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Canada's fears of U.S. protectionism justified, says top Democrat

WASHINGTON - U.S. President Barack Obama says the final version of his massive economic stimulus package must not contain protectionist language that could spark a trade war with Canada and other U.S. allies.

WASHINGTON - U.S. President Barack Obama says the final version of his massive economic stimulus package must not contain protectionist language that could spark a trade war with Canada and other U.S. allies.

"We can't send a protectionist message," Obama said in an interview with Fox News on Tuesday.

In another interview with ABC, the president added that "we need to make sure that any provisions that are in there are not going to trigger a trade war."

Obama's long-awaited remarks on the controversial "Buy American" provision contained in the US$819 billion House bill come amid a growing chorus of dire warnings from Canada, the European Union and blue-chip American corporations and business associations.

Canada has complained bitterly about the provision, saying it would violate international trade agreements and possibly trigger worldwide protectionist measures that could prevent a global economic recovery.

One top Democrat said Tuesday that Canada is right to fear the rise of American protectionism and its impact on trade between the two countries.

Steny Hoyer, the Democratic House leader, said he'd spoken with Canadian Ambassador Michael Wilson, who sent a terse letter to Senate leaders this week complaining about the provision.

Wilson is "very concerned about the flow of economic activity between our two nations," Hoyer, a Maryland Democrat, told a news briefing.

"So I think the concerns are relevant ... I think the concerns are justified."

Last week, Congress passed their US$819 billion version of Obama's economic stimulus bill, designed to pull the free-falling U.S. economy out of a devastating recession.

The House bill contained a provision that requires all the steel and iron used in the bill's infrastructure products be American-made.

The Senate's US$885-billion version of the package, currently being debated by senators, goes even further, stating that all goods used for infrastructure projects like roads, bridges and schools must be manufactured in the United States.

A Canadian official closely observing the Senate debate said there's a "decent chance" the "Buy American" provision could be watered down this week by senators

The official also pointed out that even if it remains in the bill, the Obama administration will have some discretion and input into how the provision is implemented.

"There could be some nudging and winking going on - the language may remain, but it won't necessarily hurt trade with Canada," the official said.

White House press secretary Robert Gibbs said Tuesday that Obama was continuing to review the provision.

There's no question that "Buy America" has placed him in one of the biggest dilemmas of his presidency. While Obama campaigned on a pledge to protect American jobs, he also promised in his inaugural address to reach out to U.S. allies and work together to stop a worldwide economic meltdown.

The "Buy American" movement has touched off a global uproar, with Canada and the European Union pointing out such measures may fly in the face of international trade agreements and could lead to a litany of international trade skirmishes that would stifle a global economic recovery.

Ottawa is pressing forward in its efforts to convince Washington that the provisions are a bad idea - and that Obama would likely have U.S. law on his side if he moved to block them, Trade Minister Stockwell Day said Tuesday in Ottawa.

"We have no guarantee that they're going to take the measures out," Day said.

"We are firing on all cylinders, we're hitting all levels and we are getting a response. We are going to keep the pressure up."

Hoyer said he was certain that the thorny issue of protectionism would be "a matter for discussion" between the Senate and the House after senators pass the bill.

But, he added, American taxpayers are looking for a stimulus package that boosts their own economy, suggesting they aren't particularly concerned about the economic well-being of other countries.

Nonetheless, it's not just Canada and the European Union up in arms about "Buy American." Many American observers have argued that a similar protectionist measure passed in the 1930s by President Herbert Hoover helped turn a recession into the Great Depression.

The National Association of Manufacturers, the oldest industrial trade group in the U.S., warned in a letter to senators Tuesday that the provision spells trouble for American workers and violates the country's international trade obligations.

The organization is "very concerned that the new 'Buy American' provisions in the bill will potentially backfire on the United States and end up harming American workers and companies across the entire U.S. economy," wrote president John Engler, once the Republican governor of Michigan.

"These new rules could result in mirror-image trade restrictions abroad that would put huge amounts of American jobs and exports at risk."

The association represents blue-chip U.S. corporations that include Sony, Exxon, Mobil and Dow Chemical.

The U.S. Chamber of Commerce has also raised similar concerns.

And a study released Tuesday by the Peterson Institute for International Economics estimated that the "Buy American" provision could create only about 1,000 jobs in the steel industry, but might cost as many as 65,000 across a wide range of sectors.

"The negative job impact of foreign retaliation against 'Buy American' provisions could easily outweigh the positive effect of the measures on jobs in the U.S. iron and steel sector and other industries," the study found.

The chairman and CEO of Dell Inc., one of America's biggest technology corporations, also sounded a stern alarm bell about "Buy American" on Tuesday, saying it could start a trade war.

"Trade wars are very, very dangerous, particularly in the economic situation we find ourselves in right now," Michael Dell said at a Northern Virginia Technology Council event.

Nonetheless the author of the provision, Senator Byron Dorgan of North Dakota, is adamant that it's needed to jump-start the U.S. economy.

"If we want to stimulate the American economy and create new jobs here, we ought to be investing in American-made products with the stimulus money," Dorgan wrote in a USA Today opinion piece.

"If the goal of the economic recovery plan is to create American jobs, then it stands to reason that the 'Buy American' provision is essential."

 
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