31
Jan
09

Made in America or Bought Overseas

An interesting article and equally interesting problem for our President is a dilemma over protectionist provisions in a massive economic stimulus bill: Backing the measures could set off a trade war, while opposing them could trigger a backlash from his supporters.

An article, which appeared on AP Online Newswire Service entitled “Obama facing dilemma over protectionism in bill”, by Desmond Bulter on the 31st of January describes the situation like this: “The choice involves “buy American” provisions attached to White House-backed stimulus legislation moving through Congress. They would require major public works projects to favor U.S. steel, iron and manufacturing over imports.”

The but problem is “Some Democratic lawmakers and interest groups allied to the president support the measures, but international allies and trading partners are warning that favoring U.S. companies would breach U.S. trade commitments and could set off tit-for-tat countermeasures around the world.”

Two of our largest U.S. trading partners already have spoken out against the measures. On Thursday, Canadian Prime Minister Stephen Harper expressed concern and the European Union warned that it would not “stand idly by” if such measures were passed. On Friday, Brazil’s president Luiz Inacio Lula da Silva also criticized the measures.

Here are some excerpts from the article, which bares reading in it entirety:

“The jury is out on how this administration is going on trade policy,” said Steven Schrage, an international business analyst at the Center for Strategic and International Studies. “This will be a key test.”

The provisions are likely to find support among Americans outraged that money from a stimulus package likely to top $800 billion could go to foreign competitors of U.S. firms.

I believe that when taxpayer dollars are used, they should support the things produced here at home,” Democratic Sen. Byron Dorgan, author of one of the provisions, said in a statement.

The result, according to my calculations, is that the U.S. will lose more jobs than it will gain,” said Gary Hufbauer, an economist with the Peterson Institute for International Economics, a Washington think tank. “We are going to poison the wells of world commerce if we do this.

The provisions are in a bill already approved by the House and a different version under consideration in the Senate. The Senate version states that none of the funds from the stimulus may be used for a project “unless all of the iron, steel and manufactured goods used in the projects are produced in the United States.” The House version leaves out manufactured goods.

Obama, who has argued that stimulus measures are urgent, is unlikely to block passage of any bill approved by the Congress. But he could press lawmakers to remove the protectionist measures before it is passed.

Both versions of the bill include language that would allow the president to waive the protectionist measures if he decides that would be in the economic interests of the United States. But passage of the measures could in itself unnerve trading partners and encourage other countries to take similar protective action.

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