Via Sallie James of Cato, I see that blogger Matt Yglesias points out the following in President Obama's State of the Union speech:
... After lambasting companies that “ship jobs overseas,” Obama launched into a feel-good anecdote about how “Siemens opened a gas turbine factory in Charlotte and formed a partnership with Central Piedmont Community College.” Is a politician in Germany giving a speech lambasting Siemens for shipping jobs to the U.S. and complaining, as Obama did, that it’s “not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized,” perhaps through partnerships with community colleges.
Here are the two relevant parts of Obama's speech:
It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized.
...
Jackie Bray is a single mom from North Carolina who was laid off from her job as a mechanic. Then Siemens opened a gas turbine factory in Charlotte, and formed a partnership with Central Piedmont Community College. The company helped the college design courses in laser and robotics training. It paid Jackie’s tuition, then hired her to help operate their plant.
This all intrigued me, so I did a couple searches, and found this:
German industrial conglomerate Siemens AG is consolidating production of gas turbines for electric utilities in North Carolina to position itself for an expected boom in electricity demand in the Southeast and around the world.
A subsidiary of the Munich-based company, Siemens Energy Inc., said Thursday it plans to invest $135 million to build a new manufacturing plant for 60-Hertz gas turbines in Charlotte. The company was promised a package of tax breaks, grants and low-interest loans worth up to $154.75 million to make the move.
Siemens will close a similar plant in Hamilton, Ontario, that employs about 450, though it's not yet clear how many will lose their jobs and how many transfer to North Carolina over the next 18 months, spokeswoman Melanie Forbrick said.
...
"Over the next five years, we expect employment at the Charlotte site to grow to nearly 1,800 people, with more than 1,000 of those positions new to Charlotte. With this move we're pushing ahead with our growth strategy in the U.S., which is our most important single-country market," Siemens AG chief executive officer Peter Loescher said in a statement.
The move is expected to create 825 engineering and manufacturing jobs in Charlotte within five years, paying an average wage of almost $64,000 a year. Production in the expanded plant is scheduled to start in the fall of 2011, the company said.
State and local governments promised up to $35 million in tax breaks and grants. A county development entity is also prepared to lend Siemens up to $120 million in low-interest loans, with funding coming from bonds created by last year's federal stimulus package.
The obvious question here is, what do the people of Hamilton, Ontario think of the various subsidies given to Siemens to relocate to North Carolina? Would they say something along the lines of "it's not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized"?
More generally, there is clearly still an issue of defining how subsidies should be regulated internationally in a way that minimizes trade conflict, while allowing governments sufficient scope to make domestic policy. I've suggested constraints on the use of "protectionist" subsidies as the appropriate goal of international trade rules. Are there other possibilities?
And if "protectionist" subsidies are what should be targeted, do the current rules do this sufficiently? Would they prevent the Siemens subsidies? Should they?
