Thirty six percent of American college grads could not name all three branches of the U.S. government, according to a survey that was released last November by the Intercollegiate Studies Institute. The grads also flunked their basic economics. Asked about the role of international trade in a nation’s economy, only 47.5 percent of the graduates answered correctly that trade leads to “an increase in a nation’s productivity.” Twenty percent of those respondents said that they believed that trade “decreases a nation’s economic growth in the long term.” Joe College “appears to be economically illiterate,” concluded the Wilmington, Delaware-based non-profit organization that has been measuring US political and economic literacy since 1953.
If the American public is increasingly economically illiterate, what about some of the nation’s most prominent journalists who report the news that Americans rely upon to form their opinions? Journalists like CNN’s Lou Dobbs, and Louis Uchitelle, a veteran reporter at the New York Times. Recently, both Lou’s passed along uncritically to their respective journalistic audiences some PR spin that is part of an ongoing Buy American campaign sponsored by the United Steelworkers of America. It is not surprising, of course, that Lou Dobbs was happy to pass along the union’s spin without really checking it out. Buy American is what the tub-thumping cable television anchor sees as his journalistic market niche (even though he majored in economics at Harvard). But when a senior reporter for the New York Times, one of the world’s great newspapers, soberly informs his readers that the insular-looking Steelworkers have long “endorsed” free trade, and have not really fought imports of steel in recent decades, that’s another matter. Saying that the Steelworkers are not advocates of protectionism is perhaps the journalistic equivalent of reporting that boxer Mike Tyson has always been known for his sweet disposition.
Had either Dobbs or Uchitelle done what journalists are supposed to do — be skeptical of PR spin, dig a little to get the broader context, and for business reporters especially, understand the basic economics — they would have discovered that the story’s broader context illustrated the benefits of trade and investment to the US economy, not just the perceived downside.
Here’s the story, first as reported by the New York Times and CNN, and then the missing context that undermines it.
Louis Uchitelle’s April 15 article in the Times was headlined: “Pipe Made in India Incenses Illinois Town.” Uchitelle reported that a retired steelworker In Granite City, Illinois named Jeff Rains had been out walking near a freight yard, and had become incensed when he saw a train roll by with steel pipes with “Made in India” markings. It wasn’t difficult to understand why. A few months previously, Granite City’s steel mill had (alas) been shuttered after 130 years in operation, throwing nearly 2,000 steelworkers out of work. When he saw the imported pipes, he had become “very mad,” the 61-year old Rains told the Times reporter. “I wondered why this pipe had not been made in the United States.”
Uchitelle went on to relate how Rains and the Steelworkers union have been using the example of Indian pipe “to galvanize the Granite City story into national outrage over steel imports, raising suggestions of protectionism in the process. The union and its workers want steel pipe for future projects to be made in the United States, creating domestic jobs.” Later in the article, a Granite City Presbyterian minister of the Indian steel told Uchitelle of the foreign pipe, “It is like an offense to the community.”
But while Uchitelle raised the possibility that the Steelworkers’ were driven by protectionism, he quickly accepted their protest to the contrary. “The United Steelworkers asserts that free trade is not the issue,” Uchitelle wrote. “The union’s leaders endorse that, as do the chief executives of nearly every multinational company. What the Indian pipe represents, the union argues – and it is joined in this by steel industry executives – is a violation of fair trade. They contend that generous government subsidies allow Indian and Chinese manufacturers to ‘dump’ steel in this country at prices below the fair market value.”
Later in his story, Uchitelle added: “Imports have accounted for a steady 20 to 25 percent of the nation’s steel consumption for a decade or more — and neither the union nor the steel mill operators challenged that inroad.” If the Times reporter had noted that the union and the domestic steel companies had “constantly challenged that inroad” with a lavish Stand Up For Steel campaign aimed at rolling back the imports, he would have been correct. Instead, he got it backwards.
That was the first serious error. The second came when Uchitelle reported that the Indian pipe had been provided by “a giant Indian company, Welspun,” which was not further identified. If Uchitelle had looked into the nature of the Indian multinational’s US operations, his simple story line would quickly have been undermined.
I’ll get to that in a minute. But first, take a quick look at how Lou Dobbs piled on at CNN, adding nothing except perhaps more of his characteristic righteous indignation directed at foreigners who don’t play “fair.”
“There is rising outrage tonight in Granite City, Illinois, over imported steel coming from India,” Dobbs reported on Lou Dobbs Tonight on April 23. “Tons upon tons of Indian-made steel pipe are being imported to build an oil pipeline and it’s all happening as hundreds of American steelworkers are being laid off,” Dobbs declared, saying that CNN reporter Lisa Sylvester had the story.
Sylvester began the same way as had Uchitelle, noting Granite City steelworker Jeff Rains’ reaction to the notion that Indian pipe is being being used to build pipelines in America. “It’s a slap in the face to the working people in America,” Rains said. “I mean, you grow up thinking if you work hard that you’re going to prosper, and then this stuff happens.” Sylvester then interviewed Scott Paul, who runs the Buy American campaign for the Alliance for American Manufacturing (which is a member in good standing of the Stand Up For Steel lobby, which the Steelworkers help fund, although the CNN audience was not told that). “India has been cited by the Department of Commerce at least 20 times for different sorts of subsidies that they provide to their steel industry.”
At least, Sylvester added the important qualifier that India’s Welspun “has not been cited for improper subsidies.” But that fact, which she quickly seemed to forget, didn’t quell either her sense of outrage, or that of anchor Dobbs. An excerpt from the transcript that the Steelworkers union posted on its website illustrates the sort of journalism that was going on.
DOBBS: “Lisa, thank you very much. That is incredible, 9,844 miles from India, to that steel plant. I mean, it’s just – it’s amazing.”
SYLVESTER: “These workers are so outraged, because they know that they can do the work. And if it were a level playing field, if there weren’t subsidies involved, there’s no doubt that this steel would be cheaper if it were bought in the United States. Coming all that great distance. But because this is subsidized steel, it comes into this market a lot cheaper and that’s why those workers are out of work. And that’s what they say is the basic problem with the trade system in this country, Lou.”
DOBBS: “All right, Lisa, thank you very much. Terrific report. Lisa Sylvester from Washington.”
To see why the CNN report, along with Uchitelle’s, was perhaps not-so-terrific, contemplate some news that wasn’t reported.
It turns out that while Indian pipe isn’t appreciated much in southern Illinois, it’s a different story a bit further south, in Little Rock, Arkansas.
On April 28, Welspun Tubular LLC, a wholly-owned subsidiary of India’s giant Welspun Gujarat Stahl Rohren Ltd., celebrated its new $150 million investment that has built a pipe factory in Little Rock — the largest single foreign investment ever in Little Rock. “They have invested more money and hired more people than they had committed,” said Arkansas Gov. Mike Beebe, one of the dignitaries who turned out to honor the Indian multinational investor. Added Little Rock Mayor Mark Stodola, “I welcome Welspun to the city of Little Rock with open arms.”
At the ceremony, BK. Goenka, the chairman and CEO of the parent Welspun Group noted that his company, which began as a textile manufacturer, had become interested in Arkansas in 1994, when it became a supplier of terry towels for the Bentonville-based Wal-Mart Stores, Inc. “Wal-Mart trusted us at that time, visited our plant in India and gave us our maiden order in the U.S. market,” Goenka said. “Destiny has brought us back to Arkansas.”
The new Welspun pipe plant now employs over 300 people and can produce some 350,000 tons of pipe annually in Little Rock. As reported by Chuck Bartels of the Associate Press, Welspun’s “facility sits on 740 acres along the Arkansas River, a site that has rail service and is close to an interstate highway on-ramp.” The Welspun Arkansas-based plant has expansion capacity to some 1.5 million tons per year, and hopes to raise its employment to some 500 Americans.
Welspun isn’t the only source of recent foreign investment in Little Rock. Consider the following:
India’s Man Industries is spending $100 million on a pipe plant in Little Rock.
Polymarin Composites, a Dutch manufacturer of high-performance rotor blades for the wind industry that has operations in 20 countries including China and Turkey, announced on June 4 that it will be putting a new $16 million facility in Little Rock, which is expected to employ more than 800 workers who will make an average of $15-per-hour. “Our new Little Rock facility will enable us to bring our expertise, products and services to North America,” said CEO Gerry van der Sluijs. “We could not be happier with the location and are excited about the resources and personnel that Arkansas has to offer.”
LM Glasfiber, the largest maker of wind turbine blades in the world, which is headquartered in Kolding, Denmark (with a global business office in Amsterdam), is also in Little Rock. On Oct. 28, 2008 the Danish multinational officially inaugurated its new North American headquarters in Little Rock, which now employs more than 630 workers. Over the next five years, the company — which also had been in Grand Forks, North Dakota since 1999 — anticipates employing more than 1,000 people in Little Rock.
Nordex, a German-based manufacturer of wind turbines, announced plans in Nov. 2008 to build a manufacturing plant in Jonesboro, Ark — another $100 million investment which will employ more than 700 workers. On April 30, Richard Daley, the mayor of Chicago, proudly announced that Nordex USA, Inc. will base its US headquarters in the Windy City. “On behalf of all Chicagoans I want to say how pleased we are that Nordex has selected Chicago,” the mayor declared at a news conference. Nordex president and CEO Ralf Sigrist explained: “Centering our business in Chicago brings us closer to our customers and suppliers and puts us in the heart of the wind industry. It will also support our strategy of generating 20% of global revenues here, while helping the US to achieve its ambitious renewable energy goals and to build a vibrant domestic industry.”
What about the failure of reporters Lou Dobbs and Louis Uchitelle to find any “unfair” subsidies that the Indian government may have provided to Welspun? If the CNN and New York Times journalists had been interested in reporting on subsidies that can be verified, they could have looked closer to home.
Arkansas Business reported on July 2, 2007: “The Arkansas Economic Development Commission approved a $5 million guarantee on an industrial development bond for a Welspun plant in June. There’s also $3.25 million for infrastructure funds, a $6 million Arkansas Development & Finance Authority guarantee and $500 per employee for training.” according to Joe Holmes director of marketing and communications at AEDC. He also said there were performance-based incentives that could not be disclosed.”
Meanwhile, the United Steelworkers continue to peddle their Buy America campaign. “Our first Make Our Future Work resolution calls on local and state governments and leaders to use taxpayer dollars to maximize the creation of American jobs and to restore the economic vitality of our communities,” the union’s PR Tool Kit notes. “Buy American is good for the nation’s economy.”
The Steelworkers have a Keep It Made in America bus tour to “spread the message about why manufacturing jobs are so important to our country.” One of the recent stops was in — you guessed it, Little Rock, Arkansas.
No wonder Americans are confused about the benefits of international trade and foreign investment.