Advertisement

Archive for Tuesday, February 17, 2009

‘Buy American’ clause may spur retaliation

February 17, 2009

Advertisement

The conventional wisdom is that the “Buy American” provision that the U.S. Congress passed Friday has been diluted enough to avoid a trade war like the one that led to the Great Depression. Well, I’m not that sure.

Granted, after strong protests by several foreign governments and President Barack Obama’s Feb. 3 statement that Congress should avoid passing a bill that could trigger a trade war, House and Senate negotiators substantially watered down the original “Buy American” clause in the $787 billion stimulus package.

Under the new version, the “Buy American” clause calls not only for ensuring that U.S. government infrastructure projects such as highways and bridges use exclusively U.S.-made steel, iron and manufactured goods, but also that this be done “consistent with U.S. obligations under international agreements.”

Supporters of the “Buy American” clause say this meets Democratic Party and labor unions’ demands that the stimulus package be used to create jobs in America — and not abroad — while ensuring that it won’t lead to U.S. protectionist measures that would drive other countries to retaliate, triggering a global trade war.

Even the U.S. Chamber of Commerce, which had led the fight against the “Buy American” clause in recent weeks, ended up supporting the final version of the provision.

“It’s an important win,” John Murphy, vice president of the U.S. Chamber of Commerce, told me in a telephone interview. “There was a huge uproar from the business community and foreign governments, and with President Obama showing leadership and taking the lead, the Congress unequivocally has stated that this provision will conform to our international agreements.”

Supporters of the “Buy American” provision note that its text, which refers mainly to U.S. government procurement bids, still leaves the United States with one of the world’s most open government bidding systems.

Under U.S. law, 42 other countries that are signatories to a World Trade Organization agreement on government procurement — the European Union, Japan and South Korea among them — can participate in most U.S. government bids for public works, with the exception of such projects as iron and steel.

But European laws contemplate many more exceptions, and other countries that are not signatories to the agreement — such as China, Brazil and India — have even more restrictive “Buy National” laws, they say. “You cannot ask the United States to be holier than the pope,” Murphy told me.

Peter Hakim, head of the Inter-American Dialogue, a centrist Washington-based think tank, told me that the law is not likely to hurt Latin American countries.

But many well-placed congressional sources and economists fear that the clause will do more harm than good.

Congressional trade experts note that while previous laws stated that a U.S. product can most often win a government bid if it is no more than 6 percent higher than the price of a foreign good, the new provision raises the bar to 25 percent.

This means that a U.S. product could be 25 percent more expensive than a foreign good and still win a bid, they say.

More important, the U.S. government will still have plenty of room to raise protectionist barriers without violating U.S. international obligations, critics say.

“Our international obligations don’t require us to keep the existing level of openness in the U.S. market,” says Gary Clyde Hufbauer, of the pro-free trade Peterson Institute for International Economics. “That’s the important point.”

Hufbauer’s point: Washington is likely to take measures that, while legal, will still restrict access of foreign goods to the U.S. market. This will drive others to respond in kind, and cause a reduction of world trade flows that will result in fewer jobs everywhere.

“It’s the me-tooism phenomenon,” he said. “There are plenty of protectionists in Brazil, Argentina, and other countries who will say, ‘Look, the Americans are doing it. We should do it as well.’”

My Opinion: The president deserves credit for having stood up to his party’s congressional leaders and for expressing concern over the possibility of sending a protectionist signal to the rest of the world.

But, even if the final version of the “Buy American” clause abides by international laws, I’m under no illusion that protection-eager industrialists around the world will not use it as an excuse to demand that their countries adopt tougher “Buy National” laws.

They will, and we may all get hurt.

Andres Oppenheimer is a correspondent for the Miami Herald.

Comments

Corey Williams 6 years ago

It's easy to hate walmart when just about 15 years ago, they were all over a little advertising campaign that pointed out the products they sold that were made in the USA. They even had commercials where employees of companies talked about how they were saved or growing because of their dealings with walmart. Where does that manufacturing money go now, Tom? Sam Walton wasn't an angel by any means, but even he would be opposed to what his stores have turned into.

Chris Ogle 6 years ago

I agree with Buy American..... just don't make me buy a Chrysler.

notajayhawk 6 years ago

What? We have a congress that's threatening our relationship with the other countries of the world and may end up isolating us? But ... but ... how could this be? I thought they were Democrats!

Chris Ogle 6 years ago

' I'm becoming more convinced every day you're just not happy people. And that upsets me.'

Thanks for the morning coffee all over my keyboard.... I needed a good laugh today.

By the way, are you and Bozo going to fight again today?

jonas_opines 6 years ago

Whoa, did Rightthinker get the boot today? Wonder what finally spawned that?

jayhawklawrence 6 years ago

Having worked in manufacturing across the US almost 30 years and having visited nearly 10,000 factories and jobs shops in that time frame, I feel I have a fairly solid view of the situation.

Manufacturers are among the smartest and most down to earth people on the planet. I have met hundreds of managers over the years who I believe would do a much better job of running our country than the folks we see at election time competing for our votes. Some of these guys are just incredibly bright and talented and all the good ones are well read and can debate with anybody on economics all day long.

The brightest guys don't run GM, FORD, or CHRYSLER. Forget that myth.

The brightest guys run companies that they started and have less than 250 employees. Once a company gets bought and controlled by shareholders and banks, etc., the talent level drops dramatically. Sometimes it becomes invisible. That is because the MBAs and IVY leaguers run it into the ground.

The opinion of most people I have known in this industry is that they don't want or need a Buy American clause but they want FAIR TRADE. That is what has been missing. Most manufacturers know they can compete and win if there is a level playing field. BUY AMERICAN clauses are usually promoted by unions and they usually do not represent the views of most manufacturers.

The problem we have is that the people who represent us in Washington are always giving away the farm to our competitors because they are hamstrung by political ideology, either Democrat or Republican. These poliical parties are like fiefdoms that operate like bureacrats where everyone has to do what the party leaders say and they have to follow their talking points in order to get support on bills, campaign finances, etc. As long as the American people stay stupid and believe there is only the Democrat point of view or the Republican point of view, we will always be getting screwed.

That is a big problem which we have in Kansas. We have been told what to think by our political leaders and their hacks but we have forgotten how to think.

Trobs 6 years ago

"Blessed is the government who's citizens do not think" Adolf Hitler

Flap Doodle 6 years ago

Pelosi, Reid & Barry are doing a heck of a job.

Trobs 6 years ago

Hitler wasn't an isolationist if I recall. I'm pretty sure he took vacations to Belgium, Poland, Russia, France....

Corey Williams 6 years ago

Mr_Nancy_Boy_To_You (Tom Shewmon) says… "Get over yourself Corey, the world does not revolve around you or any other liberals."

When did I say I was a liberal? And I know the world doesn't revolve around me, you need to know that it doesn't revolve around you.

Maybe buying American made products equals more American jobs. Why do you not want your fellow countrymen to have employment, Tom?

Commenting has been disabled for this item.