Ei-iE

Protest grows over “Buy American” plan

published 5 March 2009 updated 5 March 2009

Criticism is growing over the inclusion of a “Buy American” clause in the U.S. stimulus legislation.

Trade officials from several countries are warning that the stimulus bill signed by President Barack Obama in February could trigger a trade war by requiring infrastructure projects to use only U.S.-made steel and manufactured products. While the legislation stipulates that the Buy American provisions have to be implemented consistent with international trade obligations, this has done little to appease countries such as Brazil and China.

Brazil has already indicated that it may take the matter to the WTO’s dispute settlement body, and China’s official news agency warned of “potential protectionism embedded in the [domestic sourcing] provisions.” Inside the U.S., corporate lobby groups were also vocal in their opposition to the proposal on the grounds that it could start a damaging trade war. But Public Citizen, a trade watchdog, accused U.S. businesses of hiding behind false claims.

“Perhaps the real reason these firms have launched a fact-distorting PR and lobbying effort is because they have moved so much production away from the United States to low-wage foreign venues, meaning their products may see less benefit from this massive injection of government spending,” the group said in a statement.

David Robinson, EI’s consultant on international trade, says that many of the concerns expressed over the Buy American requirements are overreactions. “Ironically, the Buy American Act was passed 76 years ago during the last Depression to help kick-start the domestic economy,” Robinson explains. “It’s perfectly consistent with U.S. obligations in the WTO and NAFTA, and in fact has been successfully defended under trade challenges.”

Robinson says that for the education sector the Buy American provisions would mainly apply to school construction and renovation projects.

He adds that the growing controversy over the plan points to ways that trade agreements could compromise the ability of governments address the economic crisis.

“Procurement policies that favour local suppliers are common and long-established measures used by governments to ensure benefits to the local economy,” Robinson argues. “I think what we’re seeing now is an attempt to take this away by alleging it violates trade treaty obligations.”