Buy-American Stimulus Provision Sparks Debate

President Obama i i

hide captionPresident Obama has a mixed track record on trade.

Alex Wong/Getty Images
President Obama

President Obama has a mixed track record on trade.

Alex Wong/Getty Images

Planet Money

The Senate has opened debate on the massive economic stimulus bill. And President Obama is urging lawmakers to avoid "partisan gridlock," as they weigh hundreds of billions of dollars in tax cuts and new government spending.

One portion of the bill would require the government to use American-made steel and other supplies in all those new bridges and roads it wants to build. This "Buy American" provision has drawn criticism from foreign governments and some businesses.

It also poses an early test for President Obama, who walked a fine line on trade issues during the campaign.

Supporters Want Money For Jobs

Backers of the Buy American provision make a simple argument: "If we're going to try to create American jobs, we need to direct stimulus money to American firms," says Scott Paul, executive director of the Alliance for American Manufacturing.

The House version of the bill would do just that — requiring that iron and steel used in public works projects come from American suppliers. The Senate bill would go further, extending the Buy American requirement to all manufactured goods used in infrastructure projects. Paul, whose group represents unionized steelworkers and manufacturers, thinks it's a good idea.

"When we're investing hundreds of billions of dollars, tax dollars, into infrastructure, into economic recovery, we want to make sure we're creating jobs in the United States and not in China," he says.

But to critics, the Buy American requirement sounds suspiciously like the first step down a protectionist path that the U.S. and other countries followed on their way to the Great Depression.

"Anyone? Anyone?"

Actor and economic commentator Ben Stein riffed off this history in the movie Ferris Bueller's Day Off:

"The Hawley Smoot Tariff Act ... did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression."

It's not just fans of the movie who might think protectionist moves can backfire. The U.S. touched off a trade war in the 1930s when it raised import duties on thousands of foreign goods.

Diplomats Warn Of Retaliation

Supporters say the Buy American provisions are a far cry from those punitive tariffs, and they note federal public works projects have long given some preference to American-made supplies. Still, diplomats from Canada and the European Union are warning of possible retaliation if Congress follows through with the requirement. And that has some big U.S. companies worried about losing business overseas.

"This sends absolutely the worst signal at a sensitive time for the global economy," says John Murphy, vice president of the U.S. Chamber of Commerce. Murphy wants Obama to weigh in against the Buy American provision. So far, though, the White House has refused to be pinned down.

"The administration is reviewing that provision," spokesman Robert Gibbs said last week, in response to repeated questions. "Let us undertake that review. And when we have something to announce as it relates to that review, I will be able to answer any number of your questions related to a review that has not yet currently been done."

Obama's Record On Trade

Obama has a mixed track record on trade. During the primary campaign, he called for renegotiating the North American Free Trade Agreement. But he later appeared to soften his stance. And many of his economic advisers have strong free-trade credentials.

Yale University political scientist Kenneth Scheve says many Americans have grown skeptical that free trade is working for them. He adds that pressure for protectionism typically mounts during economic downturns — even if measures like Buy American turn out to be short-sighted.

"I do not think the economic advisers in the administration are going to be supporters of it. The question is whether the political logic sort of overrides those concerns," Scheve says.

He suggests Americans might be more willing to go along with their government buying imported steel and other materials if the other elements of the stimulus plan are successful in reviving the economy.

In network interviews Tuesday, Obama said he would "work on" the language of the Buy American provision. Obama says the U.S. should not send a protectionist message or do anything that might touch off a trade war.

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