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Protectionism or "Think Local" in the Stimulus Package


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.


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