Echoes of Smoot‐Hawley
President Barack Obama appears to have learned something compared to candidate Obama: protectionism isn’t to America’s advantage. Unfortunately, it is not clear that Congress has learned the same lesson. Three free trade agreements negotiated by the Bush administration remain in limbo, while no one is pushing to reinstate the president’s so‐called fast track negotiating authority.
And past protectionist actions are now bearing ill fruit. The “stimulus” bill required that construction money be spent in the U.S. Although the provision was amended in response to foreign criticism, some Canadian firms have been adversely affected. So Canadian cities have begun boycotting American products.
Reports Reuters:
Canadian municipal leaders threatened to retaliate against the “Buy America” movement in the United States on Saturday, warning trade restrictions will hurt both countries’ economies.
The Federation of Canadian Municipalities endorsed a controversial proposal to support communities that refuse to buy products from countries that put trade restrictions on products and services from Canada.
The measure is a response to a provision in the U.S. economic stimulus package passed by Congress in February that says public works projects should use iron, steel and other goods made in the United States.
The United States is Canada’s largest trading partner, and Canadians have complained the restrictions will bar their companies from billions of dollars in business that they have previously had access to.
“This U.S. protectionist policy is hurting Canadian firms, costing Canadian jobs and damaging Canadian efforts to grow our economy in the midst of a worldwide recession,” said Sherbrooke, Quebec, Mayor Jean Perrault, also president of the federation that represents cities and towns across Canada.
The municipal officials meeting at the federation’s convention in Whistler, British Columbia, endorsed the measure despite complaints by Canadian trade officials.
Trade Minister Stockwell Day told the group on Friday that Ottawa was actively negotiating with Washington to get the “Buy American” restrictions removed.
Thankfully, this bilateral spat isn’t likely to spark another Great Depression. However, it illustrates how protectionism is self‐defeating. Other countries will not stand by silently as American legislators attempt to bar their products from the American market. And U.S. workers will be the ultimate victims as the cycle of retaliation spreads.
