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February 5, 2009
U.S. Protectionist Clause Sparks Loud Protest
Numerous trading partners warn that a "buy American" clause in the nearly $900 billion U.S. economic stimulus bill would set off a retaliatory trade war worldwide.
The United States Senate this week is considering an $888 billion bill designed to help mend the ailing economy, which requires all "manufactured goods" purchased with stimulus money to be made in the U.S. The House of Representatives already has approved a narrower bill mandating the use of domestic steel and iron.
In recent days, the "buy American" clause in the nearly $900 billion bill has unleashed a whirlwind of protest from U.S. trading partners, including Canada and in Europe, leaving President Barack Obama's administration with an early political quandary.
The Wall Street Journal (subscription required) says:
Proponents argue that the purchasing restrictions are essential to ensure that the billions spent by the U.S. government to revive the economy and boost employment actually go to U.S. companies. But critics say that the restrictions would only delay crucial work and impose onerous layers of bureaucracy on what is already likely to be a cumbersome contracting process.
"To supporters, including labor unions that helped the Democrats retake the White House last year, a 'Buy American' requirement is just common sense at a time of economic crisis and rising unemployment," USA Today notes. Opponents, however, "say the new language could breach U.S. trade commitments and ignite a disastrous round of beggar-thy-neighbor retaliation like that which worsened the Great Depression."
"The measures, highly popular among congressional Democrats and trade unions, have come under heavy criticism from U.S. trade partners, some of whom threatened this week to file legal actions against the U.S. if the measures become law," the Wall Street Journal reports. "By siding with its trade partners in Europe and Asia, the administration could antagonize key allies in Congress as it struggles to win passage of a nearly $900 billion economic-recovery package."
A number of U.S. trading partners, including Canada and members of the European Union, have "loudly" and "fiercely" objected to the provision, warning of the possibility of a global round of tit-for-tat trade reprisals.
"For the second straight day, the 'Buy American' issue dominated early debate in the [Canadian] House of Commons as Prime Minister Stephen Harper defended his government's efforts to lobby against the contentious U.S. legislation," CTV-Canada reported on Tuesday. "Many members of the U.S. business community have also spoken out against the 'Buy American' clause, including The National Association of Manufacturers (NAM)," the Canadian report continued.
On Tuesday, NAM said the measure goes against America's international trade obligations and could even "backfire" on American workers.
"Even though this section (of the stimulus bill) may be well-intended, NAM members are very concerned that the new 'Buy-American' provisions in the bill will potentially backfire on the United States and end up harming American workers and companies across the entire U.S. economy," the Canadian Vancouver Sun reported NAM President John Engler as having wrote.
President Obama has since warned that provisions in versions of the economic stimulus bill being drafted in Congress could ignite "trade wars," describing the clause as a "mistake" for the U.S. to put up new barriers in the current economic environment when global trade is already suffering.
In an interview with ABC News, Obama said he "opposes any provisions that are going to be a violation of World Trade Organization agreements, or in other ways signal protectionism by the United States."
Since hearing Obama speak out against fueling protectionist tensions, both Canadian and EU officials have welcomed the U.S. president's comments on protectionism.
The Associated Press reports that Canada's trade minister, Stockwell Day, said yesterday he's "encouraged to hear Obama speak out against protectionism but said it doesn't guarantee Canada will be exempted from 'Buy American' provisions in the economic stimulus bill."
Likewise, the EU's trade chief spoke of her encouragement, saying Obama "realizes, like we do in Europe, that we need to trade our way out of the current economic difficulties. Trade is part of the solution as it acts as a stimulus," Ireland's RTÉ quotes EU Trade Commissioner Catherine Ashton as having said.
"We are very pleased by what President Obama has said on the 'Buy America' clause. He is standing up for what is right for trade, right for America," Ashton continued.
Nonetheless, the U.S. president's recognition of trade partners' concerns, while encouraging, does not guarantee the trade clause will be exempted from the stimulus package, which still has U.S. trade partners uneasy.
According to AP, Day said yesterday Canada "isn't necessarily out of the woods yet in terms of making sure it will be absolved of any negative effects of the legislation."
Australia's trade minister, Simon Crean, said today, "The benefits from the US fiscal stimulus package will be undermined by retaliation from other nations if the 'buy American' clause stays."
The Senate yesterday softened the "buy American" requirement that only U.S. steel, iron and manufactured goods be used in construction projects paid for in the bill, by including a requirement that international trade agreements such as the North American Free Trade Agreement (NAFTA) must not be violated.
"Similar measures to 'buy American' have been adopted or considered in Argentina, China, Indonesia, Ecuador, India, Russia and Vietnam," according to TIME.
Resources
Obama Risks Flap on 'Buy American' (subscription required)
by Neil King Jr. and John W. Miller
The Wall Street Journal, Feb. 4, 2009
Transcript: Charles Gibson Interviews Barack Obama
ABC News, Feb. 3, 2009
'Buy American' Clause Stirs up Controversy
by David J. Lynch
USA Today, Feb. 4, 2009
Obama says America Must Avoid 'Trade War'
CTV.ca, Feb. 3 2009
EU Encouraged by Obama's New Stance
RTÉ, Feb. 4, 2009
Australia Warns of Buy American 'Trade War' (subscription required)
by Peter Smith
Financial Times, Feb. 5, 2009
Obama Softens Protectionist Trade Message
by Sheldon Alberts and Mike Blanchfield
The Vancouver Sun, Feb. 3, 2009
Canada Encouraged by Obama's Trade Talk
by Rob Gillies
The Associated Press, Feb. 4, 2009
US Senate Dilutes 'Buy American' Clause
Agence France-Presse, Feb. 5, 2009
Canada Sees Progress in Dispute over US Stimulus
The Associated Press, Feb. 5, 2009
Why Europe is Fuming about the Stimulus Package
by Leo Cendrowicz
TIME, Feb. 5, 2009
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Comment
7 CommentsWhy in the sam-hell, should I care about what some other country thinks, about Americans, trying to PROTECT, our jobs and our markets. These Globalist so-called ' Free-Traders' are defending THEIR OWN INTERESTS, and saying WE have to fall in line, or else??
FREE TRADE is a standing joke. So-called 'free trade' is 'managed trade' by those who would sink America to 3rd-world status. NAFTA & GATT was a one-way ticket to serfdom for many Americans. While corporations foreign & domestic have their goods enter the U.S. with little or no tariffs attached and American manufactured goods, are slammed with import tariffs entering other countries hampering the sale of American-made goods. It's NOT an equal playing field!!!
Now we're paying a dear price for allowing these globalist socialist free-traders to control America's economic future, allowing America's manufacturing sector to move overseas, with greater profits in mind FOR THEM, at the cost of Americans jobs. This is what I call capitalism at its worst...It's referred to as 'Predatory Capitalism'
We are thoroughly disgusted and fed up to our necks, working 2 & 3 jobs, trying to make ends meet. And now we've seen our savings and retirements in great jeopardy due to the idiots who run corporate-owned Washington D.C. aka. The District of Corruption.
You know it and I know it... and now millions of Americans who've had their collective faces rubbed in it know it, too. Especially, those who've lost their homes and investments.
As for the Obama MisAdministration... forget it. They'll bring on Socialism now, like never before, and the globalists are luvin it, seeing the 'People in the Hustings', scrambling to make ends meet, which feeds right into their agenda, in controlling us and the economies of all nation states by their corrupt mindsets.
With No Apologies,
GD Cull, et al
February 5, 2009 2:11 PMIf "Protectionism" is an internal, temporary preference for employing our own...then I'm for it! Would those complaining now have complained during FDR's similar initiatives and programs?
Oh, by the way...the complainers will not be happy until we lose ALL of our sovereignty!
To H*LL with THAT idea and them!
Ted E.F. Roberts
If Protectionism means temporary employment for Americans, at a most vulnerable point, then I guess I'm a Protectionist.
Those who would complain about this initiative would have hated FDR! Oh, by the way, what say we keep just a little sovereignty.
Ted Roberts
February 5, 2009 6:52 PMWe reserve the right to help our own, during an economic crisis. We also reserve the right to just a little sovereignty, don't we?
February 5, 2009 6:56 PMThe nerve of Obama! Insisting American tax dollars be spent on America, gasp, horror, shock!
The whole reason we are in this mess to begin with is because these brilliant CEOs sent all the good paying middle class jobs to China, India, and the rest of the 3rd world.
The only reason it didn't collapse years ago is because of Alan Greenspan's Ponzi scheme of easy money loans. All this did was just delay the chickens coming home to roost, and in the end it made things much worse.
February 6, 2009 12:41 AMBusinesses should drive economies through a balanced SUPPLY and DEMAND. I would say to these business people: -You, Mr. Businessman, may be able to supply outsourced cheaper products, and anticipate BIG PROFITS. But if you crash the American consumer by sending them to unemployment, there will be not much DEMAND left for your products, not only in the U.S., but also in other countries, because the cheap labor people over there don’t have enough money to buy your staff. Your action will create a chain reaction that affects other businesses, banks, government, people, etc., and sooner or later it will backfire on your own business.
I know… your excuse is: -"The competition is doing it and therefore I have to do it too. Otherwise I lose my business…".
-Well, if proper laws were approved and put in place, that would fix the competition issue.
America used to be the "LAND OF OPPORTUNITY". But now, America is the land of opportunity FOR OTHER COUNTRIES ONLY! -See how India economy is blooming, thanks to our American business friends.
Rather than saying: "Buy American", is better to say: "Buy Made in America”.
Results exporting jobs to cheap labor countries:
1. EXPORTING JOBS = unemployment
2. unemployment = lack of consumers + increasing debt
3. lack of consumers + increasing debt = no sales + unpaid loans + low tax revenue.
4. no sales + unpaid loans + low tax revenue = business failure + banks failure + government deficit + poor social services + crime increase + etc., etc.
5. ALL OF THE ABOVE = ECONOMIC DISASTER (recession)
Whom GM or FORD is going to sell cars to, if Americans don’t have a job and therefore money to buy them? The foreign cheap labor people don't make enough money either.
How about applying TARIFFS just to AMERICAN PRODUCTS made in countries outside the U.S.?
