OUR OPINION: No time for a trade war

view original post

As the global economic crisis has unfolded, there has been one very encouraging sign: The industrialized nations’ top executives standing shoulder to shoulder, united against the crisis.

Congress and the Obama administration now should make sure that a fistfight doesn’t break out.

The stimulus package that passed the House contained a protectionist measure: a requirement that all of the iron and steel in the bill’s infrastructure projects be made in the U.S. A Senate version goes further and demands that the construction equipment be made in the USA, too.

“I believe that when taxpayer dollars are used, they should support the things produced here at home,” said the Senate provision’s principal sponsor, Sen. Byron Dorgan, D-N.D.

The trouble with that stance can be summed up by a New York Times headline: “If we buy American, no one else will.”


Leaders of other countries already have threatened retaliation. “On Thursday, Canadian Prime Minister Stephen Harper expressed concern and the European Union warned that it would not ‘stand idly by’ if such measures were passed,” The Associated Press reported.

The U.S. Chamber of Commerce also opposes using the stimulus package to build a wall around the U.S.

“If our goal is to create good-paying jobs at home by selling American-made goods and services overseas — where 95 percent of the world’s consumers live — then ‘Buy American’ requirements don’t make sense,” said Chamber president Thomas Donohue.

“If we refuse to buy foreign-made goods, then our trading partners will refuse to buy from us. We are the world’s largest exporter, so who will be hurt more?”

And consider this: If the Senate’s language passes, then one of the companies that presumably would benefit most is Caterpillar, maker of the construction cranes and earth movers that the projects would demand.

But Caterpillar, too, strongly opposes protectionism.

“I am telling you that by embracing Buy American, you are undermining our ability to export U.S.-produced products overseas,” said Bill Lane, government affairs director for Caterpillar in Washington, to the Washington Post.

The company is right to be concerned. The U.S. isn’t the only country planning to stimulate its economy by spending huge sums. Many other countries are, too.


If the U.S. wants a piece of that overseas action, it must let other countries compete on our turf. There is no other way.

Then there’s the lesson of history, which is that protectionism in the 1930s made the Great Depression worse. Here is the Encyclopedia Britannica on the Smoot-Hawley Act of 1930, which raised import duties to protect American farmers and businesses:

“Within two years, some two dozen countries adopted similar ‘beggar-thy-neighbor’ duties, making worse an already beleaguered world economy and reducing global trade.

“U.S. imports from and exports to Europe fell by some two-thirds between 1929 and 1932, while overall global trade declined by similar levels in the four years that the legislation was in effect.”

In contrast, the 1990s — the years of Bill Clinton’s presidency, years of solid growth and, ultimately, balanced budgets — were marked by a commitment to free trade. That’s not a coincidence.

We’re all in this together, world leaders have stressed. Washington now must act on that vital insight by stripping protectionist measures out of the stimulus plan.

— Tom Dennis for the Herald