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February 3, 2009

International Consequences of Stimulus Bill

by at 12:10 pm.

One of my international friends sent me this link. This is more than just a blip on the global radar. The EU is serious.

The EU has increased its pressure on the US to reconsider the “Buy American” clause in the $800bn (£567bn) economic recovery package now before Congress.

The clause seeks to ensure that only US iron, steel and manufactured goods are used in projects funded by the bill.

A European Commission spokesman said it was the “worst possible signal” the Obama administration could send out.

The EU will launch a complaint with the World Trade Organisation (WTO) if the clause remains, the spokesman said.

On the one hand, you could totally see why this sort of “protectionism” would be desirable, from the point of view of the American politician and also the taxpayer. Why produce a stimulus if some large percentage of the funds will go into international hands? How does that create the jobs we so desperately need in order to get the economy back on track?

On the other hand, under many of our trade agreements and international law, protectionism isn’t allowed. The whole purpose was to open the playing field in international markets.

Also, if we’re spending taxpayer money, and some European or foreign company can produce the material or good cheaper than we can, wouldn’t it be a waste of taxpayer money to not go with the competitive bid? And the actual job of building the bridge, or road, or other infrastructure will be done by new US jobs, so is the protectionism sort of moot, or at least, not so big a deal?

It’s a pickle, to be sure, and it won’t go away if this clause in the stimulus passes. Lest we forget previous tiffs .

2 Responses to “International Consequences of Stimulus Bill”

  1. waittilnextyr Says:

    US-based industry is disadvantaged because of tax laws and historical benefits provided through work. In UK, the VAT tax removes much of the overhead associated with work, and lesser countries don’t even worry about benefits for their workers. If US healthcare was applied universally through a funding mechanism outside of work (sales tax?), then some of the structural disadvantage would be removed. And tax laws could be changed to credit work to remove some other disadvantages. These type of changes would be structural, and not the subject of an ad hoc stimulus bill, which would no longer need any “buy American” provision.

  2. Lynne Says:

    Agreed. It is anticompetative to not have universal (and primarily, single payer) health care.

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