Just what the final US stimulus package says about only buying US-made goods remains vague, but here we explain the issue and what's at stake

I was all primed this morning to post a link to a more-than decent analysis of what has happened to the 'Buy American' provision in the ultimate US stimulus package that I came upon last night.

But lo and behold the Council for Foreign Relations liked it as well, so it's already on Pundit, in today's World News Brief. Still, I thought I'd bring give it more prominence, because the 'Buy American' clause could have serious implications, not just on our exports to the US but on the budding protectionism we're seeing around the world.

This piece from the New York Times gives eight brief and informed views on the Buy American proposal and protectionism in general. Well worth the read.

American coverage of the has focused on the local politics of the issue, primarily the lack of bi-partisanship as the Senate and House of Representatives debated their proposed bills. (If you're bewildered by the US legislative system, essentially the process is that both the Senate and the House propose bills, they come to some consensus over a final bill, then that gets passed to the President to pass or veto). The rest of the world, however, has been more than a little vexed about plans to include a 'Buy American' clause in the bill that passes the stimulus package into law.

The EU threatened to haul the US up before the World Trade Organisation for breaching trade agreements, Japan warned of protectionism that would wither world trade, and Australia fretted that Washington could start a trade war.

The House bill required that the construction projects would use only US steel. The Senate bill meanwhile wanted to extend the provision beyond steel, requiring all public work schemes to use only US-made goods. It did, however, add that all procurement must comply with US trade obligations.

On one hand you've had the Xinhua news agency in China running stories such as Buy American call can't create jobs and Protectionism plays with fire (which is a bit rich coming from China). On the other, the Detroit Free Press, in the home of the US auto industry, has run headlines such as, Don't buy into myths saying buy-American rules are bad and former presidential candidate turned rant-a-quote, Pat Buchanan has been saying it's Buy American or bye-bye America.

As the Washington Post reports, "many details of the package remained elsuive last night", but we do know that the tax cuts alone total $282 billion. Remember, when Obama proposed this package three months ago, it was going to cost $300 billion in total. It's since trebled in size.

As for the Buy American clause in the final bill, well, it's still in there but with the Senate-imposed proviso that it not run foul of any US trade deals. In other words, it's vague. Perhaps we'll get more clarity later today, or perhaps it'll be left to government officials to interpret. Perhaps President Obama will try to put his interpretation onto it before he signs the bill into law. We simply don't know yet.

Comments (3)

by David Beatson on February 13, 2009
David Beatson

Watch "Bye-Bye America" get traction after today. Global miner Rio Tinto now has an offer from Chinese investors Chinalco to double their stake in RT to 18% for a mere US$19.5 billion. The buying is starting - but this may not be the kind of buying that the Buchanans of the world will welcome.  

by Nikki Pender on February 14, 2009
Nikki Pender

Also from the NYT, Tom Friedlander takes the non-protectionism argument to the next step, and recommends more open door immigration.


by Tim Watkin on February 16, 2009
Tim Watkin

Interesting link Nikki. Friedman makes the case that one good way to respond to a sliding economy is to encourage more immigration - they buy property, rallying the house market; they bring new skills; they start new buinesses; they spend money... It's not a terribly sustainable model, but it's not a bad short-term measure.

I'm reminded of a line from a song by the big-nosed bard of Barking, Billy Bragg"

Our borders are closed to refugess, while our markets are forced open.

Perhaps loosening up the borders and tightening up the market might help!

I wonder how NZers would react to increasing our immigration numbers... I wonder if there's much demand (although I note lots more overseas students are coming to NZ schools this year since the dollar dropped)... And I wonder why no politician has raised this issue...

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