Well - the House of Representatives insistence that only American made iron and steel be used in any project funded by Obama's stimulus package - which was a clause added to the version of the bill the house passed - has the world watching with great concern.
Most international experts say that if that requirement goes through that the US would be in a violation of a whack of international trade laws. Now I know Americans are used to ignoring international laws under their previous administration, I'm sure the world did not expect more law breaking to be among the first acts of the 'new' US government.
And as much as protectionism is an easy sell to the home market - almost any expert will tell you that the LAST thing the world needs as it tries to recover from this economic mess is more trade barriers or tit for tat trade wars which actions like this will surely result in.
Obama may face an unexpected chill when he visits Ottawa in just over two weeks, and it won't be just a chill from what will undoubtedly be the frigid mid-winter temperatures in Ottawa, if the final version of the bill that he signs still has that clause in it. That potential disaster as a first international act was the talk of trade meetings in Davos over the last few days. It will be interesting to watch how Obama deals with this.
FYI - US companies exported more steel and iron to Canada than what we sent south over the last couple of years and of course that flow of steel and iron north may be cut-off in retaliation. And in fact there are already rumbles about cutting off some of the oil supply heading south in retaliation - as we are your largest provider of energy by far. Of course neither of those moves would be good for you or us - but it is the road the world followed in the 1930's which caused the recovery then to be slower and more painful than it needed to be.
So here's hoping Obama puts the screws to this first blatantly protectionist act of the new Congress. Much of the world will be watching with great interest.
Full Version: Obama's 'Buy American' Problem
There seems to be some arguement among economists about how much the trade deficit matters in comparison to other economic indicators. Personally I think it is critical to the national health.
How it is measured apparently varies somewhat, but generally the trend is that it is growing and accelerating.
Here is an article co-written by Warren Buffet in 2003 in which, along with some speculation that he admits may be wrong, that:
A graph from this blog which references the "U.S Census Bureau - Foreign Trade Statistics" through 2004, though it the graph is only compiled from information on the site) suggests the "flip" happened around 1972 (my estimate) placing it squarely during the Nixon era, for what it's worth.
That more or less agrees with the chart from this 2006 New York Times article which I find to be the most dramatic.
To assume that we can no longer work enough to support ourselves is, in my opinion, total malarkey. The question we must ask is "Where is the wealth we are producing going?"
And perhaps a corollary question: "Is international trade really "free trade" when we are the only ones who even claim to be practicing it?"
How it is measured apparently varies somewhat, but generally the trend is that it is growing and accelerating.
Here is an article co-written by Warren Buffet in 2003 in which, along with some speculation that he admits may be wrong, that:
QUOTE
after World War II and up until the early 1970s we operated in the industrious Thriftville style, regularly selling more abroad than we purchased. We concurrently invested our surplus abroad, with the result that our net investment--that is, our holdings of foreign assets less foreign holdings of U.S. assets--increased (under methodology, since revised, that the government was then using) from $37 billion in 1950 to $68 billion in 1970. In those days, to sum up, our country's "net worth," viewed in totality, consisted of all the wealth within our borders plus a modest portion of the wealth in the rest of the world.
Additionally, because the U.S. was in a net ownership position with respect to the rest of the world, we realized net investment income that, piled on top of our trade surplus, became a second source of investable funds. Our fiscal situation was thus similar to that of an individual who was both saving some of his salary and reinvesting the dividends from his existing nest egg.
In the late 1970s the trade situation reversed, producing deficits that initially ran about 1% of GDP. That was hardly serious, particularly because net investment income remained positive. Indeed, with the power of compound interest working for us, our net ownership balance hit its high in 1980 at $360 billion.
Since then, however, it's been all downhill, with the pace of decline rapidly accelerating in the past five years. Our annual trade deficit now exceeds 4% of GDP. Equally ominous, the rest of the world owns a staggering $2.5 trillion more of the U.S. than we own of other countries. Some of this $2.5 trillion is invested in claim checks--U.S. bonds, both governmental and private--and some in such assets as property and equity securities.
which places the "flip" sometime near the end of Carter's presidency and the beginning of Reagan's, making the deficit a bi-partisan effort if you will.Additionally, because the U.S. was in a net ownership position with respect to the rest of the world, we realized net investment income that, piled on top of our trade surplus, became a second source of investable funds. Our fiscal situation was thus similar to that of an individual who was both saving some of his salary and reinvesting the dividends from his existing nest egg.
In the late 1970s the trade situation reversed, producing deficits that initially ran about 1% of GDP. That was hardly serious, particularly because net investment income remained positive. Indeed, with the power of compound interest working for us, our net ownership balance hit its high in 1980 at $360 billion.
Since then, however, it's been all downhill, with the pace of decline rapidly accelerating in the past five years. Our annual trade deficit now exceeds 4% of GDP. Equally ominous, the rest of the world owns a staggering $2.5 trillion more of the U.S. than we own of other countries. Some of this $2.5 trillion is invested in claim checks--U.S. bonds, both governmental and private--and some in such assets as property and equity securities.
A graph from this blog which references the "U.S Census Bureau - Foreign Trade Statistics" through 2004, though it the graph is only compiled from information on the site) suggests the "flip" happened around 1972 (my estimate) placing it squarely during the Nixon era, for what it's worth.
That more or less agrees with the chart from this 2006 New York Times article which I find to be the most dramatic.
To assume that we can no longer work enough to support ourselves is, in my opinion, total malarkey. The question we must ask is "Where is the wealth we are producing going?"
And perhaps a corollary question: "Is international trade really "free trade" when we are the only ones who even claim to be practicing it?"
Encouraging words from Obama in a couple of the interviews he did yesterday indicating that there should not be protectionist provisions tacked on to his stimulus bill. This from the Toronto Star.
****
OTTAWA–U.S. President Barack Obama has signalled a possible truce in a looming trade war with Canada and other nations, warning that Washington's economic stimulus package must not contain protectionist language.
"I agree that we can't send a protectionist message," Obama told Fox News yesterday.
"I want to see what kind of language ... we can work on this issue. I think it would be a mistake, though, at a time when worldwide trade is declining, for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade," he said.
In interview with ABC, the president said "we need to make sure that any provisions that are in there are not going to trigger a trade war."
****
The full story and reaction up here...
http://www.thestar.com/News/Canada/article/582002
****
OTTAWA–U.S. President Barack Obama has signalled a possible truce in a looming trade war with Canada and other nations, warning that Washington's economic stimulus package must not contain protectionist language.
"I agree that we can't send a protectionist message," Obama told Fox News yesterday.
"I want to see what kind of language ... we can work on this issue. I think it would be a mistake, though, at a time when worldwide trade is declining, for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade," he said.
In interview with ABC, the president said "we need to make sure that any provisions that are in there are not going to trigger a trade war."
****
The full story and reaction up here...
http://www.thestar.com/News/Canada/article/582002
To build America we may need to buy American, unless we have legal control of the quality of foreign goods.
QUOTE(Travelpat @ Feb 4 2009, 01:00 PM) 
Encouraging words from Obama in a couple of the interviews he did yesterday indicating that there should not be protectionist provisions tacked on to his stimulus bill. This from the Toronto Star.
****
Darn Canadians are such trouble makers! Leave Barack alone!
QUOTE(just eddie @ Feb 4 2009, 05:05 PM)
Darn Canadians are such trouble makers! Leave Barack alone!
Oh we like Barack, we just want him to play fair & remember where the oil and gas etc come from because there are others who would like to buy the stuff at a bigger price than Nafta gives our southern neighbours.
QUOTE(swiminbuff @ Feb 4 2009, 06:42 PM)
Oh we like Barack, we just want him to play fair & remember where the oil and gas etc come from because there are others who would like to buy the stuff at a bigger price than Nafta gives our southern neighbours.
I think my Canadian roots entitle me to a share of those profits!
Personally I think we should nationalize the insurance industry - including health insurance - then set standards for risk assessment to make it reflect actuarial realities, where currently possible, and set flexible rates that are closely regulated by government (us taxpayers) where not currently possible; since we now see that government will be the insurer of last resort in any case.
The non-healthcare insurance industry could be resold with the new regulatory istruments in place and private health insurance could be allowed to "compete" with the minimal standards set by an ongoing national insurance.
Banks should be nationalized, as they were in Sweden, and sold off as they aree stabilized or shown by a review to already be stable. Simply buying "bad banks" would not share the risk over all of society (as it should be) and risks missing banks that only appear to be healthy because they were never reviewed.
And why can't energy efficiency depend more on international regulation than shifting the deck chairs on the Titanic by selling the right to pollute around the world? It is a cumbersome system that seems un-enforceable and counter-productive. Regulating how energy is produced couldn't be any more complicated or enforceable. Right now "sovereignty" is a means for shielding corrupt economies from open review.
Ultimately it should not matter whether we buy "American", but how sustainably and ecologically we produce.
The non-healthcare insurance industry could be resold with the new regulatory istruments in place and private health insurance could be allowed to "compete" with the minimal standards set by an ongoing national insurance.
Banks should be nationalized, as they were in Sweden, and sold off as they aree stabilized or shown by a review to already be stable. Simply buying "bad banks" would not share the risk over all of society (as it should be) and risks missing banks that only appear to be healthy because they were never reviewed.
And why can't energy efficiency depend more on international regulation than shifting the deck chairs on the Titanic by selling the right to pollute around the world? It is a cumbersome system that seems un-enforceable and counter-productive. Regulating how energy is produced couldn't be any more complicated or enforceable. Right now "sovereignty" is a means for shielding corrupt economies from open review.
Ultimately it should not matter whether we buy "American", but how sustainably and ecologically we produce.
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