If there was ever a trade policy case that questions the long-held beliefs of free traders, the multi-year large appliance battle between American-owned Whirlpool and South Korean-owned LG (formerly Lucky Goldstar) and Samsung is it.
Free traders have always believed that allowing consumers to have the freedom to buy whatever they want, from whoever and wherever they want, and without any government interference is the best policy. But what about when foreign companies cheat by illegally "dumping" their products in the U.S. market - meaning that they are selling their products below the cost of production (usually with the intent to steal market share from their competitors)?
It doesn't take a rocket scientist to figure out that Whirlpool is the victim of cheating by predatory foreign competitors, of which there is never a shortage.
Even the free trade-leaning Obama administration upheld Whirlpool's petition for tariffs on Samsung and LG washing machines imported from Mexico and South Korea in January 2013, even though Whirlpool lost a similar case involving refrigerators the year before.
By July 2014, non-South Korean-based brands including Whirlpool, GE, and Electrolux (the world's number two appliance maker behind Whirlpool) all announced sales declines. It's interesting to note that this occurred despite a significant recovery of housing construction that spurred sales of appliances.
Yet despite their sales challenges, Whirlpool moved some washing-machine production from Monterrey, Mexico to a plant Clyde, Ohio, which is its biggest washing-machine factory. Whirlpool also laid out plans in March 2014 to spend $40 million and increase capacity by over 75% at its Greenville, Ohio plant, which makes small kitchen appliances like the popular KitchenAid mixer.
South Korean-based Samsung does have production facilities in the U.S., but Whirlpool has much more, including eight American factories employing 15,000 manufacturing workers in the U.S. and 22,000 American workers overall.
But apparently, unapologetic free trade activists think job "announcements" by foreign companies like LG and Samsung are more important than protecting Whirlpool's American workers, who have been working here and paying taxes here for decades.
According to a Wall Street Journal article in March of this year, Samsung is planning to expand its U.S. production facilities, which could generate around 500 jobs. LG has announced its intention to build a new home-appliance factory in Tennessee, which could create 600 jobs.
Samsung has said its interest in a U.S. factory has been influenced by the protectionist leanings of our current president, according to those familiar with the matter. Samsung and LG are clearly wanting to produce in the United States to avoid proposed tariffs on their imports.
The LG and Samsung stories are just more proof that tariffs on imports creates American jobs by enticing foreign producers to relocate factories to America where they can be closer to consumers who make up a very lucrative market.
Memo to free traders: Only American workers pay taxes to America. Workers in foreign countries (like those who produce in South Korea like LG and Samsung) pay no taxes to America.
South Korean-owned Samsung and LG are proposing to "tip-toe" into producing in the U.S. market, while American-owned Whirlpool has already jumped in with both feet over many decades. For American consumers and taxpayers, there can be little doubt which company supports American jobs, American profits, and the American tax base. The answer is easy: Whirlpool.
In December 2015, Whirlpool found it necessary to file a request with the U.S. government to impose tariffs on LG and Samsung appliances imported from China. Why? Because after tariffs were imposed on the same products from Mexico and South Korea, LG and Samsung wanted to avoid import tariffs and move production to China. In December of 2016, the U.S. Department of Commerce vowed to continue imposing constitutionally-approved tariffs on Chinese-made washing machines by Samsung and LG.
According to Aaron Spira, chief legal officer for North America at Whirlpool Corp. "We believe in free trade, but it doesn't work if people don't obey the rules and follow the laws. We have to look for other options that will solve the issue."
The necessary option is what was once called the "American System" of tariffs on imports to both protect U.S. industries and raise revenue for necessary government expenditures.
Samsung and LG have avoided tariffs on their imported washing machines by moving production from Mexico and South Korea to China. Then, facing the most recent tariffs on Chinese imports last year, LG and Samsung moved washer production to Thailand and Vietnam.
Does that sound like a company that is genuinely interested in investing American dollars into the U.S.? Of course not. It sounds like they are more interested in playing a game of Whack-a-mole. LG and Samsung can remain committed to playing games, but the U.S. merely needs to be committed to winning for our homegrown American companies like Whirlpool and its workers.
Foreign companies like LG and Samsung aren't investing in America as much as they are using America to invest in themselves.
Whirlpool, on the other hand, has proven that they believe in making huge investments in American manufacturing. Nearly a decade ago, Whirlpool CEO Jeff Fettig said "Our U.S. presence is, and always will be, the foundation of our global enterprise. We are very confident in the future of U.S. manufacturing and proud to have more U.S. manufacturing employees than all of our major competitors combined."
Whirlpool estimates that U.S. imports from South Korea, China, Thailand, Mexico and Vietnam have doubled to about 3.2 million units in 2016, compared with 2012 levels. A huge surge in imports like that threatens good-paying Whirlpool jobs here at home.
Peter Navarro, one of the White House's top trade advisers and Director of Trade and Industrial Policy, has spoken out in support of Whirlpool's long-running battles against its South Korean competitors. In a speech earlier this year, he blasted Samsung and LG for "precisely the kind of trade cheating that must be stopped."
The answers to continuing American prosperity are simple and easy: Buy American (patronizing American-made products from American-owned companies) and reject free trade in favor of the "American System" of constitutionally consistent tariffs. Doing so will keep more jobs, profits, and tax revenue within our national borders.