Saturday, February 20, 2010

Burgh Energy Report: Anti-Globalization

The mood swing towards protectionism is impacting Pittsburgh's burgeoning energy industry. Good news for Westinghouse announced earlier this week has informed a backlash:

The reactor project will create thousands of construction jobs at the site, near Augusta, Ga. And Mr. Obama said that building the reactors would create about 800 permanent jobs.

But according to Westinghouse, the company that designed the reactors’ central components — including the reactor vessel and part of the giant heat exchangers called steam generators — can be obtained only from steel mills in Japan and South Korea, which are certified for the work.

The company said design changes it was already considering would, if adopted, allow American steel makers to compete for contracts. Westinghouse is based in Pittsburgh, but is owned by a Japanese company, Toshiba.

Thomas M. Conway, vice president for the steelworkers union, said that American taxpayers should not bear the burden of loan guarantees that would create jobs abroad. The Energy Department now has $18.5 billion to offer in guarantees for the construction of new nuclear plants. Mr. Obama is seeking to triple that number.

“If we’re going to start shoveling a lot of money at nuclear, and nuclear is part of America’s plan to get less oil-dependent, then we need to build it ourselves,” Mr. Conway said.

The jab about Westinghouse's foreign ownership stood out to me, reminding me of V&M Star's (steel pipe) expansion in Youngstown. If you have been following that story, then you know about the proposed tariffs on similar Chinese products. The American steel industry is seeking relief from alleged dumping. This plays well in Ohio, a state hard hit by the dramatic decline in manufacturing jobs. Ironically, V&M Star is a French company. How long before folks start grumbling about that fact?

Back to nuclear reactors. United Steelworkers squaring off against the likes of Westinghouse speaks to Pittsburgh's complicated economic identity (something well beyond the grasp of Forbes magazine). The NYT article about the union grievance also explains the globalization of the energy industry. The autarkic ideal of resource independence is a foolish and unobtainable goal. Few populists understand even the basics of international political economy. We can't put the genie back into the bottle, nor should we want to do so.

In the long run, protectionism will hurt Pittsburgh.

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