Saturday, February 7, 2009

Burying "Buy American"

Our economic woes are not going to be fixed by closing our ports and buying only American goods. Instead of reinvigorating American industry, the “Buy American” part of the stimulus bill going through the Senate right now could start trade wars and encourage other countries to pursue economic nationalism as well.

When you see a friend lose a job, feel strapped for cash, or begin to experience the severity of the recession, it is only a natural inclination to want to do whatever possible to help those closest to us, especially fellow Americans. However, that would be a short-sighted solution and while it may save your job for the time being, it will have disastrous effects in the long run.

The financial crisis is a world-wide one that has permeated even the most remote corners of the earth, and the only way to solve it is with international cooperation and policies, not a retreat to isolationism and protectionism.

The crisis started in America and as it spread around the globe other governments looked to us for an example of how to respond and now government bailout and stimulus plans are in the works in most developed and developing countries. With the U.S. under the new administration, they are following our every move even more closely. If the United States pursues economic nationalism, other countries will also, which would erode political relations and ties.

The Senate Compromise states:
BUY AMERICAN SEC. 1604. USE OF AMERICAN IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.

Not only does buying American send a message that the U.S. only cares about recovering its own markets, but it fosters ethnocentrism within our own borders and is inconsiderate regarding the fiscal troubles the rest of the world is experiencing.
The most frustrating aspect of the “Buy American” clause is that it is a mistake the U.S. has previously made. In the interwar period after the Great Depression the U.S. Government passed the Smoot-Hawley Act, instating high tariffs. Even the State Department’s website has a blurb outlining that nothing good came from the Act:
What is certain, however, is that Smoot-Hawley did nothing to foster cooperation among nations in either the economic or political realm during a perilous era in international relations. It quickly became a symbol of the "beggar-thy-neighbor" policies of the 1930s. Such policies, which were adopted by many countries during this time, contributed to a drastic contraction of international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934.
Our administration is in such a hurry to act that it will repeat a mistake instead of learning from its own history.

Instead, the U.S. should pursue international trade and stimulus plans which would be stronger and more effective than national remedies. Let’s hope President Obama will respond to a challenge set forth by The Economist in "The Return of Economic Nationalism" and take the lead in this situation. Here is yet another opportunity for Obama to create change - and this time it is in the stimulus bill.


  1. As important as the position of the United States on the global map is, the state of affairs domestically deems itself the priority. I agree that the stimulus bill needs ramifications, yet the bill as a whole isn't a bad idea.

  2. I disagree with WB. The bill as a whole is a bad idea. And economic recovery requires qorld wide recovery. That means more free trade and lower taxes. But i guess i'll jsut have to do with my extra $13 a week.

  3. Deciding on whether to set our focus domestically or internationally always seems to be a struggle for our country. That is just the price you pay for spending so many years as the world power. But I definitely, agree... in this global world and global economy we live in these days, the answer is never as simple as just focusing on only ourselves.

  4. I believe the only American product we really need to focus on buying is an American car. The truth is that most of us do not drive American cars and are not planning on purchasing one.

    With this exception, I agree with you when you say "the U.S. should pursue international trade and stimulus plans which would be stronger and more effective than national remedies"