‘Buy America’ Editorials
January 8, 2009 - February 5, 2009
Rocky Mountain News, February 5, 2009, “A Whiff of Smoot-Hawley.”
Click here to read the full article.
Orlando Sentinel, February 4, 2009, “We Think: Restricting Stimulus to
U.S. Goods Would do More Harm Than Good.” Click here to read the full
Christian Science Monitor, February 4, 2009, “What Others are Saying:
Don't Start a Trade War.” Click here to read the full article.
Seattle Post Intelligencer, February 3, 2009, “Put the Economy Before
Expediency.” Click here to read the full article.
Appeal-Democrat (Marysville, CA), February 3, 2009, “Stimulating or Just
Spending?” Click here to read the full article.
Winnipeg Free Press (Canada), February 3, 2009, “Our New ‘Partners’.”
Click here to read the full article.
USA Today, February 2, 2009, “’Buy American’ Provisions Offer Recipe
for Retaliation.” Click here to read the full article.
Dallas Morning News, February 2, 2009, “The Troubling Return of
Protectionism.” Click here to read the full article.
Wisconsin State Journal, February 2, 2009, “Stimulus Package Needs to
Pop.” Click here to read the full article.
San Francisco Examiner, February 1, 2009, “Ghosts of Smoot-Hawley
Stalking the Hill.” Click here to read the full article.
Toronto Star (Canada), January 31, 2009, “Test for Obama on
Protectionism.” Click here to read the full article.
The Record (Canada), January 31, 2009, “U.S. Protectionists Must be
Challenged.” Click here to read the full article.
National Post, January 31, 2009, “Smoot-Hawley 2.0.” Click here to read
the full article.
Wall Street Journal, January 30, 2009, “Protectionism as Stimulus.” Click
here to read the full article.
Australian (Australia), January 30, 2009, “Free Trade Threat.” Click here
to read the full article.
Times (UK), January 30, 2009, “Obama's Spending Programme.” Click
here to read the full article.
Globe and Mail (Canada), January 30, 2009, “Canada's Battle Against
Barriers.” Click here to read the full article.
Washington Post, January 28, 2009, “Trade Test.” Click here to read the
Dominion Post (New Zealand), January 26, 2009, “Trade Walls Lead to
Trade Wars.” Click here to read the full article.
Chicago Tribune, January 21, 2009, “Ghosts from the Past.” Click here to
read the full article.
Wall Street Journal, January 8, 2009, “Steel's 'Buy America' Ploy.” Click
here to read the full article.
Rocky Mountain News
A Whiff of Smoot-Hawley
February 5, 2009
Excerpt: In 1930, as the Great Depression tightened its grip on the country,
Congress passed the Smoot-Hawley Act, erecting a high and onerous tariff wall
around the U.S. economy. The lawmakers thought they were helping American
workers; instead, they greatly lengthened and deepened the Great Depression,
here and worldwide.
What the Congress is considering doesn't rise to the level of Smoot-Hawley but
"Buy American" is protectionism and protectionist measures tend to feed on
themselves. If this nation enacts them, our trading partners will likely retaliate and
on it will go in a downward spiral.
Just the prospect of it caused the European Union to complain to the White
House and the Treasury and State departments that Congress was about to set
"a very dangerous precedent." The House added a measure to the stimulus bill
requiring that only U.S.-made iron and steel be used in federally funded public
works projects. The Senate is contemplating an even more drastic step - that
"manufactured goods" used in public works projects come from a U.S. supplier.
President Barack Obama is against it. He has said that the United States should
avoid doing anything that "signals protectionism." This will be a tough call for him.
"Buy American" is a great sound bite but bad economics. The Democratic
congressional leadership and the unions are strongly for the Buy American
provisions. But Obama cannot let them become law.
We Think: Restricting Stimulus to U.S. Goods Would do More Harm Than
February 4, 2009
Excerpt: The sinking U.S. economy needs a temporary, well-targeted lift from
Congress, but "Buy American" restrictions in the House and Senate stimulus
packages would kick the economy while it's down.
The package that passed the House last week includes a protectionist provision
that would require U.S.-produced iron and steel to be used in any construction
projects financed by the measure. The Senate's package, under debate this
week, would go a step further by also mandating that any manufactured goods
used in the projects be U.S.-made. The geniuses who came up with this idea
must have been napping during history class.
When Congress slapped high tariffs on imports in 1930 under the Smoot-Hawley
Act, other nations retaliated with their own tariffs. World trade plummeted, and
the Depression deepened.
While the Buy American rule wouldn't impose tariffs on imports, it would invite
other countries to adopt their own buy-national restrictions, at the very least. U.S.
exporters and their workers would be shut out from hundreds of billions of dollars
worth of business with those countries. Several of those countries, normally big
customers for American goods and services, are launching their own building
programs to stimulate their economies. The list includes Germany, Britain,
France, Australia, India and China.
Christian Science Monitor
What Others are Saying: Don't Start a Trade War
February 4, 2009
Excerpt: American tax dollars directed at America's ailing economy should be
spent only on American products. That sounds logical — and compassionate to
U.S. workers, who can use all the lovin' they can get. But the "Buy American"
provision of the megastimulus package winding through Congress makes little
sense. Neither is it kind.
Last week, the House passed an $819 billion economic recovery plan with the
stipulation that all public projects funded by the bill (read highways, airports,
mass transit, etc.) use only iron and steel produced in the U.S. of A. The Senate
version goes further, to include all manufactured products.
The lawmakers' thinking on this is understandable. They're sensitive to the
outrage that would come when it's discovered that some federal monies will
inevitably go to foreign goods, supporting foreign jobs. With an economy this
bad, better take care of our own, they reason.
Seattle Post Intelligencer
Put the Economy Before Expediency
February 3, 2009
Excerpt: Barack Obama's efforts to build a broad coalition of political support for
his $800 billion economic stimulus package are, in some ways, admirable.
Demand is falling away at an ominous speed in the United States economy. The
quicker this stimulus package gets through Congress the better. And not only for
America but the world, which still relies heavily on demand from the U.S.
Tax cuts, favored strongly by Republicans, have their place, but their impact is
likely to be blunted since the over-indebted American public is liable to save the
proceeds, rather than spend them. But President Obama has made them a big
factor in his package, in part, to help ease the plan's passage into law.
Yet an element of the legislation designed to appeal to the left of the Democratic
Party -- the "Buy American" provisions -- while they might help build political
support for the package, will, in the longer term, do more harm than good to the
Protectionist plans of this nature always seem appealing -- until other nations
respond in kind. If Washington is going to pass "Buy American" legislation, why
should our own government not implement "Buy British" policies, or Canadians
demand "buy Canadian" regulations, and so on? Some U.S. producers might
well benefit from such provisions. But its exporters would soon suffer.
Appeal-Democrat (Marysville, CA)
Stimulating or Just Spending?
February 3, 2009
Excerpt: It is difficult to come up with words sufficiently emotive to express the
disgust that most taxpayers and citizens must feel at the so-called stimulus bill
passed by the House on Wednesday. Whether it was politically shrewd of all the
House Republicans to vote against it or not, it is not difficult to understand the
This is supposed to be the most serious economic downturn the country has
faced since the Great Depression. So the administration and Congress conjure
up a supposed stimulus package with huge numbers -- $819 billion in the House
version -- and sure to be increased when it reaches the Senate. The trouble is,
the bill offers very little that would actually stimulate the economy.
Beyond the fact that much of the so-called infrastructure spending included in the
package is pork, pure and simple, the Congressional Budget Office estimates
that less than half of the infrastructure money will be used before the end of fiscal
2010, when many economists project that the recession will be over no matter
what the government does or doesn't do.
Even with projects that have been in the works for a while and are considered
"shovel-ready" once the cash becomes available, it can take six months to a year
before the first workers are hired.
Similarly, money in the bill allocated to education, health care and "alternative"
energy will take time to disburse. Under the most optimistic projections some
school construction and health care spending wouldn't even start until 2012. It
rather looks as if this massive bill, while sold as economic stimulus, has been
transformed into a massive and perhaps permanent increase in federal spending
that includes everything that has been on the wish lists of Democrats and special
interests for decades.
Also troubling, a "buy American" amendment was added that would prevent the
use of foreign iron and steel in infrastructure projects. This would not only violate
existing trade agreements, it is likely to trigger retaliatory protectionist measures
by other countries. China and several European countries are planning
infrastructure spending of their own, and American companies had figured to get
some of that business. Retaliatory protectionism would prevent that, and could
trigger a more serious crisis, just as protectionism helped to deepen the
worldwide depression in the 1930s.
Winnipeg Free Press (Canada)
Our New ‘Partners’
February 3, 2009
Excerpt: Such policy should scare the bejeezus out of not just Canadians but out
of America's other trading partners as well, but it should hardly startle them.
Democrats are traditionally protectionists. President Barack Obama and
Democrats in Congress are just doing what they said they would do when they
were campaigning for election last year.
During the primaries, Mr. Obama promised workers in the so-called rust-belt
states such as Pennsylvania that he would reopen and renegotiate the North
American Free Trade Agreement. That set alarm bells ringing in Ottawa, but a
senior Obama aide was quick to assure the government that this was just
electoral posturing and that NAFTA was safe.
Election promises, however, have a way of taking on a life of their own and
judging by the trade provisions in the massive bailout package that Mr. Obama
has sent to Congress -- it was passed by a purely partisan vote in the House of
Representatives this week and goes, in a revised form, to the Senate on Monday
or Tuesday -- that appears to be happening now.
The economic stimulus package is worth US$820 billion and is designed to kick-
start the American economy that has been crippled by a world-wide economic
crisis which, ironically, was authored by previous American fiscal and economic
policies. It contains trade provisions that violate both the spirit and the letter of
The Bill that the house has just passed is specific about the use of iron and steel
-- it must all be American made if it is to qualify for stimulus assistance. This is no
small thing -- Canada exported more than $11 billion of these commodities to the
U.S. in 2007. Some of it would be locked out under Mr. Obama's bill. The bill that
the Senate is set to entertain, however, goes even further, extending the buy-
American proviso to everything purchased with money from the stimulus
’Buy American’ Provisions Offer Recipe for Retaliation
February 2, 2009
Excerpt: In November, leaders of 20 nations gathered in Washington to discuss
ways to stabilize the faltering global economy. They differed on many things, but
one thing they agreed on was that trade barriers would only make a grim outlook
Apparently, these leaders are having a hard time being heard. In the weeks since
their meeting, trade restrictions have been enacted or are under consideration in
countries from Indonesia to Argentina and — most troubling — the USA.
Both the House and Senate versions of the economic stimulus bill contain
provisions that would limit purchases with stimulus funds to products made in
America. The House bill, approved last week, would apply the seductive "Buy
American" label only to iron and steel products used in construction. The Senate
measure would cover all manufactured goods.
Protectionist measures — be they quotas, tariffs or restrictions on where
governments can do their shopping — have emotional and patriotic appeal to
workers fearing for their jobs. But they are overwhelmingly seen by economists
as counterproductive, particularly at moments of great economic peril. The
history books underscore their point: The Smoot-Hawley Tariff Act, passed in
1930, is widely credited with helping turn a stock market crash into a depression.
The act set off a global trade war, and U.S. trade dropped by more than half.
Jobs were lost, not saved.
Dallas Morning News
The Troubling Return of Protectionism
February 2, 2009
Excerpt: From their perch in the Swiss mountain village of Davos, the world's
economic leaders last week issued a stern warning to the United States –
whatever you do, don't wall off your economy from the rest of the globe.
Congress needs to take this message to heart, despite a growing populist
sentiment to turn inward to save jobs and protectionist moves from some of the
United States' biggest trading partners. The House version of the stimulus bill
would require companies receiving dollars for infrastructure construction to use
American-made steel and iron. The Senate version would onerously expand the
‘Buy American’ mandate to all manufactured goods.
Wisconsin State Journal
Stimulus Package Needs to Pop
February 2, 2009
Excerpt: We're not going to spend money just to spend money.
We're not going to spark a trade war.
We're not going to ignore legitimate GOP concerns.
That is what President Barack Obama needs to forcefully tell Democratic leaders
in Congress as they rush to pass a massive and meandering economic stimulus
A targeted stimulus is needed to help get the economy going again. Troubling
news about slumping sales and layoffs in Wisconsin and elsewhere seems to be
But the $819 billion bill that cleared the House without a single GOP vote last
week needs tighter reins and more focus.
Obama needs to harness the power of his popular and young presidency to
move Congress where it needs to go. Obama needs to be the leader he
promised to be -- the one the Wisconsin State Journal endorsed last fall.
This is Obama's first big test.
The House package would dole out money willy-nilly to all sorts of programs
favored by interest groups, regardless of whether the impact on the economy
justifies the cost.
Obama stressed the need for speed during a White House event on Monday. But
Obama also must demand more precision.
The House version of the stimulus includes $54 billion to expand existing
programs that the government's own auditors have judged ineffective or unable
to pass audits. Take that out, along with other spending frills that lack bang for
their many bucks.
Obama must be firm against short-sighted and risky "buy American" provisions
Democrats slipped into their proposals. Our trading partners in Canada, Europe
and South America are already threatening to retaliate with barriers of their own.
San Francisco Examiner
Ghosts of Smoot-Hawley Stalking the Hill
February 1, 2009
Excerpt: Shadowy figures materialized on Capitol Hill this week as House
Democrats insisted on including “Buy American” provisions in the $825 billion
economic stimulus bill. The provisions — which are mirrored in the Senate
Democrats’ version of the legislation — require that federal funds for stimulus
projects can be spent on steel and iron only from domestic producers.
That’s another way of telling foreign producers to keep out. Such trade barriers
damage economic growth just like tariffs that make goods imported from
overseas cost more. The idea behind these trade barriers and tariffs is to force
consumers to use domestic producers, thus stimulating growth in the national
economy. But the opposite results whenever politicians substitute their self-
interested ignorance — aka “protectionism” — for the collective wisdom of free
people trading in free markets: Foreign nations erect their own trade barriers,
thus killing U.S. exports, forcing prices higher and shrinking the economic pie for
everybody. That’s what happened in 1930 when Congress approved the Smoot-
Hawley Act, with the highest tariffs in U.S. history.
The history books say it deepened and vastly prolonged the Great Depression.
Politicians of all stripes must be continually reminded of this elementary
economics lesson. The free-trade policies of the Reagan and Clinton years were
central to the unparalleled prosperity that marked those days. By contrast, the
Bush and Obama-Reid-Pelosi era increasingly recalls the dark days that
produced the stock market crash of 1929, Smoot-Hawley in 1930, and the
endlessly futile depression years of the New Deal.
President Barack Obama — who has not yet taken a position on the “Buy
American” provisions of the stimulus act — and Democratic congressional
leaders would do well to review historian Paul Johnson’s account of the 1920s
and 1930s. In his “Modern Times,” Johnson reminds that “the White House, the
Treasury, the Congress and the banks worked in consort to keep discount and
interest rates artificially low to, in the words of the Federal Reserve, ‘stimulate,
protect and prosper all kinds of legitimate business.’” This vulgar laissez faire
policy was meant to keep the economy humming on cheap credit.
Toronto Star (Canada)
Test for Obama on Protectionism
January 31, 2009
Excerpt: Canadians cheered when U.S. President Barack Obama swept into the
White House this month. But his Democratic party's "Buy American" tilt has just
imposed a midwinter chill on the relationship, weeks before Obama's planned
Feb. 19 visit here.
If Obama's massive $819 billion economic stimulus package clears Congress in
its present form, it will sideswipe Canada's iron and steel exports to the U.S.
That's because the bill passed by the House of Representatives this week tries to
protect U.S. jobs by requiring that only American steel be used in public works
funded by the package - including airports, bridges, canals, dams, dikes,
pipelines, railroads, transit, roads, tunnels, harbours and piers. We'd be shut out.
This Buy America provision confirms fears that Obama's Democrats are
protectionist. And it invites retaliation by other countries that would hurt global
trade and slow economic recovery.
It is hard to say how hard Canadian exports would be hit. A lot depends on the
amount of steel-related activity the package generates.
But the crude protectionist signal the House has sent is easy to read, and it
threatens to spill over into auto and other sectors. The Democrats seem
indifferent to U.S. obligations under the North American Free Trade Agreement
and the World Trade Organization rules. That matters to every U.S. trading
partner. Americans, too, are worried. The U.S. Chamber of Commerce fears a
backlash against U.S. exporters.
Ironically, the U.S. has more to lose than gain by squeezing our lucrative bilateral
iron and steel trade. In 2007 the U.S. exported nearly $5.3 billion (U.S.) worth of
these products to Canada, and imported $4.4 billion from us, according to the
U.S. International Trade Commission. That balance in Washington's favour
translates into a lot of U.S. jobs. A trade spat would serve neither country's
The Record (Canada)
U.S. Protectionists Must be Challenged
January 31, 2009
Excerpt: When the going gets tough, those tough American lawmakers are
suddenly diving for cover behind a high, thick -- and possibly illegal --
protectionist wall with "Buy American" signs plastered all over it. What gives in
the capital of capitalism?
The global recession, which the Americans themselves engineered, is
frightening, yes. It has gutted pensions, decimated investment savings, thrown
millions of people out of their jobs and homes while blighting hopes for years to
come. Governments everywhere have a responsibility to act aggressively to
protect their citizens from the ravages of this toxic downturn.
But the protectionist road being followed by the American government leads
straight to economic perdition -- for them, for Canada, for the world. Which is
what makes this a matter for Prime Minister Stephen Harper to get involved in.
Harper has to send a clear, powerful message to President Barack Obama that
the $820-billion US stimulus package working its way through Congress is
unacceptable to the American's closest neighbour and, arguably, most important
It's bad enough that the House of Representatives voted this week to bar the use
of virtually all foreign iron and steel from any project in this infrastructure stimulus
program. That could deprive a lot of business to Canadian steel producers who,
in 2007, sold $11 billion worth of their product south of the border.
But even more provocative and destructive is the version of the stimulus that will
soon be voted on by the U.S. Senate. It extends the U.S.-only requirement to all
the goods and services paid for with the government stimulus cash. So those
who want a slice of the $820-billion pie have to buy only from their fellow
January 31, 2009
Excerpt: The precise parameters of a "depression" have been bandied about a
great deal lately, for obvious reasons. How's this for a thumbnail definition: A
"depression" is a recession exacerbated by protectionist legislators.
Certainly, they helped steer us into the big one of 1929-39; the United States, left
standing as the economic hyperpower, adopted the Smoot-Hawley Tariff of 1930,
the British dominions responded by flirting with the long-debated system of
Imperial Preference, and other European countries retreated into medium-sized
regional trade and currency blocs. The total value of world trade decreased by
50% in nominal dollars (30% in real terms) between 1929 and 1932, and was still
below pre-crash levels on the eve of the war.
We can no longer kid ourselves that it could not happen again. The developed
countries affected by the current crisis, including Canada, are practising a form of
ad-hoc protectionism by pouring tax money into vulnerable industries. On
Tuesday, the director of the World Trade Organization pointed out that poorer
countries with less ability to borrow or print cash are already responding with
explicit tariffs. Most notable, perhaps, are India's opportunistic levies designed to
defend the steel industry it has spent recent decades building. Now the U. S.
House of Representatives has shocked the world by attaching a rider to the latest
stimulus package that requires steel and iron used in federally funded
construction projects to have been made in America.
Wall Street Journal
Protectionism as Stimulus
January 30, 2009
Excerpt: Earlier this month we noted that the U.S. iron and steel industry was
lobbying for a "Buy America" provision in the stimulus package. Now everybody's
getting into the act.
On Tuesday the Senate Appropriations Committee added "manufactured goods"
to the list of items that must be American-made in order to qualify for stimulus
dollars under the American Recovery and Reinvestment Act. Congress is
signaling to the rest of the world that U.S. protectionists are in charge. Forcing
U.S. contractors to buy domestic goods instead of shopping for the best price
available world-wide means that taxpayers risk overpaying for their roads and
bridges. And that means capital will be misallocated, fewer projects will be built
and the bill will go ever-higher.
There is also the little matter of retaliation by our trading partners. The European
steel industry has said that it will urge the EU to challenge the provision at the
World Trade Organization. That's the high road. Another course would be for
other countries to lock American companies out of the bidding on their projects.
China's stimulus is estimated at $600 billion. Caterpillar Tractor says that it has a
"major initiative to compete in infrastructure projects around the world --
particularly in China -- and this would seriously undermine it." Congress must
want more Caterpillar layoffs.
Free Trade Threat
January 30, 2009
Excerpt: President Barack Obama has moved quickly to assemble the kind of
economic stimulus package that the International Monetary Fund says is
essential to halt the downward economic spiral and prepare the ground for
recovery. Workers, losing jobs in their thousands, were looking to Washington for
"action, bold and swift", Mr Obama said as the US Congress prepared to vote on
his package. The House of Representatives endorsed the $US825 billion plan
($1.25 trillion), while the Senate is still considering a parallel bill.
There is much to commend in the approach taken by the new administration. It
picks up the IMF's recommendation that the most direct way to boost demand is
for government to spend money itself on one-off initiatives. Almost $US300 billion
is directed to state governments that do not have the ability to borrow
independently, and are facing sharp cuts to services and infrastructure spending
as their own tax revenue dries up. A further $US275 billion is devoted to tax cuts
aimed at low-income families.
The package also bears the marks of the worst features of American democracy,
with congressmen trading their votes for inclusion of their pet projects. Hence,
funds are provided for internet access to rural areas, an anti-smoking campaign,
a super computer to study ocean currents, and the laying new turf on the mall
from Capitol Building to the Lincoln Memorial.
More troublesome still is the clause requiring suppliers for government funded
infrastructure projects to use steel produced in the US. It is arguably in breach of
the US's obligations to the World Trade Organisation, which require that
government procurement be open to suppliers from all countries, and it invites
retaliation from nations to which the US exports.
The temptation to protect local industry is always greatest when economies turn
down. But the US provides bitter proof of the cost of beggar-thy-neighbour
policies. The notorious Smoot-Hawley Tariff Act, passed by Congress in 1930,
imposed prohibitive tariffs on US imports. When US trading partners responded
in kind, world trade sank by half in two years, turning a severe downturn into an
Obama's Spending Programme
January 30, 2009
Excerpt: This week the US House of Representatives passed a fiscal package
amounting to $819 billion. Despite intense lobbying from the White House, this
Democratic proposal received not a single Republican vote. The Senate is
constructing its own version of the Bill, which envisages a fiscal stimulus of about
Fiscal stimulus is necessary and the White House's general approach should
receive support. With interest rates already barely above zero, there is little
remaining scope for monetary stimulus. As private consumption and investment
collapse, government spending must take their place. But the principle of fiscal
activism should not be taken as justification for any and every scheme involving
public funds. The size of this package is an open invitation to special interests to
divert public funds for sectional purposes.
Already there are disturbing elements of protectionism in the proposals. A “buy
American” provision in the Bill would hamper foreign iron and steel producers
from participating in US infrastructure projects. This type of economic nationalism
ominously recalls the Smoot-Hawley tariff legislation that compounded the global
depression of the 1930s. President Obama should avoid any such proposal.
For the package more widely, the quality of spending matters, and not only the
volume. The increasing cost and the split of party allegiances may cause
difficulties for President Obama. He should take the opportunity to scrutinise the
proposed expenditure line by line.
Globe and Mail (Canada)
Canada's Battle Against Barriers
January 30, 2009
Excerpt: Canadian governments, companies and other interests need to work
hard to persuade the Obama administration and the United States Congress
against including any buy-American clause in their stimulus package. The bill
hastily passed this week by the House of Representatives specifies iron and
steel, but the Senate bill is broader, excluding foreign “manufactured goods” from
The well-being of Canada is not all that is at stake; the world's economy is at risk.
This is the first serious expression of rising protectionism in the U.S. since the
election of Barack Obama. It needs to be nipped in the bud. Mr. Obama's visit to
Ottawa on Feb. 19 should not be treated as the sole opportunity to do so; the
rush to pass a stimulus bill may make it too late.
On Friday, however, Robert Gibbs, the new White House press secretary,
cautiously said that the administration would review the clause, noting “concerns
that have been heard in newspapers produced both up north and down south.”
The present recession invites unsettling comparisons to the Great Depression of
the 1930s. Then, one panicky response of many countries to falling prices
around the world was to hunker down and raise tariff barriers. In effect, they were
playing “beggar-my-neighbour,” and succeeded in impoverishing all concerned.
Canada was not only the victim of the U.S. Smoot-Hawley Tariff Act; R.B.
Bennett's Conservative government compounded the trouble by retaliating,
leading the charge for British Empire preferential tariffs, which naturally did
nothing to restore Canadian exports to the U.S.
Much of the discussion in the U.S. on both sides of the “buy-American” issue –
free traders and protectionists alike – suggests that Canada has been forgotten.
The debate is largely about imports from the European Union, China and other
countries outside North America. The encouraging aspect of this is that many
Americans do not think of Canadians as foreigners, and may yet relent when
they realize that trade barriers hurt Canada, too. The discouraging side is that it
is hard for Canada to get Americans' attention. The Harper government ought to
take out advertisements in influential newspapers in the U.S. such as the New
York Times and the Wall Street Journal.
January 28, 2009
Excerpt: In the two-plus years since he announced his candidacy for president in
January 2007, Barack Obama has managed to finesse the issue of trade. At
times, such as when he suggested that he would renegotiate the North American
Free Trade Agreement, he has veered toward protectionism. At others, such as
when he voted for a free-trade pact with Peru, he has recognized the job-creating
power of U.S. exports. Now that he is president, Mr. Obama will have to define
himself more clearly. The fiscal stimulus bill making its way through Congress
provides an early opportunity: Mr. Obama should say no to "Buy American"
provisions in the $825 billion measure.
As currently written, the bill would prohibit the use of imported steel on tens of
billions of dollars' worth of infrastructure projects, including work on federal
buildings and public schools. (There are a few exceptions for those willing to
spend a lot of time and money on paperwork.) This is a dramatic extension of
current "Buy American" rules for steel, which apply only to highway construction.
"Buy American" sounds patriotic, but paying more than necessary for steel
diverts resources that could create jobs in other industries. Worse, it raises the
prospect of retaliation against American exporters by U.S. trading partners. The
director-general of the European steel industry trade association already has
threatened to take the United States before the World Trade Organization if the
steel provision passes. (Notably, European stimulus programs do not bar U.S.
steel or other products -- yet.) "Buy American" would violate the Nov. 15 G-20
joint declaration, which committed the United States to "refrain from raising new
barriers to investment or trade in goods and services" until November 2009.
Dominion Post (New Zealand)
Trade Walls Lead to Trade Wars
January 26, 2009
Excerpt: The grim news that trade walls are being rebuilt in Europe is bad
enough in itself, The Dominion Post writes. What is worse is that it will provide
ammunition for others who wrongly believe the answer to the world's economic
woes is to try to protect jobs at home by shutting out the exports of others. Far
from providing salvation, that is the way to ensure stagnation.
There is little surprise in the European Union's move to revive dairy subsidies,
and its decision to buy 30,000 tonnes of butter and 109,000 tonnes of milk
powder. Like New Zealand dairy farmers, the Europeans have been hit by a
slump in demand for what their cows produce, made worse for them by the
strength of the euro. Unlike New Zealand governments, Europeans believe in
propping up uncompetitive farmers. Despite recent attempts to reform the
common agricultural policy, it still gobbles up more than 40 per cent of the $245
billion EU budget looking after 3 per cent of its population.
The crisis has meant that talk of redirecting that money into preserving the
countryside and revitalising rural areas has been forgotten. As recently as
November, European Agriculture Commissioner Mariann Fischer Boel was
speaking bravely of freeing Europe's farmers to follow market signals. Now it is
back to the fortress Europe mentality, distorting the world market with subsidies,
and hints of more to come.
Already farmers' representative Simon Michel-Berger is saying the measures
announced "might just be a drop on a hot stone". Dairy farmers in Wisconsin will
no doubt react to that by calling on new United States President Barack Obama
to provide them with protections that at least match those of the Europeans.
His attitude remains to be seen, but the Americans have a long history of talking
up free trade in theory and putting barriers in front of it in practice. Before his
election, he spoke of the need to "break down trade and investment barriers to
maintain the American farmer's global competitiveness" but in the next breath
said he would ensure that all trade agreements contained labour, environmental,
health and safety standards "so American farmers are able to compete on a level
playing field" and that he would be tougher about enforcing those.
Ghosts from the Past
January 21, 2009
Excerpt: Trade protectionism was on the rise in the world even before recession
hit last year. Now economic hardship is raising the stakes. The parallels to
events in the early years of the Great Depression are downright scary.
Then as now, a period of tremendous speculative boom had just ended badly
and the economy was shrinking. Credit dried up. Banks failed. The ranks of the
jobless were growing as companies slashed payrolls and closed factories.
Against that backdrop 79 years ago, Sen. Reed Smoot and Rep. Willis Hawley
tried to protect American farm jobs from "unfair" foreign competition.
The Smoot-Hawley Tariff Act of 1930 raised tariffs on much more than
agriculture, sparking a furious round of tit-for-tat protectionist retaliation among
our trading partners. The result: world trade dropped by half—and stayed down
for the rest of the decade.
That round of retaliatory protectionism didn't cause the Great Depression, but it
deepened and lengthened the economic misery. It was a colossal blunder. After
World War II, the U.S. and the world worked to rebuild international trade flows
by creating global organizations that fostered trade. Political leaders vowed to
never again make that mistake.
Fast forward to 2009. A tremendous speculative boom has just ended very badly.
Credit is scarce, jobs are disappearing, and markets are drying up around the
world. For a while, U.S. exports were a rare bright spot keeping the American
economy afloat. But now exports are dropping and protectionism is back in
Wall Street Journal
Steel's 'Buy America' Ploy
January 8, 2009
Excerpt: The U.S. steel industry has now joined autos and ethanol in the conga
line to Capitol Hill. Sort of. Steelmakers aren't seeking government bailout money
-- a la Detroit and Wall Street -- but they are pressuring President-elect Obama
and the new Congress to stack any stimulus proposal in favor of domestic
producers, even though that would inevitably come at the expense of the nation's
overall economic health.
You might think that the prospect of a $1 trillion spending plan that includes
significant outlays for steel-intensive construction projects would be enough to
placate an industry that has experienced record profits in recent years. Not so.
Daniel DiMicco of Nucor, the nation's largest minimill steelmaker, said last week
that "what we are asking is that our government deal with the worst economic
slowdown in our lifetime through a recovery program that has in every provision a
'buy America' clause."
Such rhetoric may sound patriotic, but in practice it amounts to protectionism that
would only hurt American consumers and taxpayers -- and might kick off a trade
war the world economy can't afford. To begin with, domestic steelmakers don't
produce enough steel to meet U.S. demand. According to the American Institute
for International Steel, steel imports account for between 20% and 25% of the
U.S. market. The industry has also gone thorough dramatic changes in the past
decade, including bankruptcies and dumping pension liabilities on taxpayers.
Most importantly, there has been tremendous consolidation, which eliminated
many producers that once made steel no matter what the cost.