Hoo boy, Hoosier. An already tough re-election cycle for Indiana Democrat Joe Donnelly just got tougher, thanks to an exposé by the Associated Press. Joe Donnelly won a Senate seat in 2012 by campaigning as a moderate against the Tea Party-backed Richard Mourdock, but adopted some of the tough-on-trade rhetoric of populists in both parties when it came to NAFTA. Just last year, Donnelly joined Donald Trump in blasting Indiana-based Carrier for shipping jobs to Mexico to take advantage of lower labor costs. As it turns out, Donnelly’s family business was doing exactly the same thing:
However, an arts and crafts business Donnelly’s family has owned for generations is capitalizing on some of the very trade policies — and low-paid foreign labor — the senator has denounced.
For more than a year, Stewart Superior Corp. and its subsidiaries have been shipping thousands of pounds of raw materials to Mexico, where the company has a factory that produces ink pads and other supplies, according to customs records from Panjiva Inc., which tracks American imports and exports. The finished products are then transported back to a company facility in California, the records show.
Stewart Superior, which also has an operation in LaPorte, Indiana, says on its website that the company’s Mexican factory “brings economical, cost competitive manufacturing and product development to our valued customers.”
Although Donnelly’s brother runs the company, the senator previously served as a corporate officer and its general counsel before he was first elected to Congress in 2006. In a financial disclosure form he filed in May, Donnelly reported owning as much as $50,000 in company stock and earning between $15,001 and $50,000 in dividends on it in 2016 alone.
In fact, Donnelly may have increased his stake in part on the profitability from these decisions. The Free Beacon’s Brent Scher sees at least a correlation between the outsourcing and Donnelly’s decision to put his money into Stewart Superior:
Julie Paramo, the company’s operations manager, said the company moved some of its manufacturing of ink stamp pads to a factory in Guadalajara five years ago—right around the time that Donnelly began directly investing in the longtime family business run by his brother.
Donnelly first disclosed his investment of between $15,001 and $50,000 in Stewart Superior, which is not publicly traded, in his 2013 financial disclosure report. No income was reported. The filing notes that he previously held assets in the company, but that it was below $1,000 and therefore didn’t need to be disclosed.
The size of Donnelly’s investment appears to stay the same in the years that immediately followed, but his income off it steadily increased.
In both 2014 and 2015, Donnelly reported that he earned up to $15,000 in dividends. By 2016, Donnelly was reporting that he earned up to $50,000 off his investment.
Hmmm. It’s not a bad business decision by either Donnelly or his brother. They’re saving money by using cheaper labor, and increasing their profit potential. Nothing wrong with that, right? Er … it depends on who’s getting the profits. Fourteen months ago, Joe Donnelly wanted the federal government to penalize other companies who made that same decision, calling it “the ultimate cynical business model”:
Donnelly says for companies like United Technologies and Carrier that do send jobs out, the federal government should require the return of all incentives given within the past five years.
“I think they have the ultimate cynical business model, which is trying to make a product in the lowest cost place they can find, and then try to ship it back into the same country where they fired the workers,” he says. “They have almost $6 billion in federal contracts and we are looking at every single one.”
In other words, United Tech and Carrier had the penultimate cynical business model. It looks like Donnelly wins the “ultimate” prize. That should play really well with Indiana voters next year in the Senate race, eh?
Interestingly, Mexico’s taking NAFTA renegotiation a bit more seriously than Donnelly. After steadfastly opposing any talks with the Trump administration, they finally agreed to work with the US and Canada to adjust the trade agreement. Reuters reports that Mexican industrial leaders are looking for ways to give Trump a win in the process:
“If we integrate further and make Mexico more competitive versus China … even if our exports rise, U.S. jobs will rise, because when we export (to the United States), they’re exporting too (via U.S. content),” said Jaime Serra, a former trade minister who led the initial NAFTA negotiations for Mexico.
However, mindful that Trump needs to be able to claim a more obvious win from the shake-up, they are also looking at rules governing how much of a product is made in the region.
Maybe Trump can get Donnelly’s company to insist on more American jobs, too, rather than just Donnelly lecturing others about it.
Update: Donnelly says he won’t allow critics to distract him from the scourge of outsourcing, so … he’s selling his shares in his family’s business:
Sen. Joe Donnelly (D-Ind.) is selling his stock in a family-owned business after the Associated Press reported the company uses a Mexican factory to produce dye for ink pads.
“I’m selling the stock in my brother’s company — a company I haven’t had an active role in for 20 years,” Donnelly said in a statement on Friday. …
“Some folks in Washington want to make the stock I’ve owned in my brother’s company into a distraction from our work to end outsourcing. I won’t let them distract us,” he said.