The "Buy American" Rider...didn't we learn anything from Smoot-Hawley?
Good old Reed Smoot and W.C. Hawley
Man, the more things change, the more they remain the same. Usher out the Replublicans who have screwed things up so badly for the past eight years and usher in the Democrats who will screw things up their own way.
The more I look at this stimulus bill, the worse it gets. My latest problem with it comes in the form of the "Buy American" rider that it contains (see article: 'Buy American' Rider Sparks Trade Debate). In short, this provision of the stimulus package, which is now up to a whopping $819 billion BTW, would ban the user of foreign steel and iron from use in the infrastructure projects that it pays for. As if this provision wasn't dumb enough, the Senate version of the bill, which has not yet been approved, required all stimulus-funded projects use only American-made equipment and goods.
The old proverb "The road to ruin is paved with good intentions" (get it...infrastructure...road) is extremely appropriate here. While the "Buy American" rider is not nearly as offensive as the infamous Smoot-Hawley Tariff Act, which raised the tariffs on 20,000 types of imported goods to a record level and created a global air of protectionism and retaliation from foreign countries that prolonged the Great Depression, it is clearly a big step in the wrong direction.
Perhaps protectionism won't be as disastrous this time around because we hardly produce anything in America any longer, but I doubt it. If our trade partners are offended by "Buy American" provisions like this one they will start rolling out protectionist tariffs of their own and the companies here that do actually produce things and export them will be hurt.
I was scared by Obama's anti-NAFTA rhetoric on the campaign trail, but I gave him the benefit of the doubt because one of his economists Austan (yes that spelling is correct...don't ask me why, but it is) Goolsbee gave our trade partners a silent wink hinting that we really wouldn't be that protectionist. Even if Obama isn't, the Democrats who rammed the current stimulus package through Congress clearly are. Apparently he does not yet have enough influence over his fellow party members to prevent protectionist clauses from being tacked on to bills.
The Obama administration is supposedly reviewing the "Buy American" rider and formulating a response right now. Let's all hope that they can get it modified or removed. Heck, even large U.S. industrial companies like Caterpillar and GE have come out against it. Bill Lane the government affairs director for Caterpillar recently said this about the provision, "There is no company that is going to benefit more from the stimulus package than Caterpillar, but I am telling you that by embracing Buy American you are undermining our ability to export U.S. produced products overseas....Any student of history will tell you that one of the most significant mistakes of the 1930s is when the U.S. embraced protectionism. It had a cascading effect that ground world trade almost to a halt, and turned a one-year recession into the Great Depression."
If I see any more protectionist measures like this passed by us or our trade partners I will quickly become much more pessimistic about the global economy than I already am. What the economy needs least right now is a war on free trade.