12 February 2009

Buy American!

A discussion on a Times blog that provides a variety of different positions on the issue (though some of the positions are pretty silly or unhelpful, in my reading - those of the "local union official" and Sherrod Brown in particular):

Things I hadn't realized that are useful to point out:

1. Only 38 countries plus the U.S. are party to the WTO agreement that ensures non-discrimination in government procurement. For the U.S. to fulfill its international obligations, then, it only has to not discriminate against those 38 countries.

2. That agreement allows countries to discriminate in particular country-specific pre-agreed sectors; or, to put it another way, the agreement only applies to certain pre-specified sectors. So, the U.S. can discriminate even against signatories in sectors it did not sign on to open up.

To me, "Buy American" needs to be framed as a very specific issue rather than an argument about the broader merits of or problems with "free trade" versus "protectionism." True, as one contributor claims, there's a lot of room for protectionist policies while abiding by the letter of international trade law. But as another of the writers points out, today we have a broad network of international agreements and commitments which, if followed fairly closely, defend against a beggar-thy-neighbor spiral of protectionism. They serve as a line which leaders are wary to cross, since crossing it changes the game from a matter of protectionism within the law to an abandonment of the regulatory regime altogether. There's a huge difference there. Moreover, I'd add that any negative consequences of loopholes in the law can just as well serve as incentives for deeper cooperation in the future (i.e. when the economic crisis is over).

It's only if leaders believe the "Buy American" clause to be part of a more general protectionist turn that it could undermine cooperation on international trade. Then, the argument that the "Buy American" clause will encourage a spiral of trade wars will become a self-fulfilling prophecy. Economists and politicians who frame the issue in terms of this deeper danger, perversely enough, contribute to the risk of that outcome. It will be crucial for the U.S. to engage in smart public relations and public diplomacy to prevent this prophecy from being fulfilled.

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