Stepping Back From A Trade War

Bowing to world pressure and hopefully common sense, the Obama administration is apparently backing away from the “Buy American” provision of the economic stimulus bill. This from the Telegraph.co.uk.

The US Senate has watered down the wording – a version of which was previously approved by the lower chamber, the House of Representatives – after President Barack Obama warned it could begin a trade war.

The move came after warnings from the European Union and Canada about US plans to use only domestically produced iron, steel and manufactured goods on projects stemming from the fiscal spending package.

The new wording says that the US will comply with existing world trade deals. A White House spokesman said the President would ensure any bill he signs is consistent with trade commitments.

This is all well and good, however, a stronger statement and commitment to free trade might have been a bit more reassuring. The truth is that there is more than one way to skin this cat. Federal procurement rules are quite strict with respect to domestic content in projects funded by taxpayer dollars. Since every penny of the stimulus bill falls within that category, it’s not hard to see how this is going to shake out. Layer on subtle behind the scenes pressure on the ultimate contractors and you pretty much can guess how this shakes out.

To be fair, it’s unlikely to be any different around the globe and maybe unreasonable to expect politicians to act any differently. Justifying billions of tax dollars flowing to another country when they were sold as domestic job creating expenditures is pretty much an impossible task. It’s a quandary of their own making but make it they have and now are its captive.

So, give Obama credit for pulling his party back. At least it relieves a little of the pressure that had been building. Hopefully, the rest of the world follows suit.

Update:

Oops, I told you there would be some backdoor action on this. After I wrote this post I came across a little snippet about Chuck Grassley (Rep. Iowa) introducing an amendment to the stimulus package that prohibits any institution receiving TARP funds from hiring workers with H-1B visas. Just an example of the shenanigans that will go on.

more:here

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