politicians might make a ''Buy American'' clause a condition of the stimulus package, said Mr Martin, a labour economist from the University of California.
New US stimulus may give rise to protectionism
Published: 19/01/2010 at 12:00 AM
Newspaper section: Business
Asian economies may not benefit from a new economic stimulus programme in the United States, which could see protectionism rise and consumers save more, says Philip Martin, a labour economist from the University of California.
The US's new economic stimulus will be funded by debt repayments from American banks who received support under the government's Troubled Asset Relief Program, a rescue package for financial institutions that was part of an earlier stimulus scheme.
Amid growing joblessness, American politicians might make a ''Buy American'' clause a condition of the stimulus package, said Mr Martin.
Exporters from Asian countries could also face growing protectionism such as anti-dumping laws for agricultural and fishery products.
The financial burden on exporters would increase even if they won any trade disputes due to costs involved with having the International Trade Commission arbitrate cases
Mr Martin said unemployment in the US now was worse than at the end of the Great Depression in 1940s as the total number of jobs has remained static over the past decade.
''We need 2 million [new] jobs a year, but we did not do that over the past decade,'' he said. ''The US population was 35 million more in 2010 than 2000, but there was no net job growth.''
The spending power of American consumers plummeted with the collapse of the housing market in 2007-08, as lending from banks has remained sluggish.
Unemployment has more than doubled to 10% since the recession began in Dec 2007. The situation is particularly grim as the number of jobless people who have university degrees is at an historic high, he said.
Around 20,000 jobs were lost each day on average over the period.
Mr Martin said government borrowing to finance the salaries of federal workers was driving the US recovery, but local governments have seen deficits balloon.
While the vast majority of Americans are employed, the psychological impact of the current situation in the job market could limit future consumer spending.
''There has been talk about a new frugality in the US. Last year, attendance at museums and movies were an all-time record. Psychologists began to wonder if Americans shifted to experiences rather than spending on goods,'' he said.
One-fifth of US banks' housing debts are for mortgages that exceed the market value of their homes.
The US government has tried convincing banks to avoid foreclosing on distressed mortgages, but the progress has been slow.
Mr Martin said import demand in the US dropped by one-third in early 2009 compared with the past, but hopeful signs emerged in the third quarter.
Mr Martin said American workers had seen no wage increases as employers need to shoulder the burden of health insurance, which costs an average $3.50 per hour per worker. |
