Friday, January 30, 2009

Obama Protectionist? Who Would Have Thought?

Last year, especially when campaigning for the Democratic nomination, Barack Obama talked openly about re-negotiating NAFTA, and setting up trade barriers for foreign goods. Now that he appears to be doing this, Canadians are acting shocked. Originally, I was for McCain because he said he would honour NAFTA and even came up to Ottawa to make a speech about it and reassure people. It didn't make a difference though, as Obama is far more popular. It just shows what a popularity contest the whole thing is. People don't care about the issues, even if it affects them.

Armed with his new $800 billion dollar pork package, the US will have a "made in America" clause for steel that goes into new works. The Canadian steel industry is worried:

Industry Minister Tony Clement also did not hide his unease.

"We're always concerned when there are protectionist pressures in the United States," he told CBC News.

"The U.S. Congress is a place where you get manifestations of protectionist pressures, there's no doubt about that," he added.

"At the same time, the United States has treaty obligations that they have signed on to — NAFTA is one, the World Trade Organization is another — and we expect the United States to live up to its treaty obligations of open and fair trade."

Canadian steel producers and builders say they have "grave, grave concerns" about the bill.

This is absurd on many different levels. If the Canadian steel industry starts losing revenue because of this, we will no doubt prop it up with our own pork. (If we don't already.)

Protectionism is one of those populist issues that people can't get their head around. In the US they fear that the steel mills will close and people will lose jobs. The problem is, there are twenty times more people employed constructing things out of steel than making raw steel. Getting cheaper steel from abroad helps the economy much more.

What does it matter anyway? These are make work projects and they don't care about costs and profits.

Hat tip: Strack Attack


  1. Protectionism is a characteristic of a negative social mood. In down economies there are social aspects that appear such as; tariffs, wars, declining birth rates, movies and popular books with dark and or horror themes, increase interest in religion, and the hatred of political leaders.
    In optimistic environments, people invest and take business risks, the birth rate increases, peace instead of war, countries co-operate with one another with trade and commerce.
    This is what central bankers to not understand. In Japan interest rates were at zero for many years, but business never took off. People need to feel optimistic before they start a new business.
    So Strack you can expect more protectionism world wide over the next couple of years. The NDP are already calling for the government to enact the same tariff provisions the US just announced. Yes its terrible and will lower everyone`s standard of living, but it is going to happen.

  2. Very interesting. I feel the mood these days among people I talk to. Nobody wants to invest or buy property. The newspapers scream that the worst is yet to come, you feel like stocking up on food and ammo, not starting a business.

  3. Yes exactly the point. Remember how big the survivalist movement became in the 70s. It just faded away in the 1980s, because the social mood was positive.
    You can trace literature back for centuries, and observe the swing back and forth from negative to positive social moods. Edger Allan Poe became very popular during a bad economic downturn. His material would have never sold during a boom period.
    Fitzgerald`s roaring 1920s books were a complete dud in the 1930s.
    Movies in the modern period also reflect this. King Kong in the 1930s was a huge hit. Jaws and The Exorcist in the 1970s were also big hits. Compare the 1970s Deer Hunter movie (war is awful)to a 1950s John Wayne war movie.
    During downturns people become rather nasty. Villains become heroes like Bonnie and Clyde, or Dillinger in the 30s.In England Dick Turpin The Highwayman, was very popular because the economy was down. Vulgar behavior becomes fashionable in economic downturns, like streaking in the 1970s. Economics is not just about numbers, there is also a social aspect. Human beings are not numbers.