Could "Buy American" Rule Spark Trade War?

Some Businesses Fear Clause In Economic Stimulus Package Could Hurt Their Exports

(CBS)  This story was first published on Feb. 15, 2009. It was updated on May 21, 2009.

Steel - the so called "backbone of America" - is suffering. The credit crisis has hit the industry hard. Steel plants across the country are hanging on until the federal stimulus package kicks in with its over $100 billion for building things like highways, bridges, and power grids, and its promise to get workers back into their hard hats.

As 60 Minutes first reported in February, the package includes a "buy American" clause that the steel industry fought hard for. It says any infrastructure project paid for with stimulus dollars must use steel made in the U.S.A., and not cheaper imports.

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"The whole purpose of your stimulus package, and it's the right purpose, is to stop the bleeding of jobs and to create new jobs here in America, not overseas, not in China, not in Europe," Dan DiMicco, the CEO of Nucor, told correspondent Lesley Stahl.

Nucor is the biggest steel maker in the United States, with 18 plants all across the country, including one outside Blytheville, Ark., along the Mississippi River.

Plant manager Doug Jellison told 60 Minutes Nucor has revolutionized the way steel is made.

Instead of using expensive iron ore to make steel, Nucor uses mostly scrap - anything with steel, like crushed cars or old washing machines. "We are the largest recycler in North America," Jellison explained.

Over the last five years, Jellison's plant, like the U.S. steel industry as a whole, saw its profits soar. By mid-2008 Nucor had hit an all-time high. But then things changed, overnight.

"Just went off a cliff," DiMicco explained. "When the credit crisis hit, the water shut off. The flow of money shut off. It was like dominoes, boom-boom-boom-boom, boom-boom. I've never seen anything like this and no one else has in our lifetimes."

That was in October. Clients, from homebuilders to carmakers, simply vanished. Up until then, the plant was running on all cylinders, with tons of scrap cooking around the clock, seven days a week.

Curiously, they call the Blytheville plant a "mini mill," though there's nothing mini about it. It's a mini mill because they use a jolt from electrodes in a small furnace, instead of heating a huge one with coal.

Loud explosion-like sounds happen when electricity hits the metal. The process is run from a control room called the "pulpit." The operator raises the temperature to nearly 3,000 degrees, and pours the witches' brew - the steel - into a cauldron.

The cauldron is transported to something called a caster run out, where the molten steel is molded and cut into beams.

Mini mills can make steel more cheaply than it used to be made, more quickly and more efficiently. "We can literally start and stop our process like you flip a light switch on and off. So we can run full out and then, if the orders back off and we need to shut down, we just turn the light switch off," DiMicco explained.

And since October, that's what they've had to do. Nucor's employees watched helplessly as the number of new steel orders plummeted.

"It just kept droppin' and droppin' and droppin'," one employee said.

"One week, we actually had a negative," another explained.

The reason for that were order cancellations.

Mounds of scrap usually clear out in a week. But an apocalyptic landscape of metal has been sitting at the plant for months. Other steel companies have dealt with the slowdown by padlocking plants and sending workers home.

DiMicco told Stahl Nucor has not closed any of its plants. Instead, the plants are running at 50 percent capacity: facilities look like ghost towns, and yet, while well over 25,000 steelworkers have been laid off around the country, not a single worker at Nucor has.

"That's the big difference in us sitting here and you interviewing some other steel company. Because when we go through the gate, we don't have to worry about losing our job," one employee told Stahl.

Which isn't to say they aren't feeling the pain: with all of Nucor’s plants non-union, the salaries of its more than 20,000 employees are tied to productivity, and productivity is now half.

Employees Stahl talked to told her they saw their salaries drop by about 50 percent.

[eyesC]

Fools, where do you think it went? China is expanding and needs vast amounts of steel, they can produce in mass volume without having to worry about restrictions. The market for steel isn't in here in the Socialist States of Obama not even Goverment Motors can use the amount of steel that China needs. Even the once thought recession proof Caterpillar will be crawling in the shoes of GM within the next few months. Then the Chinese will sell us just enough to get by on and we'll love them and WALMART for it!

[dmalman]

June 1/09
I really thought Lesley Stahl was on target with her report. Just this week the Federation of Canadian Municipalities is voting to direct purchases to countries that do not restrict Canadian Trade. It is my understanding that cities that border the USA in Ontario are already boycoting USA products for their municipalities. Protectionism is BAD,BAD, BAD.
D Malman

[jspeyton]

This is my first comment to 60 Minutes. I agree with the various posters that say that free trade is not free trade. My reason for believing this is people don't have enough information to make good choices.

I believe that the people of China would be better off if they joined the worldwide economic community on an equal footing. But my experience is that Chinese manufacturers do not "play by the rules."

First, Chinese manufacturing plants are far dirtier, less efficient, and bad for the environment than those in the US or Europe. We are paying for buying cheap goods with poor health. (The prevailing winds send the soot and pollution right over California.)

Second, many Chinese manufacturers use shortcuts that would be illegal here when manufacturing goods. That is why automobile owners get burned when they buy counterfeit replacement parts. That is why dogs in the US died from eating dog food tainted with additives prepared in China. That is why pharmaceutical manufacturers have had to recall their products made with ingredients from China. That is why children throughout Asia died when given formula made with illegal supplements. That is why Western chocolate companies that subcontracted manufacture of some of their products to China for distribution in Asia were burned when milk additives contained illegal additives.

And that is why I am having trouble with a garden plant hanger bought from Home Depot. I bought the heaviest, most durable two-hook plant hanger I could find. It was heavy - gauge steel and I thought sufficiently durable for Chicago winds. A week after I installed the baskets, during a thunderstorm, the hanger bent like a piece of cooked spaghetti.

I took it to a welder who told me that it is soft, Chinese steel.

Now, what do I know about soft steel or hard steel??? All I wanted was a durable hanger for my garden. But I am going to pay THREE times the cost of the original hanger to get it reinforced with American-forged steel.

Now, why can't I buy an American-forged steel plant hanger? I looked all over the Internet. All sites carry the same model, probably from the same manufacturer. I am offered no choice.

What I would like is to be better informed. Now I now know that there are all kinds of steel. I would like to be able to choose one that would actually be able to stand a little bit of wind. Believe me, I would pay extra for it. But store buyers are all buying in price, not quality. And that is the problem.

In looking at the story about the US mini-steel mill, I would LOVE go be able to buy products made in the US from recycled steel, but I am not given the choice.

And given that the issue of the story was about a "Buy American" provision for infrastructure projects, I would be TERRIFIED to drive on a bridge made with Chinese soft steel, bought based on price and not on quality. Remember what happened in Minneapolis. If 60 Minutes were doing their job, I would like to know where THAT steel came from.

Based on my experience with food, car parts, lawn ornaments, clothes, toys (remember the lead-based paint on the trains), shoes and umbrellas, I am more than willing to pay more to buy things made anywhere BUT China.

[larrydaddy]

Dear Lesley Stahi
I watch 60 minutes every Sunday at 7:00 pm on CBS. I have never had a real disagreement with most of your shows, but the one on May 21 2009 made me angry! In the first places if our Government hadn?t opened our market up to the world for free we would not be in this economy situation! If they had not paid the corporation to take their business over sea we would not be in this situation. You and your entire rich friend don?t seem to care about the working men & women who are losing their jobs and health care and retirement. The funny part about all of this is you and your rich buddy will end in the same sinking boat as the rest of us some day! I feel that every corporation that sends work over sea is anti American, because they support child lobar and are against human rights. Weather you are a union member or not has nothing to do with all the American good paying jobs that are going over sea. Some of the products that come back to be sold here are poising our own America people and people like you don?t seem to care. Our Government and rich greedy people did this to America! It?s sad that you are one of them.
Larry S. Palmer
726 32nd street sw
Wyoming MI 49509

[inachu1]

Buy American rule is not bad.
But it will not do any good.
Everything was outsourced or moved overseas.

Nothing left to make in the USA unless we export american workers to where the jobs are. SHould John Doe be sent out to work at his company in India to make a halfway decent living wage?
Should his income be taxed twice when he enters the USA? Once while overseas and again while he is in USA?

I would love to buy a computer that was 100% made in USA. All the pcb motherboards,transistors,capacitors,resistors,cmos chips.SMT technology.
If those things were made including the software then yes I would be one proud American.
The Idea of being an American is being dilouted.

[rfdald]

Jim Owen reflects the attitude of corporate America. He's willing to concern himself with living wage jobs for American workers as long as there is no negative impact on the profitability of his company. He wants taxpayer money to facilitate the purchase of cheaper foreign made materials and/or the exodus of production to foreign shores. Obviously the beneficiaries are primarily his investors, many of whom are non-American.. With disgusting numbers of American investors hiding their income in tax havens in the Caribbean, the benefit to American workers and taxpayers is minimal to non-existent..

[q42]

Fire "the best congress that money can buy" and take back your country. President Teddy Roosevelt did not sellout his countrymen in 1904 by exporting production but our leaders since Nixon has.

Stop giving tax breaks for exporting jobs, stop tarp money to off-shore companies, start to charge import duties at the same rate that we are charged to export to that country..

[middleman8]

The people who cry " Buy American " must also read only " American ".

Other wise they would find out the U S is the most subsidised country in the world.

What do they think the "Stimulus package" is ?

Why should people have to pay for overpriced products so some can set on their ass

and live high off the hog ?

[american_11-2009]

The Democrats infrastructure and construction bailout jobs program is more of the same old scam!

The tax payers that have obeyed the laws, paid the taxes and fought the wars and built this Nation are getting screwed by Corrupt/Stupid/Pandering Politicians and Greedy crooks at every level!

This is the same old scam, reward the Rich Bankers with billions in tax payers money and the invading horde of illegals Aliens with Jobs, Free medical, Free education, Welfare, Prison cells and make American Citizens pay for every Crook, Criminal, Peon, Welfare Leech and Marxist or Racist organization like ACORN or La Raza in the world!

The infrastructure and construction jobs without E-verify will put the millions of Illegal Aliens back to work, so they can send money home to support Mexico & South American at the expense of American workers and our economy! The contractors can charge the tax payers union scale, hire Illegals at slave wages, pocket the profits and American citizens pay both the wages and the billions in cost to educate the illegals many children, provide medical, welfare and prison cells.

You would think the Politicians would be content with just outsourcing all the jobs that can be done offshore but No they want to bring in Slave labor & Welfare votes ( while ignoring Article IV Section IV of our Constitution against invasion, the rule of Law, and their Oath of office) to take the jobs that cannot be outsourced! To add insult to injury they make the American citizens still working pay billions in extra taxes for schooling, provide medical, welfare and jail cells for the invading horde that are taking our jobs and driving down our standard of living! While keeping busy Robbing, Raping and Killing American citizens at an rate that Bin Laden can only dream about!

The Democrats love the millions of Welfare votes to further their Socialist agenda & the Republicans love the slave labor for their Pay Masters in the Chamber of Commerce and business.

If we are realistic and look at the havoc caused by the millions of invading Hispanics on our communities, culture, crime, economy, welfare, taxes, environment, schooling and standard of living the only conclusion possible is that no Nation can withstand or assimilate an tidal wave of Uneducated Third world citizens that come here illegally from another culture, for the jobs and welfare, while keeping loyally to their home countries!

This Nation is changing to the very same type of culture and society the invading millions have created, built and sustained for 100,s of years and are now fleeing in their own Countries!

One has to only look at Calif. which is basically an Bankrupt state that cannot afford to provide Welfare, Schooling, Medical, Prison cells etc. for millions of MS-13 Gang bangers, Drug dealers, Rapist and other assorted Criminals and uneducated third world rejects from Mexico!

In a very few years it will be impossible to see where Mexico ends and California begins without reading the signs as both will be an third world cesspool!

Failure to secure our borders and reward the Invading horde for their invasion and their relatives in an never ending chain with American Citizenship is nothing less then committing National Suicide & will assure our future is an over populated Spanish speaking third world Nation that is an Cesspool of Corruption, Crime, Poverty and Misery just like Mexico!

[prantha]

I do not want my hard-earned tax money to pay for cheaper Chinese steel. If I am going to give Catepillar money to purchase steel, I want my money to stimulate American jobs; not Chinese jobs. Period.

[nilesholinger]

I have seen the update. Leslie, $87,000.00 is not doing too badly in anybody's economy! Considering most of the midwest is getting by on ten bucks an hour, and small towns with any kid of a highway now rely on the fast food industry to help their residents pay the firemen and policemen! We in the midwest went through that cycle with Ronald Reagan's first term - jobs lost, replaced with low pay and part time! As for someone to step up and actually say, "Job 1 is to protect yor market." is refreshing. I marvel and am deeply humbled to know their are at least three cultures in the world more ancient than ours here in the good old USA, but, I do not wish to give my last pair of cotton socks to any of them!

[jd2408]

This has nothing to do with trade. We did not go into debt and borrow all this money to stimulate our economy only to have it spent in other countries and stimulate theirs. Our stimulus package is not a company. My grandkids don't need to be paying back a debt that was used to stimulate another countries economy.

To barbaram99 you are way off line. Products made in the USA, when you can find them, are well made. Its the cheap China junk parts that companies import to use on many items that cause a great deal of the problems. American companies try to compete with foreign imports and that is not easy for them to do. I buy American whenever the product is made here even when there are also foreign products cheaper. If we don't start supporting our country soon we will not have one left .

[walt1944]

Back in the 1980's, I worked for a company that did a lot of contract work for the government as a subcontractor.

I would be in charge of coming up with product costs for government bids sent in for the company to bid on items the government wanted. Buried in the some 50 pages of regulations and specifications was a clause labeled "BUY AMERICAN".

This regulation stated that the bidder certified that ALL material used in the construction of the part was MADE IN THE USA, otherwise, don't bother bidding on the contract!

Even though there was a BUY AMERICAN clause in the contract, the company got around that clause by buying its material from Europe BUT going through a broker with offices in the US; in other words, they claimed the material WAS made in the US because the purchase orders and payments were going to a US address, even though they KNEW the material was manufactured offshore!

In other words, it was a huge scam the company was playing on the government!

The moral of this story is that no matter what someone does to insure that jobs and business comes back to the US, Corporate America will find a way to make its profits and scam the government. I can see a lot of product labels being printed here saying "MADE IN THE US", but being sent to China for the Chinese to put on the products made there!

HAIL OBAMA!!!!

[jeffrey678]

TARIFFS OR TAXES I always find it interesting that those who scream for lower corporate taxes always claim that they are necessary for America to compete in the global economy. Is this not using tax policy to undercut other competing nations. Is the use of a Tariff not the same thing? I know that TARIFFS are the handiwork of Satan , but how is undercutting other nations(ignoring the other aspects of underfunded government and high unemployment) any less inflammatory than slapping a TARIFF on their exports? Economic Populist Blog.

[row555111]

I agree. I have no idea who gave her the assignment to do this on the steel industry. Having a spouse employed in the steel mills everything that DiMiacco said was correct. The reason the steel industry is the way it is because of teh dumping on our market by countries that do not have to toe the line in emmissions and safety items that our American mills have too, so they can produce cheaper. Our steel compainies that have gone under because of the market have been bought by foreign companies that the first thing they do is go in and cut the cost of their workers. If they have to toe the line as in emmissions they just close the plant for a while then go back in and rehire. We are being taken to the cleaners. I trully do believe that we need to put tight and restrictive regulations on any import into our country. Whether it is and american company that has "outsourced" american jobs or foreign companies .

[pjnmickey]

I have the utmost respect for steel workers. My maternal grandfather was a steel worker. But, I have little sympathy for someone who has been making 87k a year and is experiencing a 50% pay cut. Perhaps that is WHY American steel is so expensive. Perhaps these folks should have put a little away instead of living at their means. There are many Americans who would GLADLY change places with them just to have a job.

[1jumanji]

First, Mr. DiMicco has a valid point. There is no free trade, and if anyone wants to view protectionism in action, just take a look at our foreign trade "partners." Mr. DiMicco is correct, there is a trade war against us, and we have not shown up yet. More important to this issue, is the misinformation out there about the "Buy American" clause. This is not for all American trade. It is simply for the use of the Stimulus money being sent out from our government to help our economy. If Caterpillar wants to trade, and build its products in Russia, no one is stopping them. However, I think the CEO of Caterpillar was not being totally upfront during this interview. I wish there were better, far more probing questions asked of him that could have pointed to some dishonesty and misrepresentation on his part.
So, if the money is to stimulate our economy, what is the problem with it being spent here?
I really do not get the difficulty in understanding the reasoning behind Mr. DiMicco's position.
We all know that we cannot argue opinions. However, this is sound economic thinking.
Furthermore, why are people attacking Mr. DiMicco, a leader who is looking our for the American working family, hardworking steelworkers, who work a long, arduous, and difficult hours? He is not looking out for himself. With his intellect and education, he could do anything. No, he is standing by his people, and by the hardworking manufacturing workers of this county.
Finally, what I want to know from all those attacking Mr. DiMicco's economic philosophy is just what is free trade to them? Does it mean subsidizing your country's manufacturing so that it can sell its product all over the world for far less than it is manufactured for, and far less than any other free market member who is not subsidized by its government? This is not free trade, this is cheating, pure and simple. Until people are truly aware of what is going on in the manufacturing world, there will be no truly informed discussion of this crisis. To all who read this, walk a mile in the shoes of an American Industry. Period.

[1jumanji]

First, Mr. DiMicco has a valid point. There is no free trade, and if anyone wants to view protectionism in action, just take a look at our foreign trade "partners." Mr. DiMicco is correct, there is a trade war against us, and we have not shown up yet. More important to this issue, is the misinformation out there about the "Buy American" clause. This is not for all American trade. It is simply for the use of the Stimulus money being sent out from our government to help our economy. If Caterpillar wants to trade, and build its products in Russia, no one is stopping them. However, I think the CEO of Caterpillar was not being totally upfront during this interview. I wish there were better, far more probing questions asked of him that could have pointed to some dishonesty and misrepresentation on his part.
So, if the money is to stimulate our economy, what is the problem with it being spent here?
I really do not get the difficulty in understanding the reasoning behind Mr. DiMicco's position.
We all know that we cannot argue opinions. However, this is sound economic thinking.
Furthermore, why are people attacking Mr. DiMicco, a leader who is looking our for the American working family, hardworking steelworkers, who work a long, arduous, and difficult hours? He is not looking out for himself. With his intellect and education, he could do anything. No, he is standing by his people, and by the hardworking manufacturing workers of this county.
Finally, what I want to know from all those attacking Mr. DiMicco's economic philosophy is just what is free trade to them? Does it mean subsidizing your country's manufacturing so that it can sell its product all over the world for far less than it is manufactured for, and far less than any other free market member who is not subsidized by its government? This is not free trade, this is cheating, pure and simple. Until people are truly aware of what is going on in the manufacturing world, there will be no truly informed discussion of this crisis. To all who read this, walk a mile in the shoes of an American Industry. Period.

[bhz1352]

I would like to address the comments about those who are attacking the steelworker for complaining about a pay cut.

My husband works for Nucor and was also making 80,000+ per year. Two of his last four pay checks after taxes, health insurance, retirement and weekly car payment have been $0.00. The other two have been for just over $100. This has been going on for 5 months now. This, along with my job (where hours have also been cut) plus my second part-time job is not making ends meet. As for savings, yes, we had a savings account, but that was used up quickly. Yes, I thank the Good Lord that he does still have a job, but with 3 children to feed he could be making more sitting safely at home drawing unemployment. But he will not do that. If we can work for our money we will.

Why should he not earn more money than an average worker? He works 12 hour shifts, 4 days on 4 days off, then 4 nights on. He works, he does not sit in an air conditioned office. He gets dirty and he occasionally gets burned. Making steel is a dangerous job and the workers should be compensated for that. Why not attack the basketball player who gets paid millions to dribble a ball up and down the court? Why not attack a movie star or celebrity who makes millions just because of their looks?

As for the comment about them not having a college education, you might be surprised to find that a good deal of the steelworkers at Nucor-IN do have college degrees. Making steel is probably a good deal more complicated than your small minds could comprehend.

[murph0619]

Mr. DiMicco should should stand by his beliefs and quit buying Japanese Electrodes thats what they use in most of thier plants.