WASHINGTON, D.C. — The battle over “Buy America” — one that could have serious consequences for Minnesota’s Iron Range — came to a head on Wednesday night when the Senate agreed to temper provisions in the economic stimulus package that would require U.S.-made iron, steel and manufactured goods to be used in public works projects funded through the bill.
The Senate version, which expanded on the “Buy America” measures passed by the House, sparked something of a controversy in Washington and overseas this week with the European Union threatening retaliation and even President Barack Obama advising against sending a “protectionist message” and essentially urging Congress to revise the language.
At the same time, members of the United Steelworkers union, many traveling from North Eastern Minnesota, descended on the Capitol Tuesday and Wednesday to lobby in support of the strengthened measures that (for the purposes of the stimulus money) would expand on a 1982 law basically requiring that U.S. steel and iron be used in federal highway and transit projects.
“Why should we give our stimulus package over, and buy our steel from foreign companies when we can buy it right here in the state?” said Ray Pierce Sr., president of the United Steelworkers Local 6115 at the Virginia, Minn., taconite plant, who traveled with others to Washington, D.C., to meet with Iron Range Rep. Jim Oberstar (D-Minn.) and Sen. Amy Klobuchar (D-Minn.).
Plant shutting down
Pierce, who works at Minorca Mine, which is owned by steelmaking giant ArcelorMittal, said that his plant may be shutting down temporarily this year because of the economy.
“We are the ones right now that are hurting,” said Pierce. “Let’s get our economy picked back up and growing rather than sit there and take this big stimulus package and put the money overseas.”
The amendment that the Senate accepted on a voice vote Wednesday night added language, which specified that the provisions should be “applied in a manner consistent with United States obligations under international agreements.”
The United States has treaties with more than 50 countries. Those nations may now be eligible for exceptions to the restrictions.
Craig Pagel, president of the Iron Mining Association of Minnesota, an industry group and lobbying organization, said that it was hard to tell just yet how the amendment might affect Minnesota.
“The economic impact to northeastern Minnesota may not be as great as it would have been if it would have required that only steel poured in the United States be used,” Pagel said.
The Senate rejected another amendment that would have gone much further by eliminating all the “Buy America” provisions. The amendment, offered by Sen. John McCain (R-Ariz.), was soundly defeated by a 65 to 31 vote. Earlier in the day, however, the suggestion that the provisions might be removed from the bill provoked strong words of frustration from Oberstar.
“If this ‘buy-America’ provision is not in this legislation, I’m off, I’m not supporting it,” Oberstar said. “I’m not going to have U.S. taxpayer dollars support foreign steel to displace U.S. steel workers in the mills and in the mines. Period.”
Given the support for the provisions in both the House and Senate, it is not likely that Oberstar will have to make good on this ultimatum — but the controversy over “Buy America” still raises some interesting questions.
Pros and cons of ‘Buy America’
On the one hand, “Buy America” supporters argue that the provision will have a direct and positive effect on American lives and therefore the U.S. economy. The Iron Range, for instance, produces about 80 percent of the nation’s iron ore, which is used in making steel. More demand equals more jobs equals more people paying taxes on social security, health care, and, of course, more spending.
On the Iron Range, it’s simple: “Mining is the engine that drives the economy,” Pagel said.
To make his point that it would be absurd not to use U.S. iron and steel in U.S. transportation and infrastructure projects, Oberstar reflects on a the Bong Memorial Bridge, which connects Duluth to Superior, Wis. At the time of construction, Oberstar led an effort to prevent Japanese steel from being used in the bridge.
“I said, ‘We’ll have iron ore from the Mesabi Range going under a bridge built with Japanese steel… intolerable,” Oberstar said.
In an interview with MinnPost Wednesday, Oberstar also pointed out that as other countries —particularly China — see their economies decline, the market place is likely to be flooded with excess steel.
“So they are going to dump that steel in the world market place. And, where do you think it is going to go? The U.S. open market,” said Oberstar.
To put this into some perspective, in 2007, the U.S. produced about 91.5 million tons of crude steel. China produced 502 million.
On the other hand, economists have argued that the “Buy America” provisions might do more damage than good. A study by the Peterson Institute for International economics suggested that the provisions could adversely affect international trade and U.S. reputation abroad. The study said that the provisions would create about 9,000 U.S. jobs but that the resulting retaliation overseas would hurt U.S. exports and may cost at least 6,500 U.S. jobs.
Similarly, the U.S. Chamber of Commerce has come out against the measures, saying that they violate free trade.
“It might help one sector for a limited period of time… but overall there is a high probability of losing thousands of more jobs,” said Chris Braddok, director of procurement policy at the U.S. Chamber of Commerce.
Terry Roe, director of the Center for Political Economy at the University of Minnesota, agreed that the provisions represented a tradeoff.
“This would certainly mean an increase in employment and continuing processing of Taconite ore, which is actually pretty high quality,” said Roe, but he added that the U.S. products are likely to be “bought at a higher price than we can get them in the world market. Therefore the goods that are ultimately produced will enter our market at a higher price.”
Cynthia Dizikes covers Minnesota’s congressional delegation and reports on issues and developments in Washington, D.C. She can be reached at cdizikes[at]minnpost[dot]com.