Wednesday, May 20, 2009

Democrats start trade war

In 1930, Hoover was accused of “Doing Nothing” about the economic collapse. Would that were true. In fact, against the advice of 1,000 economists who wrote the White House, he signed the Smoot-Hawley trade bill, putting up barriers. World trade collapsed, Roosevelt continued the policy, and the depression was locked in for a long time. Always popular with unions and economically ignorant voters, trade barriers hurt everyone, as countries retaliate.

The Democratic Congress and the Obama administration seem determined to follow up on campaign promises to stop free trade with "Buy American” protection. The hundreds of thousands of US Workers dependent on foreign trade probably won’t know why they lost their jobs. We stick it to Canadian workers, so Canada sticks it to our workers. Wonderful. ~Bob

Trade Wars Brewing In Economic Malaise
Outrage in Canada as U.S. Firms Sever Ties To Obey Stimulus Rules
By Anthony Faiola and Lori Montgomery
Washington Post Staff Writers Friday, May 15, 2009

Is this what the first trade war of the global economic crisis looks like?

Ordered by Congress to "buy American" when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.

Outrage spread in Canada, with the Toronto Star last week bemoaning "a plague of protectionist measures in the U.S." and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts -- the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.

This is not your father's trade war, a tit-for-tat over champagne or cheese. With countries worldwide desperately trying to keep and create jobs in the midst of a global recession, the spat between the United States and its normally friendly northern neighbor underscores what is emerging as the biggest threat to open commerce during the economic crisis.

Rather than merely raising taxes on imported goods -- acts that are subject to international treaties -- nations including the United States are finding creative ways to engage in protectionism through domestic policy decisions that are largely not governed by international law. Unlike a classic trade war, there is little chance of containment through, for example, arbitration at the World Trade Organization in Geneva. Additionally, such moves are more likely to have unintended consequences or even backfire on the stated desire to create domestic jobs.

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