Obama Weighs In Against Buy America Stimulus Provisions

David Sanger does a good job of reporting the story:

The Senate, at the urging of White House officials, agreed Wednesday night to water down some of the “Buy America” provisions in its version of the $900 billion economic stimulus bill. The vote gave President Obama a victory in the first test of how he will balance his campaign promises to toughen protections for American workers against a storm of protests by American trading partners who have threatened retaliation.

The White House had been seeking assurances that any requirements barring purchases from abroad did not significantly expand existing law or violate existing trade treaties. The language approved by the Senate said such provisions should be “applied in a manner consistent with United States obligations under international agreements.”

(Emphasis supplied.) So Buy America will stay in place as it exists - with preferences for US goods, unless we have reciprocal agreements with other countries. So what was this really all about? US steel and iron producers, who apparently need bigger preferences:

“Buy America” is hardly a new idea — Congress has passed similar requirements for seven decades — and in many cases it is not considered a violation of trade treaties.

The first efforts to compel the government to buy American goods go back to the Great Depression. Scott N. Paul, the executive director of the Alliance for American Manufacturing, said Wednesday that “there are ‘Buy European’ programs that are a lot stronger than what is being described” in the Senate bill, and he argued that the European protests were simply efforts to gain an edge in future trade disputes.

Even as the protests from Europe poured in, Democratic lawmakers from steel-producing states warned Mr. Obama that if he backed away from the provisions, they would oppose the whole stimulus bill — perhaps an empty threat, but perhaps not. “If it’s not in, I’m not supporting this package and I’ll bring a lot of votes with me,” said Representative James L. Oberstar, the Minnesota Democrat who is chairman of the House Transportation Committee.

This dispute puts a fine point on an issue I discussed during the primaries - that Obama would not be the "fair trader" many in the Netroots expected. As a free trader, I was happy to note it was all campaign bluster from Obama:

Other members of Mr. Obama’s party issued similar threats, reminding Mr. Obama that he was the candidate who early in his campaign called for renegotiation of the North American Free Trade Agreement and constantly cast the stimulus bill as a way to create or save at least three million jobs.

But Mr. Obama is constrained by trade agreements, Nafta included, and a commitment that the United States joined at an emergency meeting of the world’s 20 largest economies in Washington in October. All countries agreed on “the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty.”

Many presidents have been caught in a similar vise, but few at a time of such economic stress. Bill Clinton ran for the presidency in 1992 raising questions about Nafta, which had yet to be ratified, and vowing to link China’s human rights record to its trading status. He later pushed Nafta through Congress and got China into the World Trade Organization, assuring its trading rights, without regard to its human rights record.

But for Mr. Obama it is a particularly difficult moment because of his emphasis on creating jobs. He has steered clear of adopting Mr. Clinton’s arguments about how free trade leads to greater American exports.

There has long been a debate raging on the value of protectionism in spurring job growth (from the days of "domestic content legislation and even earlier, to Smoot-Hawley.) I have been a staunch free trader and remain so. This debate on the added Buy America provisions in the stimulus bill puts a fine point on it. But in the end, the existing Buy America provisions will apply to all government spending, including the stimulus bill - but it will not be the absolute prohibition on foreign purchases some wanted, especially in the steel and iron industry. BAA provides a 6% preference for American goods - absent an exception (unavailability, reciprocal agreements, etc.)

For now, the steel and iron industries will have to find a way to make that work.

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    Iron and Steel (none / 0) (#1)
    by Socraticsilence on Thu Feb 05, 2009 at 01:12:40 PM EST
    Preferences in government works are allowed by the WTO- each signatories was allowed at the outset to request certain industries be exempted if said industries were used in government projects: the US requested Iron and Steel, Canada Coal, the EU Telecom etc.

    Depressing (none / 0) (#2)
    by cal1942 on Thu Feb 05, 2009 at 11:01:41 PM EST
    This is a point in time when it appears that our decline is unstoppable. The foolish persistence of "free traders" in strategic positions will seal our fate. Free traders are unable to cite advantages and ignore the grievous damage done to the nation. The only argument that free traders are able to make is fear of retaliation. An empty threat since retaliation only means that those who would retaliate would be losing a significant market. Our export losses would be far smaller than their losses. Indeed, increases in domestic production would far and away outstrip export losses.

    The fact that we have a serious balance of trade deficit not counting oil imports should be cause for genuine alarm. An alarm that free traders refuse to hear. Like any theology free trade develops its own heresies. "Free Trade" has ruined many, many communities. The nation can't survive the continued destruction of its communities.

    Weakened educational institutions, crime, declining social standards,etc. are all directly traceable to a declining industrial base. Free traders have no interest in discussing the destructve role of trade in this ongoing tragedy. Free trade has become a theology with no regard for reality.

    Entire industries have been allowed to evaporate.
    It's not just American workers who suffer in this environment although workers are suffering as the American middle class continues to shrink.  Whole industrial skill sets, engineering, crafts, even science itself suffers when manufacturing technologies are abandoned. A skill unused is a skill lost. There is no future for a retail nation and no lasting economic recovery possible without a significant industrial base. Without altering trade agreements and rebuilding the manufacturing base the nation's economy will continue to be based on rapid boom/bust cycles. Real wealth cannot be built without manufacturing. Good public health, modern infrastructure, great universities are not sustainable without the wealth created by manufacturing.

    It's not surprising that a bad idea among elites (and now, in this country, many simple minded snobs) would bring down great nations, empires and even whole civilizations. History is littered with examples.

    Obama's stimulus plan (none / 0) (#3)
    by Rajan on Fri Feb 06, 2009 at 12:01:31 AM EST
    On going thru the published list of recommended projects in President Obama's stimulus plan, I discovered a glaring and very  important omission.  I do hope that the architects of the $800 (now expected to top $900) billion stimulus plan have not overlooked the need for setting aside at least a  couple of billion dollars (which is a paltry 0.2 % of the total stimulus budget) for construction of a very large federal penitentiary (or even several, albeit  each on a more modest  scale, located strategically in various parts of the country) as the integral part of the plan. With such a huge budget to be deployed and spent over a relatively short span of time (which will  render any effective supervision next to impossible), there is enormous scope and opportunity for swindle, graft,  outright stealing (and even plain, "unintentional" ex-senator-type cheating in tax payment) in the execution of various projects and, therefore, a substantial number of grand jury indictments cropping up, as the stimulus plan gets under way, should be anticipated as a distinct possibility. This  potent prognosis need not pertain to only one side of the political divide.  No one can deny that a vast majority of business men and women are honest and hard-working people.  At the same  time, there are enough crooks, swindlers, conmen and fraudsters owing allegiance to both the major parties to fill very many penitentiaries, as has been evident from the shenanigans orchestrated by the pinstripe-suited crooks on the Wall Street, thanks to which the entire world is reeling  now under an economic meltdown. We don't want to have another post-Katrina type situation in which the authorities may  be caught napping in finding adequate shelter for a flood of convicted felons who will be suddenly thronging our already overcrowded prisons, do we? And, we have not forgotten what happened  with the infamous oil-for-food to Iraq program which operated on  a far smaller budget and which was supervised jointly by the  bureaucrats in the US and the British governments, have we?   Moreover, the construction and staffing of these penitentiaries themselves  together with ancillary facilities will create a large number of jobs and will give quite a sharp stimulus to the local economies in the manner similar to the benefits that will accrue from  building and upgrading of schools and roads! And the added bonus will be that the  economic stimulus generated by these penitentiary projects is  likely to become self-perpetuating since any hanky-panky during their construction and subsequent operation will  inevitably result in  increase  of the inmate population which will, in turn, create a need for additional penitentiaries! As someone else has already suggested, even the GITMO facility which is to be emptied out of its present inhabitants may be retained for holding the white-collar criminals who have, in fact, wreaked as much, if not more,  havoc and inflicted as much, if not more,  horrendous pain and suffering on the world population as the so-called "non-combatant" terrorists! Even a little water-boarding will be in order!