ShareThisThe "Buy American" provisions in the United States' stimulus spending program are raising concerns that a spate of protectionist measures will spread around the world, slowing any economic recovery and becoming a permanent feature of international trade.
China has now revealed a policy that will pressure local governments to use domestically made goods for stimulus projects. Earlier this month, the Federation of Canadian Municipalities passed a resolution that could eventually exclude U.S. companies from bidding on municipal contracts.
Those are just the latest examples of many episodes of protectionism around the world in recent months.
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, said he is aware of more than 120 such moves that restrict trade. Essentially, the Buy American provisions have given a "permission slip" to other countries to take similar measures, he said.
While most of these actions don't directly flout rules of the World Trade Organization or various free-trade deals, many fall in "gray areas," he said.
Government procurement, which has always been somewhat restricted, "is going to get a lot more so in the next year or two as countries say 'the U.S. is doing this and China is doing it, why don't we do it,' " Hufbauer said.
His big concern is that once new rules are in place, they will be difficult to unwind. Among the most entrenched protectionist measures are the support programs for the automotive industry that have sprung up worldwide, he said.
Karan Bhatia, General Electric Co.'s vice president and senior counsel for international law and policy, said that multinational corporations are very concerned about protectionist moves.
Buy American "is bad policy" that is damaging U.S.-based multinationals like GE, which use global supply chains, he said in an interview. It is also bad for the United States in general, because it "slows down and potentially defeats the benefits of stimulus."
He, too, sees a "contagion" prompted by the U.S. moves. "An eye-for-an-eye (approach) is only going to make the whole world blinder and poorer."
A key concern of GE's is that Buy American provisions will become a permanent feature of spending legislation in the United States.
While it may be too late to get the current protectionist measures removed from the U.S. stimulus package now in place, it is crucial to ensure they don't linger in future U.S. legislation, Bhatia said. "The next challenge, quite frankly, is ... the next wave of these kinds of requirements (that) potentially will pop up in other pieces of legislation."
He is worried about proposed federal spending bills for water projects, and "green jobs" legislation that is currently moving forward.
"We have heard that there will be an effort to put these kinds of provisions in to every piece of legislation of that type working its way through (Congress)," he said. "Our fear is that these requirements will multiply within the U.S. system and internationally."
GE is lobbying to have the Buy American provision moderated or rolled back through a softening of the regulations that will implement the broad language of the legislation, Bhatia said.
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
Canadian clients may not useMust credit Toronto Globe and Mail(All currency U.S.)
