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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2 Comments

Filed under Free Market, steel

2 responses to “Ragging on Nucor

  1. Peter Mitchell

    Free Trade is a great academic theory which has completely failed in practice. NAFTA proponents promised that Free Trade would create jobs and increase exports. Well, we now have 12 years of data to examine and Free Trade promises have failed to materialize. Rather, we have shipped approximately 5 million jobs overseas, and the USA is now going into trade debt at the rate of $800 billion/year. If you consider that for every manufacturing jobs we lose, we also lose 5 secondary jobs, it’s easy to see why we have plunged the USA into recsession. In your personal situation, as manufacturers scale back their advertsiing spending, the Decatur Daily may have to eliminate your job. So – maybe you should stop trying to defend the academic theorists, and let’s stop being naive. These extreme Free Trade agreements have to be more sensibly constructed to provide USA benefits.

  2. Jonathan Miles

    You may call my comments “protectionist” but as a Nucor teammate your closing line is disturbing. Nucor is successful because we produce the lowest cost steel products without sacrificing safety or quality.

    Nucor cannot compete in a “Free Market” with China unless our government lends a helping hand and ENFORCES the laws that are already part of the WTO agreement. Our government has been lax in regards to China flooding the US market with subsidized, cheap steel. The EU has recently won a judgement against the Chinese for dumping so you can’t argue that they don’t do it. I’m not going to get into the currency manipulation aspect of the argument because our beloved Sec. of Treas. recently said this wasn’t the case and we all trust the government right (LOL)? Passing Cap/Trade laws only compounds our problems, putting American manufacturing at a bigger disadvantage and sending more jobs overseas. Where does that figure into those “jobs saved” figures that were being touted in the media?

    The imbalance in trade is the FUNDAMENTAL problem that needs to be resolved. Holding China accountable for their mercantilist policies is only a start in the right direction. American manufacturing will be a thing of the past unless our elected officials do something to combat this issue. You can scream “protectionist” until your blue in the face but you better learn to say it in Mandarin or Wu.

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