Global trade wars or voter revolt? Let Obama's difficult decisions begin
Canada exported more than $11-billion worth of steel to the U.S. in 2007. Now, Ottawa worries trade barriers will herald a new era of protectionism.
JOHN IBBITSON
From Friday's Globe and Mail
theglobeandmail.com
January 30, 2009 at 4:23 AM EST
WASHINGTON — The toxic "buy American" provisions in the economic stimulus package currently before the Senate pose a crucial test for Barack Obama's young administration.
To prevent a cascade of tariff protection that would ultimately hurt his own workers and his own country's economy, Mr. Obama must find some way to strip the protectionist clauses that infect the American Recovery and Reinvestment Act.
Yet, politically, that might be impossible. Mr. Obama owes his presidency to the votes of blue-collar workers in the industrial Midwest, many of whom are out of work as a result of the slowdown.
"Buy American" violates the North American free-trade agreement, but Mr. Obama has vowed to renegotiate or, failing that, rip up NAFTA, so has little stake in coming to its defence.
And he would be overriding protectionist provisions put in the bill by his own Democratic Party.
The President has said the time has come to make "difficult decisions." This is one of them.
Even economists who strongly support the stimulus package are dismayed by the protectionist measures contained within it.
"It looks like a very bad thing in the bill," said economist Brad DeLong, who worked on trade issues in the Clinton administration and teaches at University of California, Berkeley.
"Pressure from the Canadian government saying, 'Do you really want to do this?' is important."
Canadian officials have, in fact, been working behind the scenes to keep protectionist measures out of the economic stimulus package.
But they failed to stop the House version of the bill from including a provision banning the use of anything other than American-made iron and steel in projects funded by the stimulus package.
The Senate version of the bill would require that everything it funds use only American products.
The White House could try to convince the Democratic leadership to strip the anti-trade measures from the bill, both before it is voted on by the Senate and during the conference to reconcile the House and Senate versions of the bill.
If that fails, then Mr. Obama could issue what is called a signing statement saying the "buy American" provisions of the bill violate treaty obligations. That might effectively veto the measures, though Daniel Ikenson, associate director of the Center for Trade Policy Studies at the Cato Institute, believes the measures would go ahead regardless.
Mr. Ikenson, who calls the "buy American" provisions "stunningly ridiculous" and bound to incite trade wars, believes Mr. Obama must either convince Congress to drop the provisions or acquiesce.
"He has to strip it or sign it," he said yesterday in an interview.
Canada could ask for an exemption from the provisions, based on the integrated nature of the continental economy. George W. Bush exempted Canada from steel tariffs imposed in 2001. But the trend since the Sept. 11, 2001, attacks has been in the opposite direction, and there are early indications the Obama administration might accelerate that trend.
Days after she was sworn in, Homeland Security Secretary Janet Napolitano ordered an urgent review of the Canada-U.S. border.
"Members of Congress and homeland-security experts have called for increased attention to the Canadian border," the directive reads.
"What are the current vulnerabilities, the overall strategy for reducing those vulnerabilities, the requirements, the programs, the budget, and the time frame for improving security along this border and what level of risk will remain once the programs are completed?"
Various agencies, including Homeland Security, Customs and Border Protection and the Coast Guard have until Feb. 10 to prepare an oral report, with the final report due Feb. 17. Any recommendations, once implemented, could further impede the free flow of goods and people across what used to be the world's longest undefended border.
Suddenly, Mr. Obama's Feb. 19 visit to Canada has turned into a meeting to address the growing list of protectionist measures directed toward Canada by his administration.
Throughout the 19th century, the United States pursued a policy of erecting high tariff walls, while pressing trading partners - especially the weaker, more dependent ones - to open their markets to American goods.
After the Second World War, the United States led the push for ever freer trade in goods and services, though protectionist backlashes - usually emanating from Congress - were a constant irritant.
The 111th Congress is showing every sign of being more than an irritant. How he handles the "buy American" provisions of the stimulus will tell a lot about Mr. Obama's determination, or lack of it, to resist congressional efforts to close the American border.
jibbitson@globeandmail.com |
