President Obama to water down 'Buy American' plan after EU trade war threat

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http://www.timesonline.co.uk/tol/news/world/europe/article5655115.ece

Quote:

The European Union warned the US yesterday against plunging the world into depression by adopting a planned “Buy American” policy, intensifying fears of a trade war.

The EU threatened to retaliate if the US Congress went ahead with sweeping measures in its $800 billion (£554 billion) stimulus plan to restrict spending to American goods and services.

Gordon Brown was caught in the crossfire as John Bruton, the EU Ambassador to Washington, said that “history has shown us” where the closing of markets leads " a clear reference to the Depression of the 1930s, triggered by US protectionist laws.

“I agree that we can’t send a protectionist message,” he said in an interview with Fox TV. “I want to see what kind of language we can work on this issue. I think it would be a mistake, though, at a time when worldwide trade is declining, for us to start sending a message that somehow we’re just looking after ourselves and not concerned with world trade.”

Mr Brown does not want to join criticism of President Obama’s stimulus proposals, which he sees as vindicating his own, but the Prime Minister remains strongly anti-protectionist, resisting calls yesterday for more safeguards for British workers.

Trade unions demanded a tightening of the law on the use of foreign workers as hundreds again walked out at the Lindsey oil refinery in protest at the hiring of Italian and Portuguese workers, and energy workers around the country followed suit.

A spokesman for the Prime Minister refused to condemn the “Buy American” clause. When pressed, the spokesman said that Mr Brown had repeatedly made clear that he was opposed to protectionist measures. He would not say, however, whether Britain was lobbying the new Administration to drop the clause.

Mr Brown remained in favour of President Obama’s decision to inject cash into the economy. “We are supportive of the approach in the US in terms of their fiscal policy.”

The EU warnings came in letters to US political leaders in Congress, Timothy Geithner, the Treasury Secretary, and Hillary Clinton, the Secretary of State. Mr Bruton urged them to respect the decision taken by the G20, the world’s leading economic nations, in Washington last November to resist protectionism as a defence against the crisis. They are expected to meet again in London in April.

“Failing this risks entering into a spiral of protectionist measures around the globe that can only hurt our economies further,” he wrote.

“Open markets remain the essential precondition for a rapid recovery from the crisis, and history has shown us where measures taken contrary to this principle can lead us.”

Under the “Buy American” clause passed by the US House of Representatives, American iron and steel must be used in construction projects that form part of the recovery plan. The US Senate wants to extend the scope of the clause before the Bill goes to the White House for approval.

The European Commission’s powerful trade department, a bastion of open markets formerly headed by Lord Mandelson, said yesterday that the “Buy American” clause was “the worst possible signal” that could be sent to world trade.

A spokesman said: “We are particularly concerned about the signal that these measures could send to the world at a time when all countries are facing difficulties. Where America leads, many others tend to follow.”

The Commission believes that the US move would violate international trade rules policed by the Geneva-based World Trade Organisation (WTO). The Commission also made clear that it was keeping an equally vigilant eye on protectionist moves within Europe as France prepared to insist that its motor manufacturers buy their parts only from French companies.

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Type: Discussion • Score: 5 • Views: 3,038 • Replies: 24

Personally I think that since it is the government that is doing the buying (with our tax money) it is perfectly fine to insist that we buy American as it's our economy that we are trying to stimulate, not the world economy. What's your take, maporsche?

1 Reply

@FreeDuck,

it's my take that regulated "buy american" would be immediately self-destructive and would do far more harm than good.

1 Reply

@dyslexia,

dyslexia wrote:

it's my take that regulated "buy american" would be immediately self-destructive and would do far more harm than good.

Is that what this is, though? Or is it just with respect to the stimulus money.

1 Reply

@FreeDuck,

FreeDuck wrote:

dyslexia wrote:

it's my take that regulated "buy american" would be immediately self-destructive and would do far more harm than good.

Is that what this is, though? Or is it just with respect to the stimulus money.

does it make any difference which pocket the money comes out of?

1 Reply

@dyslexia,

Yes, in my opinion. If this spending is supposed to stimulate the US economy then it is reasonable to expect it to go to US industry. Nobody is stopping me from buying a Toyota.

1 Reply

@FreeDuck,

Okay, but then it's reasonable for other countries to support their own industries. This is not a good move, even if it does sound kind of satisfying.

1 Reply

@roger,

I guess it depends how. If the idea is to stimulate our own economy then I think it's ok. This is a one-off, not a permanent tax subsidy or high tariffs on competitors.

0 Replies

Would you "buy American" even if it was more expensive? Even if it would mean more American tax dollars put into the same bailout?

Any Nationalist protectionist scheme is destined to fail, and to make the depression even deeper... at the same time it helps special interest groups, such as unions and ineficcient producers under an ideological banner.

All economies have opened to some degree (and that is why the American crisis infected the rest of the world), so the solution must be global, not local.

The idea "let's get the US going and let the rest of the world drown in the torment we created" is: a) so very American; b) economically wrong.

2 Replies

@fbaezer,

Is this stimulus supposed to be the "solution" to the global economic crisis? If so then there must be a lot more to it than what I understand. You are asking me would I buy American if it were more expensive -- this isn't about limiting my choice. I can still buy whatever I want, and do. This stimulus isn't going to solve the economic crisis in the US or globally. It's supposedly designed to inject some spark into our economy, in which case I think it's perfectly fine to inject it in such a way that it spurs growth in American companies. I don't see it as protectionist at all but rather a question of scope.

If we need a global solution to this crisis then we should do something about it in a global forum with global funds, not in the US Congress with US taxpayer funds. This one package is not the be-all end-all of the efforts to solve the economic crisis, and nobody has expressed the (so very American) idea that we need to get the US going and let the rest of the world drown.

2 Replies

@FreeDuck,

FreeDuck wrote:

If we need a global solution to this crisis then we should do something about it in a global forum with global funds, not in the US Congress with US taxpayer funds.

What makes you think that other countries are not putting up their tax money in order to try to help solve this American-made problem? Even though we exported this problem other countries have been more proactive about solving it than the US, and the whole "we are in this together" (even though we made the problem for you) schtick from the US would be pretty cynical if we then turn around and add "Buy American" qualifiers to our efforts.

Quote:

This one package is not the be-all end-all of the efforts to solve the economic crisis, and nobody has expressed the (so very American) idea that we need to get the US going and let the rest of the world drown.

If the "Buy American" doesn't hurt them it doesn't help us, and if it hurts them then conceivably they'd want to do something about it, and may do the same. At a moment when the world needs the money to start moving again, erecting barriers on where it can go is not a great idea.

It's the ethics of reciprocity: Because we don't want them to do it to us we should not do it to them.

1 Reply

@fbaezer,

fbaezer wrote:

Would you "buy American" even if it was more expensive? Even if it would mean more American tax dollars put into the same bailout?

Any Nationalist protectionist scheme is destined to fail, and to make the depression even deeper... at the same time it helps special interest groups, such as unions and ineficcient producers under an ideological banner.

All economies have opened to some degree (and that is why the American crisis infected the rest of the world), so the solution must be global, not local.

The idea "let's get the US going and let the rest of the world drown in the torment we created" is: a) so very American; b) economically wrong.

You were doing great up to the last sentence. That the rest of the world piggy backs on America to build and sustain their own economies is their choice, not ours. That both do whatever is prudent to mutually benefit from that situation is the way the free market works. Based on greed? Sure. Without greed--translate that incentive to make profit--there is no profit and no free market and no healthy economy.

And when the USA, through their own stupidity or incompetence or honest error or circumstances beyond their control, has an economic downturn, those nations that chose to piggy back on the US economy share the same 'flu'. But it was their choice to piggy back on, and it is not the USA's responsibility to fix them along with ourselves.

So on that principle, I strongly disagree with your last line up there.

Evenso, when it is absolutely a global economy with everybody in part dependent on everybody else's economic health, protectionism has proved counterproductive to a cure in the past, and there is no reason to believe it will produce any different results this time.

So in the interest of greed--translate that incentive to make a profit--far better to keep the markets free and working.

1 Reply

@Robert Gentel,

Robert Gentel wrote:

FreeDuck wrote:
If we need a global solution to this crisis then we should do something about it in a global forum with global funds, not in the US Congress with US taxpayer funds.

What makes you think that other countries are not putting up their tax money in order to try to help solve this American-made problem?

Where did I say that? I'm talking scope here. As in this stimulus bill isn't that global initiative and it doesn't preclude a global initiative which would include money from all of us, including the US who yes, created this problem, and would be designed to solve the global crisis. You seem to be reading some sort of "screw them" attitude into my argument which isn't there.

Quote:

Even though we exported this problem other countries have been more proactive about solving it than the US, and the whole "we are in this together" (even though we made the problem for you) schtick from the US would be pretty cynical if we then turn around and add "Buy American" qualifiers to our efforts.

Maybe so.

Quote:

If the "Buy American" doesn't hurt them it doesn't help us, and if it hurts them then conceivably they'd want to do something about it, and may do the same. At a moment when the world needs the money to start moving again, erecting barriers on where it can go is not a great idea.

I don't necessarily disagree, but are we sure that the proposed initiative (buy American for infrastructure projects) is going to do that?

Quote:

It's the ethics of reciprocity: Because we don't want them to do it to us we should not do it to them.

Sure. But what is it that we're doing to them, exactly?

1 Reply

@FreeDuck,

FreeDuck wrote:

Where did I say that? I'm talking scope here. As in this stimulus bill isn't that global initiative and it doesn't preclude a global initiative which would include money from all of us, including the US who yes, created this problem, and would be designed to solve the global crisis. You seem to be reading some sort of "screw them" attitude into my argument which isn't there.

No, I don't think you have "screw them" in mind. But you did bring up the point that it's "our economy that we are trying to stimulate, not the world economy" while our leaders have convinced the world that "we are in this together" and that they should all work in unison to try to solve it.

Quote:

I don't necessarily disagree, but are we sure that the proposed initiative (buy American for infrastructure projects) is going to do that?

If we were going to "Buy American" anyway for market reasons it would be merely rhetoric, if we were going to buy from elsewhere due to market reasons then any advantages we gain would come at the cost their loss.

Quote:

Sure. But what is it that we're doing to them, exactly?

See above. If it's meaningless it's divisive rhetoric, otherwise it's coming at the cost of their trade.

1 Reply

@Robert Gentel,

Robert Gentel wrote:

No, I don't think you have "screw them" in mind. But you did bring up the point that it's "our economy that we are trying to stimulate, not the world economy" while our leaders have convinced the world that "we are in this together" and that they should all work in unison to try to solve it.

As in, that's the purpose of this bill, not as in we don't ever want to stimulate any economy but ours. Let me try this again. The point of this stimulus bill is supposedly to stimulate the American economy. Just as I'm sure other countries' stimulus packages are intended to stimulate their economies. If the point of the bill is to stimulate this economy then that's what it should aim to do. That doesn't mean that we shouldn't also, in addition, work together to solve the problem, but that's not what this bill is supposed to do, is it? I am not in favor of protectionism. Where we seem to differ is whether or not the provision in the stimulus bill constitutes protectionism. I absolutely agree that we adopt excessively protectionist measures that provoke retaliation we will be shooting ourselves in the foot.

Quote:

If we were going to "Buy American" anyway for market reasons it would be merely rhetoric, if we were going to buy from elsewhere due to market reasons then any advantages we gain would come at the cost their loss.

It's a fair point that if other countries are investing in their infrastructure and not requiring "buy at home" for theirs then we shouldn't do it, either. But I do still see a distinction between restricting trade and using government investments in infrastructure to boost local industry. And if it were called "hire American" you might see that distinction too.

1 Reply

@FreeDuck,

The "let's get the US going and let the rest of the world drown in the torment we created" comes from phrases like this one:

FreeDuck wrote:

it is perfectly fine to insist that we buy American as it's our economy that we are trying to stimulate, not the world economy.

... which would be irresponsible, coming from the so-called World Leader.

FreeDuck wrote:

You are asking me would I buy American if it were more expensive -- this isn't about limiting my choice. I can still buy whatever I want, and do.

You, personally, can. But the "buy American" campaign has to do with not letting the consumer or the investors "buy foreign", through tariffs, quotas and, more ominously, legal restrictions to components -such as steel and cement- of government financed infrastructure or cars from rescued companies.
For example: to supposedly keep US steel workers' jobs, steel is going to be more expensive, and you're going to pay for it with your money, whether you want it or not: the Legislative you voted for decided for you.
Union leaders must be chanting in the streets.

I think Robert answered fully to the rest of your claims.

1 Reply

@Foxfyre,

Foxfyre wrote:

That the rest of the world piggy backs on America to build and sustain their own economies is their choice, not ours.

Your whole argument lies on this phrase, which is simply not true.
The rest of the world has no choice -at least for the next few years- in a globalized economy.

It has no choice because the US imposed financial conditions to the rest of the world ever since World War II, where they came out as rightfull victors.

Not a single country in the world would have survived with the incredible US deficit (which means you all are living beyond your means), were it not for our obbligation first and our necessity later to finance that deficit.
Isn't it paradoxical that the US can have trillion dollar deficits because the rest of the world has to lend them to the US, even when its' economy plummets?
For example, it is important for China to continue buying Treasury bonds to finance a recovery that would allow Americans to resume buying Chinese exports.
What happens if Americans said: "let's not buy Chinese?", and actually did it.
Not that I'd love to see it, but it would certainly prove my point.

1 Reply

@fbaezer,

Actually I appreciate what you're saying and appreciate the rationale behind it. But to say that the rest of the world had 'no choice' is simply not true. Of course it had a choice. And those nations who went into business with the USA did so because it was the prudent thing to do. And it was mutually beneficial. Those who chose to go it alone or stay apart from the west have not fared nearly so well.

We Americans didn't really chose to be 'king of the hill' so far as the size and strength of our economy, but it just worked out that way as an unintended consequence of certain principles, freedoms, protections, and rewards that our Founders built into our Constitution. Have all our policies and practices been honorable or ethical? Of course not. We aren't saints for sure and there are chapters in our history that we simply cannot whitewash no matter how much we would like to do so.

Are we worse than any other western nation? No. All of us look to our own interests first and adopt policies and practices that are self-serving first and we all have ugly chapters in our history that we simply have to live with.

But in my libertarian soul, there is absolutely no justification for mega billions in deficits and certainly not a trillion dollar deficit when there is little or no expectation of any practical return on most of that money.

I do think the rest of the world sharing our current case of 'flu' though would prefer that we get back to doing it the American way instead of the socialist way and get our economy healthy again. That way we all can get well a whole lot faster.

(You did notice somewhere in there I stated that I am 100% a free trader though didn't you?)

2 Replies

@Foxfyre,

Foxfyre wrote:

(You did notice somewhere in there I stated that I am 100% a free trader though didn't you?)

Yeah, and also that you have a thin skin when you feel someone it too critical about your country.
There's a sick kind of proud isolationism that's strictly American. Not that all Americans share it, of course.

1 Reply

@FreeDuck,

FreeDuck wrote:

Let me try this again. The point of this stimulus bill is supposedly to stimulate the American economy.

I think what we are hung up on is that we aren't in disagreement over whether this is an appropriate end so much as whether this is an appropriate means to the end.

I don't think this will better stimulate our economy, not just because it will motivate others to take similar measures but because erecting barriers in the market has its inherent downsides.

I object to things like protectionism (and I know you note that you may not agree that it is protectionism but I think we can agree it's in the same spirit) mainly because I don't think it is sound economics and I don't think it's what's needed to stimulate the economy. I think it is, for the most part, just like the exec compensation limits, it plays well to the domestic audience but ultimately doesn't help much.

0 Replies

President Obama to water down 'Buy American' plan after EU trade war threat

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