Protectionism or "Think Local" in the Stimulus Package

Posted by: David Kiley on February 17, 2009

Members of Congress were a bit ham-handed in their attempts to get “Buy American” provisions into the stimulus package such as requiring state governments completing infrastructure projects to buy American steel.

Foreign governments and devout free-traders immediately cried out.

This from Businessweek’s story:

“Organized labor and small U.S. manufacturers won an amendment to the stimulus bill to ensure that more materials used on construction and infrastructure are made in the U.S. Critics of the H-1B visa program won tougher rules governing when banks that are bailed out by the Troubled Assets Relief Program (TARP) can fill jobs with skilled immigrants.

The final language drew criticism from abroad, where editorials and government officials warned it could run afoul of trade agreements. But both provisions are less stringent than earlier versions had been, and neither is likely to have a radical effect on how stimulus spending takes shape.”

The fact is, of course, that the very governments complaining have been practicing more subtle forms of protectionist policies for years. Take Japan’s long-running currency manipulation that kept the yen weak against the dollar and artificially boosted Japanese automaker profits. How about China’s insistence on forcing automakers into partnering with its dozens of automakers. Let’s face it. The only reason these partnerships are needed is because the Chinese government mandates it. Ford, GM, BMW and VW to name a few could manufacture and sell vehicles in China without cutting in the Chinese automakers to the profits or serving as tutors on product engineering and manufacturing.

How many years did Italy and France have tax policies that favored their home country automakers before the field was leveled by the EU?

If these countries agree that when the U.S. sneezes, they all catch a cold, then there might have been more deft negotiations to have more measures in the bill that favored U.S. manufacturers and suppliers perhaps for only the next two years. There are also political realities in the U.S. they could have been more attentive to.

All that said…there is nothing keeping these same members of Congress trying to get protectionism measures into the bill from touting to their constituents the power of buying and thinking local in general without angering foreign trading partners and governments.

In Michigan, for example, our family and some of our friends have been going out of their way to shop at Michigan-based Plum Market instead of Whole Foods, Michigan-based Meijers instead of Walmart and Target; local toy stores and book stores instead of amazon.com and Toys R Us or online toy stores. Sire, Target and Walmart employ Michiganders. But by buying more local, the jobs and the profits stay in Michigan for reinvestment. Local businesses like toy and book stores don’t get near the tax breaks that chain stores get, so supporting those businesses actually helps the local tax base by keeping them in business.

If hard hit states like Michigan, California, Ohio, etc. made a sustained PR and advertising effort to encourage more peoeple to buy and think local, the impact can quickly mean billions of new dollars into the states. Given how hard hit newspapers are from loss of local ad revenue, something tells me that local newspapers would give such efforts plenty of ink.

Reader Comments

Tom

February 17, 2009 10:28 PM

The U.S. needs to return to protectionism, end the H-1B Visa Program, repeal the 1965 Hart-Celler Immigration Act, and go back to National Origins immigration policies. We have scumbag politicians who keep saying we can't have protectionism because if we do it will hurt our economy. Total lies. These are just pro-diversity nutjobs from both the Left Wing (NY Times Editorial Page) and Right Wing (Heritage Foundation).

Kim Berry - Programmers Guild

February 18, 2009 12:32 AM

I agree with your position.

Since the days of Ross Perot those of us who objected to the "free trade" agreements (that were really one-way "job and money flow from the rich country to the poor country") have been dismissed as "protectionists" who did not understand Ricardo, etc.

For the past 15 years the globalist free-traders have had their way - U.S. manufacturing moved the China, and services to India. A substantial chunk of our GDP also flowed there each year. Still the free-traders assured us that, under Ricardo's theory, this was a win-win for all countries.

Now it's time to ask - is the U.S. economy better off today than it was 15 years ago?

Ballbuster

February 18, 2009 4:23 AM


When Big Business export American jobs over sea to Europe and Asia, they call it necessary "Globalization." When the CEOs of the same Big Business collect multi-million dollars salary, they remind the working stiff the virtue of capitalism. But when Big Business fails, their CEOs conveniently blames "Credit Crisis." Ironically, while the right hands of Big Business are receiving largess from taxpayers to subsidize their incompetence, their left hands are laying-off hundreds of thousands of American taxpayers. Such gratitude. This time around , these greedy and dishonest CEOs, having caused America's economic collapse, can not blame Europe or the Asia for their demise. Nevertheless, undeterred, these CEOs tried to dazzle the media with new snazzy words like, “Liquidity” or “Volatility” but in the end gained little mileage. When all else fails, the season scoundrels will resort to Good-O-Standby, patriotism: Buy American. Buy Locally. Flag waving always have certain appeal for the simpletons who knows little about flow of capital and even less about history. For over a century, filthy rich corporate CEOs were the first to recite American style capitalism: Adam Smith's invisible hand, Keynes’ deficit spending, supply-side economic, trickle-down-theory, and of course, "Globalization." And the media ate-it-up and served it to the working stiffs. Today, despite the media's sleight of hand the working stiff knows the “Gig” is up. The lie is exposed. Even if there ever were a shallow form of capitalism in America, it has been officially repudiated with government programs that provided massive subsidies that essentially nationalized banks, insurance companies, industries, and other private business. America has become the new Soviet Republic of North America. In the former Soviet Union, at least its people were not deceived about socialized medicine; benefit of cradle-to-grave job security; corruption and favoritism in government. The founding fathers of this great nation are tortured even in their graves as the fourth branch of government has repeatedly failed its duty to inform the American people as to the abuse of the US Constitution. Instead of identifying the culprits who are eroding America’s liberty, the fourth estate has joined the other sycophants in Flag-Waving-Buy-American chant.

Ssejjoba Joseph

February 19, 2009 8:46 AM

Are We winding the clock to the past bcentury when some of the developed countries namely France and now The USA starty agitating for the protectionist policies.

The Developing Countries were also hoping to do benefit from the stimulus packages in form of exporting the resources to The USA and other coners of the world so that there reciproation of the services on offer.

The Business of buying and thinking local is un thinkable.This world has become a global Village so let all the world do benefit from these so called Financial packages.
No man is an island so let us think Global.

Regards;

Ssejjoba Joseph

cellblow

February 19, 2009 2:02 PM

See early on the cell phone mfrs made money by actually making the handsets all have different chargers. But now that the trend is smartphones for which you pay thru your nose, they can afford to make money on the phone and want the charger to be more convenient. Good thing that they are doing now.

However, other than the IPhone and Blackberry is there any phone where the advanced features are nothing more than eye candy. Maybe the Palm Pre that's it. All the cell operators are evil. They do not do things for the consumer till it hurts them.

Ask them to choose WiMAX over 3G crap and LTE crap they are promising.

Paulo

February 20, 2009 7:16 PM

After reading this article posted by David Kiley and the comments by some of the readers, it is not surprising that most people are oblivious to the real problem in the US Economy.

I am sure an explanation of my theory at this point will be useless, but let me say that it is human nature to blame the problems on somebody else.

The US and other capitalist countries have been promoting free trade agreements all over the world. Now that many smart countries have caught up with the process of globalization, the greed of US Executives and the stupidity of corporations have collided and collapsed the economy.

No expert world economics will agree that a bankrupt company should be 'rescued' by its government, and yet 'Uncle Sam' will try to save banks, automakers and God knows what else for a whopping 787 Billion!

And some people who comment on this article want to say it's all to be blamed on people who come with H-1B Visas, or Free-Trade Agreements.

My suggestions: Admit the wrong-doing by greedy Corporations, fix the abuse with proper laws, apply the law with severe enforcement, and work hard to be competitive in the globalized economy.

Techie

February 21, 2009 2:28 AM

Buy local end globalization. US does not deserve to have such high standards of living subsidized by foolish currency fixing chinese policies. Things should be as expensive for US citizens as for rest of the world. Stop trade. Let the americans work in their own fields and eat their own produce.

giorgio

February 21, 2009 5:49 AM

At last we are getting a single battery charge system for cellphones.
WHAT ABOUT A SINGLE, UNIFIED ND STANDARDIZED GLOBAL ELECTRICAL PLUG?
we need that badly

bruno

February 22, 2009 3:21 AM

I disagree with your comments... look just the dollar ratio with euro. It is about 10 year that 30% off between the two current gives as result benefit for the american manufacturers. I don't believe this difference is really due.

jim

February 25, 2009 5:49 PM

why is it that anytime someone mentions trade laws need to be fair your quickly labeled a protectionist? the mass exodus of american industries over the years wasn't from a lack of ingenunity, pride, and quality products, or high wages and benifits, but rather was from predatory trade practices,that were anything but fair. now this country is left trying to pay it's bills. wake up america.we can't enact laws that benefit a few at the cost of many. were on the road of becoming a third world nation right here! rich and poor

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