February 6, 2009

Canada has expressed relief that the U.S. Senate has watered down the "Buy America" provision of the economic stimulus package currently under negotiation but that it will continue pressure to keep trade between the two countries open. John McCrank for  Reuters:

 

The "Buy American" provision would have required that all public works projects funded by the stimulus package use only U.S.-made iron, steel and manufactured goods. But, under the amendment passed by U.S. Senate on Wednesday, the provision must be "applied in a manner consistent with U.S. obligations under international agreements."

Canadian Trade Minister Stockwell Day told reporters on Thursday the amendment was "a great step forward."  "Respecting the fact that this is their legislation, we want to continue to impress upon them the things that we think are necessary to avoid either a North American or even a global negative reaction to that legislation," Day added.

[...]

The Senate moved to amend the "Buy American" provision after several countries, including Canada, Japan and Australia, expressed concern over the legislation, and President Barack Obama warned the original language could trigger a trade war.  Senator John McCain, an Arizona Republican, urged the Senate to exclude any "Buy American" provision as part of the stimulus package, but his amendment was rejected.   "It would have been nice to see that go through," said Day. "It would have put some extra weight on the amendment that's already there, but we are pleased with progress so far."

The United States has made commitments under the North American Free Trade Agreement and the World Trade Organization to provide trading partners such as Canada, Mexico, Japan and the European Union with access to its government procurement market and has received similar commitments in exchange. But other countries such as China, Russia, India and Brazil are not party to those pacts so would not have any protection from the amendment passed by the Senate on Wednesday.

With key senators and President Obama opposing the measure, there's some hope that it can be removed entirely.  While the political motives are perfectly understandable, most analysts agree that protectionism would be a disaster for the global economy.  Further, while there are carveouts for government contracts, such measures go against more than six decades of American leadership on breaking down international trade barriers.  Yes, the purpose of the bill is to stimulate the domestic economy, not those of the BRICs.  But we need to think about the consequences of our actions beyond the next six months. 

James Joyner is managing editor of the Atlantic Council. 

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