Fallout: The Financial Crisis

‘Buy American’ clause creates conflict

Marketplace Staff Jan 28, 2009
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Fallout: The Financial Crisis

‘Buy American’ clause creates conflict

Marketplace Staff Jan 28, 2009
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COPY

TEXT OF STORY

KAI RYSSDAL: As I mentioned earlier, after a day full of debate the House passed the president’s economic stimulus package late this afternoon — 647 pages, $816 billion, according to the Congressional Budget Office, including a provision that you get to on Page 12. It says the thousands of new infrastructure projects to be funded with all that money have to use American-made raw materials. Materials like steel. It’s not the first bill to have a “Buy American” clause in it. But it has become an early test of the Obama administration’s trade policies. Our Washington bureau chief John Dimsdale reports.


JOHN DIMSDALE: The administration hopes to reverse the economic tailspin by creating 2.5 million public works jobs. Those workers would build or repair bridges, schools and sewage systems. But a group of U.S. manufacturers says if those projects aren’t built with domestic steel and concrete, not all those new jobs will be filled by Americans.

SCOTT PAUL: You may be inadvertently stimulating the economy of China.

Scott Paul heads the Alliance for American Manufacturing, which supports Buy American. He admits some of the construction materials will be cheaper overseas. He says some of the construction materials would be cheaper from overseas.

PAUL: Our manufacturers are facing a lot of subsidized competition. We have had Buy American laws in effect since the 1930s to guarantee that we have a stable and secure manufacturing base that can provide the steel, the cement, the rubber, glass and bricks we need to build and rebuild America.

Paul says the Bush administration weakened existing Buy American laws and the stimulus package will restore them. But other trade groups are urging Congress to eliminate any domestic content requirements.

Calman Cohen is the president of the Emergency Committee for American Trade that represents companies ranging from equipment makers to aerospace.

CALMAN COHEN: Our workers, producing the products, the services that are in demand overseas will find markets locked to them.

Barack Obama promised to review U.S. trade agreements to make sure workers and the environment were protected from unfair competition. Members of Congress, especially from the Rust Belt, have already responded by introducing laws to retaliate against trade barriers in other countries.

Robert Cassidy, a former Clinton trade official, hopes that under Obama the U.S. will act more in its own economic self-interest.

ROBERT CASSIDY: Economic self-interest means that the government needs to be more assertive. The last administration preferred dialogue over any trade conflict. And so, consequently, there were few trade complaints taken to the WTO.

But free-trade advocates worry about rising protectionism, which they admit is inevitable in an economic downturn, with or without a new administration.

WILLIAM REINSCH: In tough economic times you kind of hunker down and close up. It’s always easier to blame the foreigners for your problems, anyway, than it is to blame either yourself or your neighbor.

William Reinsch, the president of the National Foreign Trade Council, is heartened by the fact that, so far, Obama’s economic appointees are not anti-trade.

REINSCH: They clearly won’t be as ideologically doctrinaire on the free-trade side as the Bush administration was. But the president’s economic advisors all have experience in this area, one that supported open markets.

But he says we’re only a week into this administration and it has not yet given any clear signals on just how free its trade policies will be.

In Washington, I’m John Dimsdale for Marketplace.

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