Fiscal Stimulus-Does The Ghost Of Smoot-Hawley Linger?

Despite my praise for President-elect Obabm in the post below, the statements from an Obama spokesman that fiscal stimulus language may include a “buy American” provision are deeply troubling.

One element of the plan could be “buy American” language benefiting U.S. industry. “We are reviewing the buy American proposal and we are committed to a plan that will save or create 3 million jobs including jobs in manufacturing,” Obama transition spokeswoman Jen Psaki said by e-mail. 

The New York Times on Friday quoted Daniel DiMicco, chairman and chief executive of steel maker Nucor Corp, as saying the steel industry was asking Obama to “deal with the worst economic slowdown in our lifetime through a recovery program that has in every provision a ‘buy America’ clause.”  

Now would hardly seem to be the time to start withdrawing into a protectionist shell. Partly because we haven’t been shy about lecturing the Chinese about devaluing their currency in order to gain an advantage and mostly because we should be aware of the perils that competitive protectionist measures hold. I assume they have read the history books.

Mr. Obama campaign was arguably one of the most anti-trade in memory. He can’t be faulted for not knowing the economic circumstances that he would encounter when he started down that road but he most certainly would be faulted if he proceeds with anything that stifles trade. Amid a collapse of commerce, the last thing that is needed are political impediments to whatever flicker of life may be left.

Let’s hope that pragmatism once again rules the day in the Obama camp. Otherwise, this might be a fatal mistake.


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