This, which I got to via the Mises Economics Blog (such is the world these days), is not good. It is from today’s London Evening Standard:
GEORGE Bush’s administration has called on US companies in Britain to relocate jobs to America in an astonishing move that could trigger a major trade war.
US-based multinationals have been told they will receive compensation from American trade authorities if they cancel contracts in Britain and take jobs home, according to CBI director-general Digby Jones.
The allegations come only a day before Bush arrives in London for his controversial State visit and escalate the storm of protest he has already caused by slapping big protectionist tariffs on European steel imports.
Speaking at the CBI’s annual conference in Birmingham, Jones said: ‘Three chief executives of American companies investing in Britain have told me to my face that they have been told to close down, bring their stuff home and make it in the US.’
For as long as I can remember, I have been telling myself and anyone else who will listen that the very existence and widespread use of the phrase ‘trade war’ – as opposed to the cuddly version: protection – is evidence that the world now understands how deeply dangerous trade wars can be. Now I am not so sure. Not only is Bush provoking a ‘trade war’, but people on this side of the Atlantic seem keen to make the absolute most of this that they can. This is just want Europe in the worst sense wants, and Britain in the best sense does not.
No wonder the CBI (Confederation of British Industry) – which loves big business and hates small business, which thus favours regulation of the sort that big business can live with and small business can not, and which thus favours Britain being locked into the EU – is flagging up this stuff. It is grist to their EUro-mill, a multi-coloured EU rag to all their fat cat bulls. I hope they do not get anywhere with it. I fear they will.
I have also tended to resist the idea that the current President of the Unites States is a fool. Do fools get elected President? I am starting to have doubts about that as well. On the other hand, maybe Bush wants a trade war with Europe. It certainly seems that way. And it also seems that he does not mind making maximum bad vibes for his former best friend, Tony Blair.
Sounds more like a little judicious sabotage to me.
The info is very suspect, as to the reporting and the quoted sources.
All very third party hearsay stuff. The only reason I can think of for it surfacing at this particular time, is as some device for preparation for a subsequent ‘push to Europe’, at a later date, particularly as the CBI is invovled.
If true, it is politically driven, to blunt criticism of a “jobless recovery” of U.S. economy. And U.S. workers pay U.S. income and Social Security taxes. Pending deficits require revenue enhancements, while letting Howard Dean commit electoral suicide next November talking about raising taxes.
Without getting into long winded details I think these moves by Bush are made in an attempt to stem the tide of moving jobs overseas and create jobs in the US. There have been too many hard manufacturing jobs (and the middle management jobs that go with them) moved out of the US most likely to avoid the onerous taxation and regulation. So its not necessarily to appease Unions but the stone cold reality that the Feds need hard domestic production upon which to skim to make good on the future promises made by the Feds. How taking jobs back from developed Britain is supposed to help I don’t know, but with a huge debt and transfer payment IOU’s to make good, the US economy needs to flourish and the GDP needs to grow (it is GDP and not GNP that is used as the measuring stick on how much the Feds can skim off production). So it does not come as any surprise that barriers are being thrown up and new incentives being put into place to attract (or force) domestic production. It is short sighted in the long run and is likely to do more damage than good. The real change needed is to end the State Transfer Promises that call either for bankruptcy or increasing domestic production upon which to leech. I suppose the age old method of conquer and pillage could be used to transfer wealth but we will see.
hmmm…i don’t know. Calling on US companies in France and Germany to leave? Maybe. In the UK? I don’t think so.
Sooooo…we’re going to make cans of chicken noodle soup in America and ship them overseas? Airlift cornflakes? Ketchup packets? Big Macs?
Huh. I don’t buy the story. Not on the basis of some unnamed CEOs fingering unnamed “American trade authorities”.
It’s not hearsay, it’s fact. Congress last week approved a bill mandating trade protectionism within the defence sector, and Bush has now signed it.
So much for the British troops who died supporting the US war effort, and so much for free trade. Go Dubya, etc.
My first thought is “how could he be so stupid?!” which then rapidly leads to: “do I really think he’s *that* stupid?”
The answer is no, not only don’t I think Bush is that dumb, but I’d be shocked to find that any American company was dumb enough to close down profitable overseas activities for a one time payment.
The payment would have to be in the hundreds of millions of dollars, and we would have heard something about that passing congress (or more likely not). Not only that, but I don’t know who these “US trade authorities” are who would pay the compensation.
On top of that is the article itself. I don’t know what the Evening Standard’s politics are, but the article reads as a politically motivated smear hopping someone will take it seriously and give it life. There are no hard statements, no search for comments from anyone official, no US companies saying anything. There is a scary headline, a bunch of fear mongering, and nothing real or verifiable. Nor is there anything on the web that I can find with a quick search.
In short I think someone is trying to make trouble, the article is not believable
Regardless of whether the story has substance or not, it will almost certainly be copied-and-pasted into the Universal Standard List of Moonbat Moans.
The very same people who spend their time howling about ‘American corporate imperialism’ will now take to the streets complaining about British job losses caused by ‘American isolationism’.
Jumpin’ Jehosephat!
If they want to give incentives to the business sector LOWER THE TAXES!!!!!!!!!!!!!!!!!!
The sped-up capital investment writeoffs are already working.
What I think W should have done is told the EU after the $4bill in trade sanctions is, do you want that in hundreds? Or, I could authorized special $1000 bills.
Even better, we’ll deduct the $4 bill from what you owe us from the Marshall Plan and other loans. It seems phrawnce owes us around $11 billion.
Toolkien,
Just love the notion that US co’s will leave the UK to pay more in taxes in the US. Is there some sort of reverse logic involved in your thinking here?
I was under the impression that most overheads and taxes were higher in the UK than in the States, and the reason for having an entity here was for the purpose of having easy entry for goods and services into the EU. The very same reason that the Japanese, Koreans, and other Far Eastern countries established a presence in the UK.
It certainly was not for the lower wages or higher output per head here in the UK.
A large part of the UK ‘industrial’ output is from these assembly plants established by auto makers in the ’80’s.
Strange how when Mercedes, VW et al, bought the remnants of the UK car industry and moved production to Germany, the CBI didn’t have a word to say.
I am sure that this item is just another mischievious piece of politicking by the CBI and ‘others’. Are we seeing a UK ‘enemy within’ here?
I don’t believe it, frankly. This smells like another anti-US broadside timed to coincide with the president’s visit. Timing aside, it doesn’t make sense. The US hasn’t lost, and isn’t losing, a great number of manufacturing jobs to the UK. It’s not as if the UK is a cheap labor market. So why would Bush and Co. want to piss off our closest ally over something basically trivial? France and Germany, sure. India — where a vast number of IT jobs is migrating — maybe. But the UK?
N.b. re: defense sector “protectionism”. The idea that keeping key defense production in the US is mere protectionism is anencephalic nonsense. National security can’t be sublet. And what idiot would want to contract with, say, the Chinese to manufacture essential defense materiel?
Want to try the link again, john b? I Googled defense and legislation for references, and came up with:
This was three weeks ago. It seems strange they wouldn’t have mentioned pending legislation. Manzullo is a Congressman and Miller is an IT executive, incidentally.
There are “Buy American” laws in effect for government purchases, though they’re more of a preference than a mandate. I remember a bit of a flap recently when someone noticed the US Army’s new black berets were manufactured in China.
While I think he’s quite a fair war leader, he has come across to me as one who is economics-challenged. Those steel tariffs were one of the stupider moves in recent history. I wouldn’t put it past him to come up with other economically moronic ideas.
But even if true, what would the impact be? CEO’s answer to shareholders, not to the government. It is the bottom line that matters.
I don’t expect to see any exodus from anywhere in any direction other than towards maximization of profit.
Michael is right. US companies in Britain are there because the market put them there. In order to reverse that incentive you would indeed have to make payments in the hundreds of millions of dollars every year. That’s a lot of trouble to go through to punish your closest ally. Why Britain and not France?
Sigh, Does anybody remember the Swiss companies that withheld electonics from the US and grenade fuses to the UK during because they opposed the the Iraq war? That is what the ” Buy defence stuff from factories in the US law is about. I believe that theGerman arms company H & K has a plant in the UK for military arms. They are ramping up in the US for a new rifle contract.
As for manufacturing jobs being lost, as Reich says every country that manufacturs anything is losing manufacturing jobs, even China, improved technology has been increasing output so fast that there is has been little hiring on the manufacuring end. However, having said that, there is now evidence that hiring was on the rise in the third quarter in the US. Why bring jobs from the UK to the US and lose the tax money on the revenue that the overseas company is sending to the US? The UK and the US are heavily invested in each other. If the US starts playing games with US companies in the UK, what’s to prevent say, some of the big UK pension and insurance companies to be encouraged in pulling out of the US market. There is too much chance for retalitory damage to play this game. Some socialist duffuss in the US State Department might think this is a good idea, but I can’t see it flying with the conservatives who make up the majority of the Republican party. The steel tariff was pretty much a ploy for the 2002 legislative elections.
Woo! Helpful code elves have replaced john b’s link, but the article it points to now says the opposite of his contention:
How…very…
Yes. Yes, I’m sure it’s all true. Because, as everybody knows, the president only has to pick up the Batphone and he is immediately placed into contact with all of America’s corporate heads. From there he only has to issue the marching orders and these corporation fall into lockstep. One man had the courage to stand up to the president and refused to obey orders, but he paid the ultimate price. God, I miss Colonel Sanders.
I agree that there may well be a lot less to this than meets the eye!
The more I think about it, this would be a gross violation of US WTO obligations. The US government is free to “buy American” if it wishes, but interfering with private companies would just expose it to more penalties at the WTO.
Toolkien,
Just love the notion that US co’s will leave the UK to pay more in taxes in the US. Is there some sort of reverse logic involved in your thinking here?
What the companies will or won’t do, or whether the Federal government will be successful in enticing them to do isn’t entirely the point. The point to me is that the Fed is very interested in the outflow of manufacturing jobs in the US (just as each State within the Union is desperately trying to vie for the shrinking pool of jobs). A country measures its capacity to assess taxes and fees upon a country’s GDP and not GNP. Foreign branches and subsidiaries count toward GNP but not GDP. The Federal government, making itself the prime beneficiary of domestic economic health has a vested interest in stimulating domestic production. It is certainly part of lowering unnecessary protection on domestic resources, for years off-limits, lowering certain labor regulations (unions are in a tizzy), not even giving any time of day to economically restrictive Kyoto-esque non-sense, etc. But the reality still is that a country, to make good on its intangible promises of providing Good has two choices, fall upon itself to make the mice run faster in the maze they can control directly (unlike foreign operations) or attack, conquer, and transfer (the preferred method of bygone eras). But it all originates from a Statist mindset which needs to be eliminated. I see protectionism and barriers as ultimately a logical extension of Statism. Just as there is an interest in maintaining domestic strength in military production, so goes all production eventually when the State is made the provider.
The timing and source are suspect. We are talking here about three unnamed executives. If they exist, they probably won’t step forward. If they don’t, they won’t step forward either. Either way, the allegation is unlikely to be challenged and cannot be cross-checked without the help of Mr Jones and an independent third party.
The biggest reason for manufacturing job losses in America are due to environmental regulations. Many of which are almost impossible to meet. So who is shooting manufacturing to death? We are. *shrug* go figure.
As for the WTO I really don’t know how much longer it’ll last. It might rebound as an international entity but I think it’s more likely to disappear. There’s so much monkeying around with protectionism that it’s hardly worth the effort to deal with the WTO. Also considering the failures of the WTO to deal with third world economies and you’ve got an interesting formula for failure.
Do I think the article in question is true? No. That would be idiotic. But I do think that we’re going to see a fairly extensive retrenchment on the whole concept of global trade. Whether that is good or bad I’ll leave to someone else as I haven’t made a study of it. But it’s definitely on it’s way.
ed
Perry
If there is “less to this than meets the eye”, then the perfidy of the CBI is the big story here, rather than any perfidy from the USA or George W.
For surely, the less basis in fact there is for Digby Jones’s accusations, the more of a EUro-lying shit this makes him. And I reckon that is still something.
If you’re right, in other words, I got the balance of the story wrong, against Bush, but there is still a story here.
S Weasel – I think you’ve been misled by the headline of the article I linked to (I’m not happy with misleading headlines today).
The House – under pressure from GWB – has made the Buy American rules that it was planning to introduce less stringent than they would otherwise have been. The effect is still that, compared to before the beginning of this month, there will soon be stricter Buy American rules in force for US military procurement.
This is protectionism. While it may not make sense to subcontract procument of sensitive weapons to China (although quite why the Chinese can’t be trusted to make uniforms God only knows), it’s an insult to Britain and Australia to suggest that the same is true for all non-US defence contractors.
I read the entire article, john. It says that defense contractors will get extra points bidding for jobs if they use American machine tools as opposed to foreign machine tools, and it creates a special fund to help rebuild American defense manufacturing. That’s all it says. As protectionism goes, that feeble thing couldn’t wipe the boots of our (or anyone else’s) farm subsidies.
As for an insult to dead British troops…ahhh…
Hmmm. Interesting.
So where was your outrage when the EU reneged on a won bid to manufacture heavy lift aircraft by Boeing for the EU militaries in order to give it to Airbus? This includes the UK, France and Germany, among others.
It’s not only legal but makes perfect sense to restrict military purchases to domestic manufacturing. First off it’s domestic tax money that’s being spent. Secondly the last thing that anyone really wants is to be dependent upon foreign manufacturing for critical items. And the exact definition of what is critical tends to change over time and with different situations.
If it doesn’t make sense then go have a talk with the EU member states. They’re playing the same game.
ed
Perry may be right about the flap over Mr. Jones’ breathless assertion about American companies in the UK being “ordered home” having less substance than the Standard article might indicate: closer analysis from both the blogosphere and Big Media (such as has appeared so far) seems to agree that the issues have been over-simplified and overstated. The problem seems to be that two issues have been conflated: first: defense-related “buy American” regulations have recently become popular again – a few years ago, IIRC, there was quite a flap over the discovery that many military electronic components had been obtained from foreign sources (yes, Harry, including China): secondly, the Bush Administration has lately pushed through a significant tax-relief package for US companies to “repatriate” – both in the manufacturing and service sectors. From a cursory analysis, it seems like the writers of the Standard‘s piece have just combined the two issues and presented as a scare piece to make Bush look bad [not as if that is so difficult].
However, sadly, on fundamental trade issues, the Bush Administration should never be counted on not to suggest or impose idiotic and/or counterproductive policies – election-year grandstanding will always trump wise policy with that crowd: the potential that business repatriation might cause economic damage to the US’s main ally (Britain), while affecting less-friendly nations (EU, China, etc) hardly at all has probably never even entered their heads.
5{ will soon be almost 100%^ dependent on the UK for its towed artillery – i.e. M 119 and M777. While these weapons will be mostly made in the US, essential parts and design authority will remain with the Brits.
Protectionism?
Good Luck
If it is true, it is disgraceful, and fully inline with Bush’s peculiar ability to slap people in the face after they’ve just done him an enormous favor. This is no way to treat our only steadfast ally in the entire world.
Tell the corporatins to bring jobs home from France, Germany and Belgium all you want, but leave the Brits alone, please!
This story is a crock. I’m the CEO of a multi-national, and I sure wasn’t told.
A government deciding to buy goods from one particular country or another is not protectionism. When a government purchases goods and services it is acting as a consumer just like any other, and it faces the same choices.
If that government chooses to forego the best price in favor of some other consideration, it is just as appropriate for it to do so as for any other private consumer for whom cost is but one factor among many. This practice is not market intervention, it is market participation.
Ed: Your analysis of the WTO needs some work. Free trade is a good thing. The WTO both promotes it and provides a forum for settling trade disputes (e.g. Bush steel tariffs). We will no more withdraw from the WTO than we will withdraw from world trade.
Susan,
Don’t swallow the lefty line that Bush is a fool, he isn’t, and he is as unlikely to ‘slap a friend in the face’, as Clinton is likely to give up sex.
Sure he has different ideas, which is why people voted for him….
Sure he has a more direct approach, he realises that he is running a country, not competing in a beauty contest….
Lastly, the Brits did not do him a favour, they did what they thought was right….
I think Brits may be laboring under a misconception here. The U.S. president has as much influence with a multinational CEO as does my Aunt Sally — and much less if Aunt Sally owns 25,000 shares in the company.
The very idea that any politician — even the President — could “order” U.S. companies to “bring jobs back” is ludicrous.
The only pressure the U.S. government can bear is through legislation and/or tax relief (both outside the President’s purview) — and there is no Constitutional mandate for the President to order, let alone enforce, such an action.
Somebody’s playing games, I think.
I believe that theGerman arms company H & K has a plant in the UK for military arms. They are ramping up in the US for a new rifle contract.
H&K, while based in Germany, is actually British owned. Owned by Royal Ordnance, which is itself owned by… BAe I think?
*nit pick*
1. Ed: Your analysis of the WTO needs some work. Free trade is a good thing. The WTO both promotes it and provides a forum for settling trade disputes (e.g. Bush steel tariffs). We will no more withdraw from the WTO than we will withdraw from world trade.
Sure free trade is good, but it depends entirely on how free it is. Fract is that there are precious few aspects of free trade that is actually free. There’s often a great deal of protectionism, government mandated quotas & regulations, manipulation and government subsidies.
Once you pare through all that, is it really free trade? If it isn’t, then exactly how good is it? I remember watching a documentary where the local chicken farmers, on Jamaica I believe, were completely wiped out because American companies dumped chicken thighs and drumsticks there for pennies a pound. Since the American market valued chicken breasts and wings much higher than thighs and drumsticks. So the companies involved had enormous quantities of thighs and drumsticks that they absolutely had to get rid of.
So really was the free trade all that good? They’ve got a lot more chicken, thighs and drumsticks at least, but no jobs.
tough sell.