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‘Buy America’ Clause Sparks Trade War Talk

February 10, 2009 at 5:59 by Mario

Last week’s furore over the controversial ‘Buy America’ clause included in the American Recovery and Reinvestment Act of 2009 — passed by the US House of Representatives on January 28 — ended the week with the White House promising to review the protectionist proposal.
This latest move, which came after outcry from industry bodies and governments across the globe, is likely to be unpopular among US steelmakers, many of which came out in support of the proposal during the week.
“We need to put Americans back to work,” Nucor ceo Dan DiMicco said at a Congressional Steel Caucus hearing last week.
“The best way to do that is with a strong stimulus package that focuses on rebuilding our nation’s infrastructure, including our roads, our bridges, our schools and our buildings, as well as our energy infrastructure, both conventional and alternative.”
“The ‘Buy America’ laws are consistent, I repeat consistent, with our international obligations,” he added.
“They have not and will not start a trade war.”
Chairman of the Congressional Steel Caucus Representative Peter Visclosky, a champion of stronger provisions, agreed.
Bottom line
“The bottom line is that requiring American steel to be used in economic stimulus projects is a surefire way to quickly create American jobs, and the American taxpayers deserve to know that their hard-earned tax dollars are being used to revitalise the American economy and help Americans who want to work,” he said.
But others elsewhere were not so sure, and a number of foreign government bodies, including the European Commission, welcomed President Obama’s new tack on the proposed trade legislation, particularly when the US premier took a softer tone in an interview with Fox News.
“I’m encouraged by the words of President Obama,” European trade commissioner Baroness Ashton told MB. “He realises, like we do in Europe, that we need to trade our way out of the current economic difficulties. Trade is part of the solution as it acts as a stimulus.”
But the ‘Buy America’ clause has ruffled feathers in more than one nation outside Europe, and Obama and his administration will have to tread carefully if they wish not to trigger further ire in these quarters.
“It’s trade protectionism, which is against the common practice of the World Trade Organisation, but then, so far, it has been more propaganda than reality, so it is still too early to make any formal protest,” said an official at China Iron & Steel Assn (Cisa).
“In a global economy, the market should be the decision- maker, not the government. Even China, a 500 million tpy steelmaker, has to import some products every year, how can the US be different?,” he continued. “The US triggered the financial crisis and global economic recession, which has hit Europe harder. All countries are making an effort to help each other out, and [if the US passes ‘Buy America’ provisions] it will turn all the other countries against the US,” he said.
And Serdar Kocturk, president of the Turkish Steel Exporters’ Assn, was similarly unimpressed.
“The law favours American producers in government tenders. In this act there are some countries called ‘designated countries’ which are treated like local suppliers. If there is a public interest, if the product is not available and if the cost is unreasonable, some products may be excluded with prior approval,” he told MB.
Trade barriers
“In the past, prices up to 6% higher were acceptable for local suppliers. I think that such protective laws are against free trade practices and it’s not fair. However, we are going through tough times and most nations are not respecting free trade rules — they’re applying trade barriers and tariff barriers,” he added.

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