Canada is furious about U.S. protectonism

By Edward Harrison On Feb 4, 2009

The “Buy American” clause stuck onto the stimulus bill wending its way through Congress is a pernicious piece of legislation because it has engendered a ferocious response from trading partners, not the least of which is Canada.

Below is a Wall Street Journal video clip discussing this piece of legislation and the Canadian reaction to it. In addition, the video rightly claims that the bailouts now being conducted for financial services industries around the world are subsidies that are equally protectionist. None of this bodes well for the global economy.

Edward Harrison 7783 posts 575 comments

Edward Harrison is a senior Editor at Bloomberg. He is also the founder of Credit Writedowns newsletter, a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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4 Comments

Ranger Turtle says 15 years ago

If the intent is to make sure that the Subsidy bill currently in the Senate spends U.S. tax dollars ONLY on U.S. companies, then I for one am for it.
We cannot afford to bail out other countries.!
Edward Harrison says 15 years ago

Ranger Turtle,

You should definitely read this VoxEU article which details how “Buy American” is bad. This is potentially in violation of multilateral agreements and opens the U.S. to retaliatory measures. Moreover, the number of jobs ‘created’ by this measure could dwarf those lost in a retaliatory move.

Really, this is just a subsidy that hurts Americans and lines the pockets of captains of industry. Do not be fooled by the jobs rhetoric. That is purely for populist purposes. Economically speaking, “Buy American” is poison.
John Creighton says 15 years ago

According to this link:
https://www.epi.org/worth_reading/entry/buy_american_brouhaha_what_are_the_eu_and_canada_hollering_about/

The buy American laws does not violate international treaties. Anyway, I don’t believe America should buy all their steel from America but I do think that it is reasonable to expect that during an economic downturn a government should spend the majority of tax payer dollars locally.

I just don’t think that they should pay too high a premium for local content. The problem is that there are few areas in the treaties where the government is allowed to base procurement decisions on the country of origin. As a consequence in the area’s where there is wiggle room the “protectionism” is disproportionately large. Perhaps revisiting the treaties is not such a bad idea.

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