Backing Off Buy American

By February 4, 2009Trade

President Obama’s comments to ABC’s Charlie Gibson on the ill-advised “Buy American” provisions in the stimulus bill are getting some notice. From the transcript (and the paranthetical “not” corrects a misstatement as acknowledged by the White House):

CHARLES GIBSON: A couple of quick questions. There are “Buy America” provisions in this bill. A lot of people think that could set up a trade war, cost American jobs. You want them out?

PRESIDENT OBAMA: I want provisions that are [not] going to be a violation of World Trade Organization agreements or in other ways signal protectionism. I think that would be a mistake right now. That is a potential source of trade wars that we can’t afford at a time when trade is sinking all across the globe.

CHARLES GIBSON: What’s in there now? Do you think that does that? Do you want it out?

PRESIDENT OBAMA: I think we need to make sure that any provisions that are in there are not going to trigger a trade war.

The NAM’s letter to the Senate cited below includes a statement in opposition to the Buy American provisions. The Sun newspapers in Canada regarded the item as newsworthy, reported across the nation in, “Buy American’ clause will backfire, U.S. leaders warned.”

Getting even more attention was a letter from Canada’s ambassador to the United States, as reported in The Globe and Mail:

In a letter to Harry Reid and Mitch McConnell, the respective leaders of the Democrats and Republicans in the Senate, Ambassador Michael Wilson asks legislators to refrain from bringing in new laws that would restrict trade, lest they lead to similar actions by other nations.

“A negative precedent set here in the United States can have repercussions around the globe and could provoke debilitating beggar-thy-neighbour policies,” said the letter, a copy of which was obtained by The Globe and Mail.

At one point, he warns that legislation in Congress that would force officials to direct infrastructure spending to U.S. firms could undermine the United States’ ability to dissuade others from also undertaking protectionist measures.

“We are concerned about contagion, that is, other countries also following protectionist policies. If Buy American becomes part of the stimulus legislation, the United States will lose the moral authority to pressure others not to introduce protectionist policies,” he writes.

“A rush of protectionist actions could create a downward spiral like the world experienced in the 1930s.”

We should note that the U.S. and Canadian economies are closely integrated. In fact:

The two nations share the world’s largest and most comprehensive trading relationship, which supports millions of jobs in each country. In 2007, total trade between the two countries exceeded $560 billion. The two-way trade that crosses the Ambassador Bridge between Detroit, Michigan and Windsor, Ontario equals all U.S. exports to Japan. Canada’s importance to the U.S. is not just a border-state phenomenon: Canada is the leading export market for 36 of the 50 U.S. States, and ranked in the top three for another 10 States. In fact, Canada is a larger market for U.S. goods than all 27 countries of the European Community combined, whose population is more than 15 times that of Canada.

From the U.S. Embassy site in Ottawa.

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