In the global economy, sometimes your friends are your enemies. That seems to be the case with a federal loan project to help sell American-made mining equipment to a new iron mining venture in western Australia.
John Myers at the Duluth News Tribune wrote about the deal, including the obligatory reference to our “mates” Down Under, which would essentially put U.S. federal money into the expansion of an Australian iron ore industry.
Myers writes:
U.S. Sens. Al Franken and Amy Klobuchar and U.S. Rep. Rick Nolan, all Minnesota Democrats, are on record opposing a plan in front of the U.S. Export-Import Bank to invest in equipment for the giant Roy Hill iron mine in Australia’s northwestern Outback.
The Export-Import Bank is considering a request for $650 million in long-term financing to aid the export of $522 million of U.S.-made mining equipment to mine and process ore at Roy Hill. The rest of the money could be going to install the U.S. equipment on site at the mine.
Cleveland-based Cliffs Natural Resources, with four mines in Minnesota and Michigan, has led the charge to stop the loan, saying it threatens U.S. mining jobs and, with new Asian steel produced from Australian ore, eventually threatens U.S. steel industry jobs.
But think about that. Half a BILLION dollars of equipment sales is something that Caterpillar wants and other senators would surely seek for their home states. In this case, Cat is saying this would create scads of new jobs in Wisconsin and Illinois (President Obama’s home state, by the way).
The iron ore in question would flood the market in 2015, mostly going to Asia. But Chinese use of nearby Australian ore would probably bring steel prices down worldwide, perhaps affecting demand for minerals sometime shortly after that. It’s easy to see how that might affect Iron Range mines, and their workers, down the road.
It’s all Jenga. Someone will lose, and there will be a mess to clean up.
This is why the government programs like the export-import bank shouldn’t exist. There’s no reason why taxpayers should be in the banking business. What helps one company or region will hurt another. If Caterpillar can find banks or private investors willing to fund this project and produce a profit, more power to them. But taxpayers from one region shouldn’t be forced to be the lender for something that is going to hurt them.