The House included a Buy American provision in its economic stimulus program that sounds great on paper. But is it?
The rider would require that only American iron and steel be used in infrastructure projects funded by the stimulus.
Promote American steel-making sounds great, right?
But, I can’t see how this passes World Trade Organization scrutiny. (That’s not to say I’m a fan of the WTO, just reporting the issues.)
Compound that with the fact that sovereign wealth funds from China and the Arab world, among other places, are getting antsy about the possibility of being asked to take a haircut on their investments in U.S. investment banks as part of a “bad bank” idea, and the “Buy American” provision looks like an even tougher international sell.
The European Union has already threatened countermeasures, in shades of the Great Depression after the 1930 Smoot-Hawley tariff.
A better set of ideas would be to go after Chinese steel dumping while giving bidding bonus points to using U.S. steel without requiring it.
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