The American and European media showed unusual unanimity in their response to the inclusion of a "Buy American' provision in the $900 billion stimulus package currently before the U.S. Senate, following adoption of a slightly smaller measure in the House last week. The clause endorsed by the House would require public works projects funded by the stimulus bill to use only U.S. iron and steel, while the Senate version extends the restriction to all manufactured goods.
American publications such as the New York Times ("If We Buy American, No One Else Will') and the Christian Science Monitor ("Buy American, buy a trade war') published strongly worded op-eds admonishing Congress for having apparently been persuaded by American steel industry lobbyists to insert the "Buy American' clause into the bill. The Christian Science Monitor piece cites research by the Peterson Institute for International Economics suggesting that, depending on the version of the provision, 1,000 to 9,000 new jobs might be created, but the blocking of U.S. exports by retaliatory measures in other countries could lead to far greater American job losses. The New York Times article by Dartmouth College economics professor Douglas Irwin points out that American companies such as GE and Caterpillar oppose the provision as it might prevent them winning contracts abroad, further hurting American workers. Time Magazine's report "As Europe's Economies Slide, Protectionism is on the Rise' describes trends toward protectionism in Europe in response to the global economic downturn. Italian Trade Minister Adolfo Urso is quoted saying that risks stemming from a "Buy American' provision are not only European retaliation against the United States but the possibility that the issue could cause serious divisions within the European Union.
European op-eds and news reports reflect similar anxiety over the "Buy American' clause, warning that it has the real potential to cause a spiral of protectionist legislation that could lengthen the recovery time of the world's economies. The Times of London ("EU warns President Obama to drop protectionist measures') and The Telegraph ("Europe and Canada warn U.S. over "Buy America' clause') both describe strongly worded letters addressed to Senate leaders by EU and Canadian officials warning against "entering into a spiral of protectionist measures around the globe that can only hurt economies further.' The Independent says that the "Buy American' provisions could "trigger a disastrous trade war.' The Independent is among the few European newspapers to mention that Vice President Joe Biden did not see the provision as a "harbinger of protectionism', though several European reports have mentioned President Barack Obama's concerns about the provision. Like the British papers, French daily Le Monde in its report “The United States takes a risk in playing the protectionist card” stresses how detrimental such a provision might be to global trade and that it will possibly harm the ‘carefully cultivated’ popularity of President Obama abroad. The Financial Times website carries a lengthy op-ed blog entry by London School of Economics Professor Willem Buiter, a former chief economist of the European Bank for Reconstruction and Development, who links the wave of protectionist leanings among the G-20 major economies to many economic challenges facing the world and Europe today. Writing under the headline ""Yes we can!' have a global depression if we really continue to work at it," Buiter says:
"The questionable value of the fiscal stimulus is overwhelmed by the unquestionable domestic and global harm caused by the Buy American clause. If president Obama fails to veto a protectionism-laced bill, it will be clear that we have a wuss in the White House. If such is the case, God help us all.'
The Financial Times, in an analysis ('to Each Their Own’) similar to the one published by Time Magazine, says that Europe will find it hard to implement protectionist policies by the traditional means of raising tariffs, because of EU and WTO commitments. But it warns that other kinds of protectionism, in the guise of “economic nationalism,” are cropping up around Europe, as well as dangerous new forms of financial protectionism.
