Since it is the weekend, here are a few articles about the American protectionism issue we were talking about recently. It's hard not to think of the Smoot-Hawley disaster.
'Buy American' bill puts Canada on edge
Harper urged to act as U.S. Senate set to pass stimulus provisions
theglobeandmail.com
CAMPBELL CLARK AND BARRIE MCKENNA
From Friday's Globe and Mail
January 30, 2009 at 3:34 AM EST
OTTAWA, WASHINGTON — Fears of U.S. protectionism shot to the top of the agenda for President Barack Obama's Feb. 19 visit to Canada, as "buy American" provisions in a Washington bill set off alarms in Ottawa.
The U.S. House of Representatives passed legislation yesterday that includes a controversial provision barring virtually all foreign iron and steel from the $820-billion (U.S.) stimulus package's infrastructure projects.
A Senate version of the bill, which hasn't yet been voted on, goes a step further, extending the U.S.-only requirement to all goods and equipment paid for with government stimulus cash.
In the House of Commons yesterday, Prime Minister Stephen Harper expressed worry, while Trade Minister Stockwell Day spoke in more cataclysmic terms, noting that U.S. protectionism fuelled the Great Depression in the 1930s.
"This is obviously a serious matter and a serious concern to us," Mr. Harper said in the Commons, adding later: "We will be having these discussions with our friends in the United States and we expect the United States to respect its international obligations."
Mr. Day said he hopes diplomatic pressures will persuade U.S. policy-makers to kill the provisions, and hinted that Mr. Obama can veto the bill.
Mr. Day then warned that if the "buy American" provisions are made law, Canada and other countries can take legal action under trade treaties.
"History shows clearly that you can't fall back into protectionist measures. That happened in the 1930s and what could have been a bad one- or two-year recession turned into, as we know, the Great Depression," he said.
Mr. Day's comments were a far cry from the sanguine remarks that both he and Mr. Harper had made since November about the protectionist rhetoric of both Mr. Obama and lawmakers, especially Democrats, in the new U.S. Congress.
Now, there is a tinge of panic in political Ottawa and among Canadian business groups. At the World Economic Forum in Davos, Switzerland, World Trade Organization director-general Pascal Lamy warned that trade barriers will make the global economy worse.
It's unclear what impact the U.S. bill would have on the Canadian steel industry, now mainly comprising companies with plants on both sides of the border. But Canadian business groups across the board worried it will start a broader, and deeply damaging, trend of U.S. protectionism, and then retaliatory trade wars.
"The danger with something like this is that it's a spark in the forest," warned Perrin Beatty, president of the Canadian Chamber of Commerce.
He said U.S. protectionism must now "absolutely" be the top item on Mr. Harper's agenda for Mr. Obama's visit, but the government cannot wait until then. "We cannot wait three weeks until he gets here," Mr. Beatty said.
He, like Mr. Day, raised the example of the U.S. Smoot-Hawley Act of 1930, which raised tariffs on foreign goods and sparked a global trade war that many economists blame for the Great Depression.
"If other countries followed suit ... you would have a round of protectionism that would be as damaging to the global economy as in the 1930s," said Lawrence Herman, a trade lawyer at Cassels Brock Blackwell LLP in Toronto.
But Liberal Leader Michael Ignatieff made it clear he will lay the blame on Mr. Harper's Conservatives for U.S. protectionism. "What does this country have an embassy in Washington for if the government cannot prevent protectionism language creeping into the package?" Mr. Ignatieff asked in the Commons.
Fears that U.S. recession-era policies could hit Canadian jobs were already expected to be a big part of the talks when Mr. Obama visits Ottawa.
Washington has offered a $17-billion (U.S.) bailout to the Big Three auto makers, and Ottawa and Ontario have offered $4-billion - but the Conservative government fears U.S. policy makers might extract domestic job guarantees that cause Canadian plants to shut down.
"The actual amount of money that's going be required to save these companies is probably ... closer to $100-billion from the U.S. government alone," said auto industry analyst Dennis Desrosiers.
"And if you're putting $100-billion into GM, Ford and Chrysler, America is going to want to save American jobs - and not Canadian ones." |
