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Is a Trade War on the Horizon?

Posted By Kevin Binversie On January 30, 2009 @ 2:04 pm In Ongoing Priorities | Comments Disabled

Jay Van Andel Senior Trade Policy Analyst at Heritage Daniella Markheim comments [1] on why the recently discovered “Buy American” provisions [2] in the ‘stimulus’ bill will only hurt the American economy in the long run.

Advocates of Buy American rules claim that limiting competition for U.S. government contracts to domestic firms will protect U.S. jobs and help prop up firms in troubled industries. Regrettably, the cost of such protectionism will be inflicted on the American public, who will fail to get the best value for their hard-earned taxpayer dollars; the U.S. workers who lose their jobs when the companies they work for go out of business as countries retaliate in kind; and the economy as a whole, which will become less productive.

Meanwhile, at the same time America’s trading partners are beginning to react to the news with a retaliatory tone.

The EU [3]:

Catherine Ashton, the EU trade commissioner, said: “We are looking at the situation. The one thing we can be absolutely certain about, is if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore.”

Australia [4]:

Australian officials are intensively lobbying lawmakers on Capitol Hill to reconsider new “Buy American” provisions that were attached to the $US819 billion ($1.25 trillion) stimulus package passed by the House of Representatives on Wednesday, amid fears that they will usher in a new era of protectionism and harm Australia’s steel exports to the US.

[...]

“We would certainly look to the US to meet its international obligations,” he said.

The Buy American provision would be a serious setback for Australia, which is a major exporting nation. In the Free Trade Agreement with the US, Australia secured much greater access to US government procurement, although there remain some restrictions on steel sales for transport projects.

It would also appear to run contrary to the commitment the G20 leaders gave in Washington before Christmas to avoid taking measures that affect free trade during the global financial crisis.

Canada [5]:

Prime Minister Stephen Harper said the provision, which has been attached to the massive economic stimulus package working its way through the U.S. Congress, goes against the spirit of free trade.

‘I spoke to our ambassador about it yesterday and I know that countries around the world are expressing grave concern about some of these measures that go against not just the obligations of the United States, but frankly the spirit of our G20 discussions,” Harper said in the House of Commons on Thursday.

‘We will be having these discussions with our friends in the United States and we expect the United States to respect its international obligations.”


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/01/30/is-a-trade-war-on-the-horizon/

URLs in this post:

[1] Daniella Markheim comments: http://www.heritage.org/Research/tradeandeconomicfreedom/wm2256.cfm

[2] recently discovered “Buy American” provisions: http://www.washingtonpost.com/wp-dyn/content/article/2009/01/28/AR2009012804002.html?hpid=topnews

[3] The EU: http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/4389597/US-EU-trade-war-looms-as-Barack-Obama-bill-urges-Buy-American.html

[4] Australia: http://www.canberratimes.com.au/news/local/news/business/aussie-plea-on-us-trade-restrictions/1420228.aspx

[5] Canada: http://www.google.com/hostednews/canadianpress/article/ALeqM5jcOE4gNG-uybJj9kgM4ysqaYuy0g

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