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2009-01-30 13:31:55
by Veronica Smith Veronica Smith 2 hrs 51 mins ago
WASHINGTON, (AFP) A "Buy American" drive in President Barack Obama's economic stimulus plan is sparking protests from businesses and trading partners, and drawing cheers from domestic manufacturers and unions.
Obama is pushing Congress for swift passage of the American Recovery and Reinvestment Act as vital to prevent the collapse of the fragile US economy amid the accelerating global financial crisis.
The House of Representatives passed an 819 billion dollar version of the economic stimulus package Wednesday that contains a "Buy American" provision generally barring the purchase of foreign iron and steel for any stimulus-funded infrastructure project.
The massive stimulus plan of tax cuts and spending has moved to the Senate, where lawmakers are working on their own version that extends the "Buy American" initiative on iron and steel to include all US manufactured goods.
The bulk of Obama's stimulus package is infrastructure spending targeted to ensure the country's long-term competitiveness in the global economy.
The sweep of infrastructure projects is broad, from roads, rail, bridges, airports and dams to military construction and housing, among others.
Obama argues the expensive stimulus package, supported by unions, could save or create more than three million jobs.
Leading business interests warned that such measures could trigger trade wars that only will exacerbate the slump in trade volumes and economic growth stemming from the financial turmoil.
"Since 95 percent of the world's consumers live outside the United States, American workers would be the first to suffer as 'Buy American' provisions trigger retaliation by other countries -- that is, 'Buy German,' 'Buy Chinese,' and so on," said Chris Braddock of the US Chamber of Commerce.
"We certainly aren't against companies and governments 'Buying American,' but we are against the government arbitrarily mandating such a requirement, because it would harm our economy in numerous ways," Braddock said, citing the trade wars that eventually sparked the Great Depression.
"The Chamber is absolutely committed to avoiding a replay of that disaster," he said.
The House's "Buy American" provision bars spending on any infrastructure project "unless all of the iron and steel used in the project is produced in the United States."
Exceptions would include the unavailability of a sufficient quantity of satisfactory quality of the US metals and if their inclusion would raise the overall project's cost by more than 25 percent.
The "Buy American" provision in the House-approved bill raised hackles in Canada, the United States's biggest trading partner, as well as in Europe.
"We want to avoid protectionism in this economic slowdown," said Canadian Prime Minister Stephen Harper.
It is a "serious concern to us," he said, and so "we're joining with all countries in the world to insist that the United States respect its WTO (World Trade Organization) commitments."
Under the North American Free Trade Agreement (NAFTA), Canada sells about 40 percent of its steel to its southern neighbor.
Harper intends to broach the "Buy American" issue with Obama when the US president visits Ottawa on February 19, Canadian Industry Minister Tony Clement said.
A European Union spokesman said it was premature to take a stance on a text that had not yet been seen but "if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore."
There was no immediate reaction from China, another major steel producer.
Obama, who criticized international trade agreements, including NAFTA, in his presidential campaign, has wasted no time in taking a tough stance on trade since taking office on January 20.
The next day, the Obama administration branded China a currency manipulator, setting the stage for a trade war with the Asian giant which has overtaken Japan as America's biggest foreign creditor.
"It's time for economic patriots to stand up in our country. We need to ensure that our laws are aggressively implemented to ensure that American taxpayer dollars are used to put Americans back to work and help renew our economy," said Leo Gerard, head of the United Steelworkers union which supports the "Buy America" campaign.
Kevin Kearns, president of the US Business and Industry Council, said a stimulus bill that lacks strict "Buy American" provisions "will only encourage ever more consumption of foreign goods with borrowed foreign money -- which helped produce today's economic crisis in the first place."