmaking operations at Nucor, at the Decatur rally.

“No,” the crowd yelled back.

Neither Nucor nor China, however, seeks a level playing field. They want it to tilt, provided it tilts toward their owners. Nucor has discovered that while quality steel improves profits, politics does, too.

Nucor constantly pushes for a dam to prevent the flood of steel from China. China subsidizes its steel companies, Nucor complains. It has lax environmental laws. It pays its workers too little. It lacks the safety laws that increase costs for U.S. steelmakers.

There is a measure of truth to everything Nucor says, but China could say similar things.

Nucor has enjoyed tax abatements from local government. That’s a subsidy.

Nucor will be a major beneficiary of the federal stimulus package that focuses on infrastructure. Another subsidy.

Every federal effort to make commercial paper available to domestic industry has, directly or indirectly, benefited Nucor. A subsidy.

Nucor benefits from subsidies to automakers and Boeing. It benefited from U.S. law that permitted it to buy a bankrupt Trico at low cost.

Indeed, even as it gripes at China and other steel exporters, Nucor has instituted a major push for the federal government to use stimulus dollars solely for U.S.-made steel.

A “Buy American” provision made it into the stimulus plan.

Highlighting the contradictions is the German-owned ThyssenKrupp plant in Mobile. Is that un-American steel, despite the fact it will be one of the largest employers in Alabama?

Nucor, for all its patriotism, is not just a U.S. company. It also has operations in Trinidad and Canada.

In the midst of all this is the painful truth. Nucor’s aggressive lobby has one goal: to be able to charge domestic customers more for its steel.

But what about workers at companies who buy from Nucor, or pay more for steel because of Nucor’s protectionist efforts? General Electric, Delphi, Independence Tube, United Launch Alliance. Or consumers who pay more for their cars or their buildings?

Nucor is a good company. It treats its employees well; it goes to great lengths to avoid layoffs despite lousy economic times; and it values employee safety.

When Nucor rattles on about China and Turkey, though, we need to evaluate the rhetoric carefully. Like every other company, its goal is increasing profit.

Contact Eric Fleischauer at his blog, http://www.mile304.com, or at eric@decaturdaily.com.

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