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.

======================================================

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.

======================================================

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.

======================================================

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.

======================================================

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.
======================================================

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.

======================================================

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.
======================================================

Your a jackass.

RESPONSE: Ouch.
======================================================

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.

======================================================

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.

======================================================

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.

Advertisements

2 Comments

Filed under Free Market, steel, stimulus

2 responses to “Nucor and free trade: addressing my detractors

  1. Bob

    Believe it or not, Eric, Wal-Mart DOES sell a lot of steel. Televisions, computers, refrigerators, recliners, wheelbarrows, shovels, rakes, lawn mowers, washers, dryers, dinnerware, desks, chairs, ladders, file cabinets, safes, guns, knives, doors, nuts, bolts, screws, nails, the list of items made with steel parts goes on and on.
    As for as my comment about Nucor’s cost of operations vs. government assistance: It is pertinent. My point is the amount of assistance you give so much weight in your column is less than a drop in the bucket compared to the company’s operating costs. This is not true for Chinese steel companies. “… if any comparison is relevant, it should be between subsidies Nucor receives and subsidies Chinese steelmakers receive.” I agree. I, however, do not think that is impossible. Let me get some figures to back up my analogies of the apple merchant and your wages vs. Bill Gates’ (which you do not address in your response) and get back to you. I understand what you are saying about trianing and infrastructure. But I think, when you see the disparity, while you might not be able to compare exactly apples to apples, you will be surprised at the vast difference.

  2. Bob

    Eric: Some figures.
    The Chinese government owns 90 percent of the country’s steel industry. The Chinese government granted more than $52 billion in subsidies to steel producers between 2002 and 2007, making China’s steel capacity four to five times larger than the entire North American steel industry, according to American Iron and Steel Institute. In 2007, energy subsidies to Chinese steel are estimated at approximately $15.7 billion, showing a 3,800 percent increase since 2000, according to Alliance for American Manufacturing. According to World Bank, 20 of the Earth’s 30 most polluted cities are in China.
    Back to my apple analogy: How can the guy who gets one apple compete in an open market with the guy receiving a whole orchard?
    All the domestic steel industry is seeking is a fairer global marketplace. I do not believe China can sustain this level of subsidy of its steel industry for long. I just hope the U.S. industry can hold out until Chinese resources dry up.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s