Buy America As Sound International Economic Policy

Corporate front groups are intensifying their campaign against provisions in the stimulus bill that would allow the president to target money to American companies and workers. Tellingly, their entire argument against Buy America provisions is based not on sound economic data, but on fantastical hypotheticals about a theoretical "trade war" that will supposedly erupt in the undefined future. As Third Way [1] claims in a typical screed emanating from Washington these days, "By restricting the use of foreign-made materials and goods, these provisions could precipitate retaliation from other countries."

Except, the New Republic's John Judis [2] correctly notes that probably won't happen, because the macroeconomic effect of Buy America provisions is not only to create jobs here at home and multiply the economic effect of the stimulus, but also to address our huge trade deficit that international institutions like the International Monetary Fund [3] (whose members include our key trading partners) say are destabilizing the global economy:

"This provision, if successful, might help the U.S. revive and even reduce its yawning trade deficit--which would have a favorable effect on the world economy that depends on a healthy American economy. Of course, countries are going to complain--and some already have--but it's likely that they recognize that the U.S. has to do something like this to ensure that its spending doesn't simply disappear in a flood of imports. If they still insist, then the U.S. can have a talk with these nations about how to end global trade imbalances that have been caused in good measure by Asian countries pursuing export-led growth."

Judis goes on to note that despite the hysteria over "protectionism" [4] and the repeated citation of the Smoot-Hawley tariffs of the Great Depression, those references are patently nonsensical, because Buy America provisions focus only on government procurement and have nothing to do with tariffs. That's a point reiterated by Public Citizen's Lori Wallach and Todd Tucker expand on over at the Huffington Post - check it out [5].