President Barack Obama on Thursday moved to reassure business and trade partners that the “buy American” provision of the economic stimulus package will not further harm the economy.
Critics of the measure, including foreign trade partners, business groups and even some U.S. industries that use steel and other products, have called “buy American” protectionist and complained it will drive up the cost of business.
Obama, who met with Canadian Prime Minister Stephen Harper for several hours in Ottawa, said he told his counterpart the United States would abide by existing trade pacts.
“I want to grow trade and not contract it,” Obama said. “And I don’t think that there was anything in the recovery package that is adverse to that goal.”
The “buy American” clause emerged as among the most controversial elements of the $787 billion economic stimulus package signed by Obama on Tuesday. It also illustrates the line Obama is trying to walk between supporters of the measure in his own party and economic forces opposing it.
“We expect the United States to adhere to its international obligations. I have every expectation, based on what the president’s told me and what he’s said publicly many times in the past, that the United States will do just that,” Harper said. “But I can’t emphasize how important it is that we do that.”
Initially, the stimulus bill required that infrastructure projects funded by the legislation could only use U.S.-manufactured materials, such as steel and iron.
The provision was later modified to say that such procurement must conform with existing trade pacts, a concession allowing trade partners such as Canada, Japan, Mexico and others to benefit from U.S. public works spending.
The rule also does not apply if American goods required for a job aren’t available in sufficient quantity, or if the materials increase the cost of the project by more than 25 percent.
Daniella Markheim, a trade policy analyst at the Heritage Foundation, said several large countries including Brazil and China do not have government procurement deals with the United States and would be locked out — and could retaliate with tougher protectionist policies of their own.
In the worst-case scenario, Markheim said, “The U.S. could be committing to buy American while the rest of the world is committing to ‘don’t buy American.’ ”
The “buy American” provision was supported by labor groups, small manufacturers and others who said the measure was needed to offset the layoffs and work slowdowns in the economy.
Opponents include the U.S. Chamber of Commerce, big industry and defense contractors among others, who argued the measure would further harm the economy and hurt U.S. exports.
The European Commission, which oversees trade for the European Union, a major U.S. trade partner, said Thursday it planned to keep a close eye on how the provision is enforced, Reuters reported.
