This may be the new administration’s first misstep. I don’t have a problem with missteps in general as long as they’re corrected. Everyone makes mistakes. What’s more important is how you address them once they’ve been made. Canadians will be watching this one very closely, and realistically we’ll probably be preparing a counter attack if necessary. Let’s hope we don’t get into a situation where every country feels it needs to start throwing up its own trade barriers. See also: http://seekingalpha.com/article/117...on-to-protectionist-language-in-stimulus-bill http://www.thespec.com/News/CanadaWorld/article/503931
Classic? We have our own stimulus package, as I’m sure do most western countries. I think ours is about half as big as yours is on a per capita basis, but the real problem is the impact on international trade. Did you read the Caterpillar link? I’m sure they can see the writing on the wall very clearly. If they aren’t allowed to buy Canadian steel to make their equipment, for example, then why should Canadians buy their equipment? There are Japanese and European manufactures who make very good equipment as well, and maybe they’d like to buy more of our steel in return. Do you see the problem here?
I'm not a fan of this - and this is a House-pushed thing, not an Obama one as far as I know - but I don't see how this HURTS Canadian industry? First off, it would only apply to new money that's not out there now. So there should be no negative impact. It just won't help Canadian industry increase their sales. But that said, these commodities are sold on the open market. If there's more demand for American steel for the stimulus money, it will raise the price of American steel. That will make Canadian steel more attractive for any projects NOT involving the stimulus money. It's not like the bill is enacting country-wide protectist policies. They are just putting restrictions on the new money that they would be spending.
Protectionism was one of my greatest fears with the democrats. It exacerbated the great depression and increases costs for all people. It keeps groups from specializing and becomes contagious as other countries follow suit.
But in these tough times, that still hurts. Canadian companies need the work too. I think that this issue actually becomes fairly complicated with lots of shades of grey. I have to run, but here are a few of the issues as I see them. -NAFTA There is a free trade agreement in place between Canada and the US. -I buy Canadian whenever I can and I wouldn’t expect any different from Americans, but many, not all, government level trade restrictions can really mess up what is now a highly integrated North American economy. The first thing to consider is that we are each other’s biggest trading partner. http://www.census.gov/foreign-trade/top/dst/current/balance.html With respect to integration, plants have been built on one country or the other with the expectation that they would service the whole market. Many industries are in trouble right now and hypothetically if some are barred access to US contracts and work it could put them under. In response our government may take steps to protect them by putting up barriers to direct more work to them. We may block US steel products, for example. Here’s a paragraph from my above quote. I suspect that we trade back and forth like this because there are mills in the US that are good at producing product X for the North American market and export a lot to Canada, and mills in Canada that are good at producing product Y and ship a lot to the US. If the US blocks Canadian steel then less competitive US plants that do or can produce product Y will get more contracts and work, but Canada may well throw up barriers in response to prevent US manufactured product X from entering Canada so that Canadian mills, even though they may not be as competitive with respect to that product, will have some work. In the end we would end up losing efficiency. Our economies are so integrated that I think any barriers like this have the potential to really cause havoc. In don’t think free trade should be limitless, I should add, and by that I mean that I think there are areas were restrictions are appropriate, but this kind of restriction I think could easily cause a lot more harm than good. I think the American stimulus packages may put some Canadians to work, but ours may well put some Americans to work too. On top of our own stimulus package we’re also contributing over $3 billion to the bailout of the big 3. Note that about 20% of NA auto manufacturing is done in Canada, and a lot of it is components that are exported to the US, which again shows the extent of the integration between our economies. http://business.theglobeandmail.com/servlet/story/RTGAM.20081212.wrautos1213/BNStory/Business/home
That's fine, if Canada wants to react with trade protections to try and take our stimulus money. We'll just trade with Mexico. Mexican labor is cheaper and plentiful.
Grizzled, you don't seem to want to grasp the difference between blocking foreign access to markets, and the idea that the government of a country can target its special funding how it wants. There is a difference which has been pointed out between erecting a barrier to the entire market, and the government as a single entity spending its funds how you want. If this is protectionism, then I'm a dirty rotten protectionist if I prefer Kentucky Bourbon Whiskey to Canadian Whiskey and only spend my funds on the former. By not drinking Canadian Whiskey, I'm not preventing anybody else from drinking it.
Obama's got to pander to all those union slobs that helped get him elected. This doesn't surprise me. I'm very much for free trade and for much more free immigration, too.
I think you’re splitting hairs. The construction industry is severely depressed right now, but governments around the world are gearing up to start up a lot of infrastructure projects. Will Canadian companies be allowed to bid on American government projects or not? If not then that is effectively a trade barrier. Strictly speaking, Kentucky Bourbon and Canadian Whiskey are not the same thing. If you prefer Bourbon to Canadian Whiskey or Scotch Whiskey then that’s your preference. There’s no protectionism there. If the spec for the supply of alcohol you’re taking bids on only said whiskey, however, and any kind would do, then if the Canadian bid was lower than the Kentucky bid but was excluded because it wasn’t American you would be engaging in unfair trade practices under NAFTA, I suspect. There is a lesson here, imo. If you want to walk carefully around the edges of protectionism, and quite frankly every country wants to direct as much money as possible towards its own people right now, then you have to pick projects where the industry in your country is dominant. With respect to the relationship between Canada and the US, however, we’re so integrated that in many cases such a line probably couldn’t be drawn. I’d have to double check, but I’m pretty sure that more trade goes between our two countries than any other trading relationship in the world. 20% of your exports go to Canada, and about the same percentage of your imports come from Canada. From our standpoint 80% of our exports go to the US. Most Canadians hate that fact, but when you have a country that’s 9 times your size sitting on your southern border, this is what naturally develops. The result of all that trade, which has been largely free trade for quite a while now, is that we’re very, very, integrated, and for many industries probably too integrated to separate. I will say that this is a breaking issue and I don’t think it’s clear at this point what the impact will be, but if there isn’t going to be any impact on foreign companies then what’s the point of provision? It could be just cosmetics, I suppose. We’ll have to wait and see, but there is no doubt that Canadians, and others, have reacted very strongly to this. We’ll have to wait to see how this unfolds. http://www.bloomberg.com/apps/news?pid=20601082&sid=aYCf165YJXqA&refer=canada
^Maybe some bailout money would sweeten the deal? I think Asia is doing the same thing though. They're the ones technically financing the whole thing...
The US government isn't preventing the free market from buying Canadian, they're just trying to make sure Americans benefit most from the infusion of an American tax payer stimulus package. The Canadian government should do the same thing with their tax money. By classic, I meant that Canada is acting like the 51st state trying to get their cut of the pork.
I'm not a fan of protectionism but this isn't raising a tarriff barrier but jut targetting spending as Ottomaton notes. Grizzled since you have noted that you buy Canadian when you can you are doing exactly what the US government is doing in basing your spending decisions on nationalistic interest. The US government just happens to be doing that on a much larger basis. I personally would like to see more open bidding on this but I'm not that bothered by deciding to concentrate the spending of a US stimilus bill on US suppliers. I don't think this violates NAFTA or any other trade agreement.
Will Obama start a trade war with the Buy America Steel provision? I didn't know this terrible idea made its way into the stimulus package until I read an editorial in Barron's over the weekend. Apparently, if this garbage is in the bill then foreign steel can only be considered if there is no domestic steel available for the project or if the total cost of the project has increased by more than 25% due to steel costs. Please correct me if I am wrong here. I hope Obama does not cave to special interests here but it does not look good and the effects of it could be very dangerous. http://www.theaustralian.news.com.au/story/0,25197,24982537-5013948,00.html Barack Obama's threat to free trade on steel David Nason and David Uren | January 30, 2009 Article from: The Australian FEARS that the world downturn will spark a trade war have been stoked by the inclusion of measures to protect the US steel industry in Barack Obama's $US819 billion ($1.25trillion) package to stimulate the US economy. The package, which Mr Obama hopes will jump-start the recession-hit US economy, contains about $US90 billion worth of infrastructure projects, with about $US64 billion subjectto mandatory US steel requirements. In a further sign of world trade tensions, a war of words erupted at the World Economic Forum in Switzerland over claims by the newly appointed US Treasury Secretary, Timothy Geithner, that China was "manipulating" its currency by artificially holding down its value against the US dollar, supposedly swelling the US trade deficit. China's Premier, Wen Jiabao, told the forum his message to the Obama administration was that it was imperative for China and the US to enhance their co-operation - a confrontational relationship would make them both losers. Mr Wen claimed China was seeing the first signs of economic recovery. He suggested that "the harsh winter is gone and spring is around the corner", and China could help "restore confidence in global economic growth and curb the spread of the international financial crisis". The Rudd Government is not commenting directly on the protectionist threat until the Obama stimulus package is finalised, but a spokesman for Kevin Rudd said Australia expected the US to be mindful of its international trade obligations, including under our bilateral free trade agreement. Business organisations said it ran counter to the commitments made by the US to the meeting of G20 nations held in Washington in November. "The US was one of the G20 making a commitment that it would not introduce protectionist measures, and that is what this amounts to. It is inconsistent with the spirit of that crisis session," the policy director of the Australian Chamber of Commerce and Industry, Greg Evans, said yesterday. Trade analysts go further, saying the measure would be illegal under the commitments the US has made to the World Trade Organisation. US steel will be compulsory for any airports, bridges, canals, dams, dikes, pipelines, railroads, multi-line mass transit systems, roads, tunnels, harbours and piersfinanced by the stimulus package. The measure has been attacked by US business groups, with a letter to congressional leaders signed by 15 business groups urging the removal of allprotectionist measures from the package. It specifically warns that the "Buy America" steel provision could result in US companies being shut out of economic stimulus programs in countries such as China, Germany, Britain, France, India and Australia. But with Mr Obama strongly in support, the stimulus package passed the House of Representatives by 244 votes to 188. No Republican voted for the package, a blow to the President's hopes for bipartisan support, and 11 Democrats were opposed. The bill will now go to the Senate, where a second version is also under discussion, and some senators, including Democrat Sherrod Brown of Ohio, want the Buy America provisions expanded to include other materials such as cement. "As we are losing jobs in record numbers, we obviously need to devote these funds to direct creation of American jobs," Senator Brown said. "To do that, we must ensure that federal funds are used to buy American products and to help promote manufacturing in our country." A US embassy official pointed out that the separate bills in the two houses of US congress would eventually be brought together in a conference, over which the new Obama administration would have considerable influence. "There is likely to be changes once the Senate version is resolved," he said. The issue is the first test of Mr Obama's free-trade credentials. During the election campaign, he appealed for the votes of steelworkers, saying he had opposed key free trade agreements and calling for action against Chinese imports. "The men and women you represent haven't been getting a seat at the table when trade agreements are being negotiated," he told steel unionists. However, Mr Obama's chief trade negotiator and his key economic officials have all strong free-trade credentials. Although Mr Obama's views will be considered by legislators, it is unthinkable that he would veto the stimulus package because of the Buy America provisions. However, opinion in the US is split. A letter to congressional leaders by business groups, led by the US Chamber of Commerce, the National Foreign Trade Council and the American Business Conference, said the US would be in breach of procurement commitments to the World Trade Organisation if the Buy America steel provision were enacted. "If the US expands or enacts new Buy American-type provisions that abrogate the US government procurement agreement or our other trade agreement commitments, the US and US firms will face retaliatory sanctions in other markets and jeopardise our ability to open other foreign government markets to US goods and services," the letter said. The letter also noted last November's G20 declaration in which member nations pledged to "refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing (WTO) inconsistent measures to stimulate exports".
Sorry, I like it...if you are going to take the bailout money, it should be spent on US companies products. Why should our tax payers money go to support China, or other foreign countries who do not allow free trade? Sure our prices might go up as the market adjusts but China has been screwing the US in trade for years......I am for free trade, as long as it is equally free from both sides. Maybe they could add a provision to allow money spent on foreign steel if that country has free trade? Grizzled, Maybe Canada should actually have to pay for an adequate military to protect it's borders, and stop supping on the US's teete? DD
I don't really see this as protectionism - protectionism is about putting barriers to trade. This does no such thing. Second, the stimulus is designed to stimulate domestic demand, not demand abroad. Sending money abroad to countries that don't import from the US is like flushing it down the toilet from a stimulus perspective.
so how is it better to mandate overspending? hell we could just give the money away if that is the best route to go.
