Now, with the threat of Buy American legislation before Congress, many others are worried. I know President Obama has made reassuring statements recently, but we have yet to see how strong his commitment to free trade is. And anyway it is not clear how much he can do against Cngress.
Marcus Gee:Governments and business around the world, including Canada, are worried about protectionism in the United States. They should be, because what the world sees now is likely a harbinger of more.
Americans are in a hurting, inward-looking mood. The Democratic Party they elected is strongly protectionist. Their new President has to listen to - and act on - at least some of the hurting.
Of course, not everyone is worried. From the Red Star:Preventing this destructive protectionist spiral will take cool heads and strong leadership, most of it from the United States. President Barack Obama must make it clear that he won't dig the United States out of recession at the expense of its trade partners. A trip to Beijing to meet with his counterpart, Hu Jintao, about a co-ordinated response to the global crisis would go a long way to calming fears of a trade war. Throwing his weight behind a move to conclude the Doha round of world trade talks would help, too. Above all, Mr. Obama must make it clear to Congress that he will oppose beggar-thy-neighbour policies that could spark a global trade war.
In a storm like this, it is not enough that right-thinking people agree on the necessity of open trade. In 1930, 1,028 economists signed a petition against the protectionist Smoot-Hawley Tariff Act. When it was signed into law regardless, it set off a round of retaliatory tariffs by trade partners. Global trade fell by two-thirds between 1929 and 1933.
Everyone agrees now (as many agreed then) that it was a huge mistake. That doesn't mean it can't happen.
It sounds as if they think that Canadian lobbying against protectionism is misplaced, because it would align Canada with reactionary American forces. They do not seem to care about the impact on our economy, or indeed on jobs. But maybe I'm interpreting them wrongly -- gosh, I really, really hope I'm interpreting them wrongly.Instead of complaining "in no uncertain terms" to Washington about the proposed multi-billion-dollar "Buy America" stimulus plan, International Trade Minister Stockwell Day should read Canada's trade pacts and review the precedents.
He might discover the North American Free Trade Agreement (among other treaties) allows an exemption for procurement contracts to allow only American iron and steel, a provision contained in last week's $819 billion stimulus package passed by the House of Representatives.
Moreover, Day might learn the U.S. exempted NAFTA partners Canada and Mexico from tariffs on foreign steel in 2002 – and might do so again.
But by using "trade war" rhetoric, Day appears to have positioned the Conservative government with big American corporations already gunning for new President Barack Obama by attacking the package now being worked out by Congress in response to Obama's election pledges. News emerged yesterday that Canada's ambassador to the U.S., Michael Wilson, has fired off a letter to U.S. legislators warning the rules would be a disaster for business and workers in both countries.
"Unfortunately, rather than working co-operatively and practically for an exemption, Canadians politicians ... have been publicly lecturing Americans about their `international obligations' and the theoretical virtues of global free trade," wrote Erin Weir, economist with the United Steelworkers' Canadian arm, in The Progressive Economics Forum.
"This argument is not correct in the current economic context and certainly will not be very persuasive south of the border."
Scott Sinclair, senior trade analyst with the Canadian Centre for Policy Alternatives, agrees. "As far as I can tell," he says, "the provision included in the stimulus package will not violate U.S. international treaty obligations." He cautions that Day "should know better," adding: "I think there is a back story here."
From the same article:
Yeah, Canada might (or might not) get exemptions. But that's not the point. If trade wars come, they will be global, and thw whole global economy will be hurt. Canada's exemptions will be of very little use then.Weir argues that, where trade law might be violated (as potentially in the case of other goods), Canada is positioned well to push for exemptions. He sees countries like China and India as targets.
Oh, well, we can always fight fire with fire. From the same article:
In other words, rather than trying to stop the trade war, let's arm ourselves.NDP Leader Jack Layton agrees Ottawa is "failing to do what other countries are doing to ensure some of the work in government procurement has a big Canadian component."
But maybe I'm being unfair getting all my material from the Red Star. Here's Ken Lewenza in the Financial Post:
Trade war? Bring it on!If governments are using public funds to purchase goods and services in an effort to stimulate a depressed economy, then it's a no-brainer that those products should be made at home. When governments build infrastructure or purchase equipment, they must steer maximum benefit toward taxpaying citizens: creating jobs, stimulating industries and strengthening communities.
The practice of domestic procurement is both logical and common. It's widely used by countries throughout the world. And, for the most part, it's totally legal: Even under the terms of NAFTA and the WTO, sub-national governments have full powers to source locally, and national level governments have great leeway to favour domestic suppliers.
Instead of putting on a Boy Scout's uniform and wringing our hands about others' domestic-sourcing practices, Canadian officials should play hardball. They must defend our jobs with just as much determination as the Americans defend theirs.
Indeed, Canadian governments at all levels are squandering the opportunity to support the economy through public purchases. In recent years, billions have been sent offshore to purchase new buses for the Department of National Defense, ferries that ply the B. C. coastline, transit infrastructure in Ottawa and even uniforms for our Olympians in Beijing.
The damage that the U. S. provisions would do to our Canadian industries has been overstated. In fact, if we implemented our own buy-domestic strategy, we'd have a bargaining chip to negotiate sectoral partnerships or mutual exemptions (in steel, auto, and other key sectors) with the Americans that make better sense for our hard-pressed industries than the current free-trade free-for-all. That would give manufacturers on both sides of the border a chance to compete with the offshore imports that are destroying hundreds of thousands of jobs in both Canada and the United States.
Now I'm scared.