Stimulus+Package+Buy+American

** 2/11/09 ** - Steel Industry lobbyists have persuaded House Democrats to require all iron and steel used in stimulus-funded projects be US made. It expands on a 76 year old federal law. - Also in bill: Uniforms and textiles for 100,000 Dept. of Homeland Security workers will be US made.. and the Senate is likely to expand this provision to include more. Other Buy America idea’s floating around DC: - A # of lawmakers are looking to get the $20 billion allocated for computerizing medical records are done exclusively through US tech firms - Some approve limiting stimulus related purchases to only countries that have signed the WTO’s agreement on gov. procurement (so basically using something that was originally set up to encourage non-discrimination purchases would be used to discriminate.) ** Arguments FOR: ** President Obama has promised to create up to 4 million jobs, and this is what the amendment is meant to fulfill. Currently, twenty thousand people a day are losing their jobs. The “Buy American” provision would not violate any trade laws, has appropriate safeguards, and the “protectionist” argument is bull. THE US has a nearly **$2 billion dollar a day deficit in trade.** It's absurd for somebody to suggest we're protectionist. A survey conducted by the American Iron and Steel Institute found that 86% of poll respondants favor using American iron and steel for stimulus funded transportation and infrastructure projects. Institute president Thomas Gibson: “This survey shows that the American’s support a common-sense approach to rebuilding the economu. American’s want to see American taxpayer funds supporting the stimulus package that will generate American jobs using high-quality, American-made products.” As reported by Center-Left news: As steel production goes — and it is now in collapse — so will go the national economy. As construction and manufacturing have wound down with slowing economy, so did the output of steel, plunging 50 % since September.  It has also gone through the painful makeover demanded of automakers, which forced steel mills to close, companies to consolidate, and hundreds of thousands lost their jobs and the survivors agreed to concessions.   Steel goes into nearly everything made in America: homes, office buildings, cars, appliances, light bulb sockets..  New spending should provide an immediate jolt that the steel business will need to survive – this is what the BUY AMERICA provision will ensure. If we do not use American Steel for most of our infrastructure projects, the entire industry will collapse. The “Buy American” provision would not violate any trade laws and would not start a trade war. The WTO does not regulate federal grant programs like those included in the bill. Sen. Byron Dorgan – D. North Dakota, creator of B.A. provision: “The “Buy American” provision is simple. If taxpayers’ money is going to be spent by the federal government to try to create jobs in the U.S., then those funds ought to be used wherever possible to buy things made in our country. That means when we build roads, bridges, dams and similar projects, the iron, steel and manufactured goods that go into those projects should be produced here in the U.S. if it is possible to do so. That will put people to work on construction sites as well as the factory floors.” Conclusion: Suggesting that we use economic recovery funds to buy American products is simply a strong dose of common sense. The Buy America provisions have appropriate safeguards to ensure stimulus spending is not wasted on expensive materials and the U.S. economy does not suffer long term consequences. -Both bills stipulate that if construction costs would rise by 25% or more due to purchase of American-made materials, contractors could receive a waiver to purchase foreign materials. - The bills also allow for a waiver if buying American is not in the best interest of the economy or the taxpayers (VERY BROAD) Dorgan: “I recognize that there are a variety of products that are not made in this country anymore, and there also may be instances where U.S. products are not sufficient — either in quantity, quality or price. So my provision allows for these common-sense exceptions by including a “public interest exemption.” But this is about creating jobs in our country when we desperately need them.” The protectionist proposition has been fostered by the editorial writers and a few multinational companies that don't necessarily have any interest in creating jobs here. The US Business and Industry Council’s president Kevin Kearns said: “A stimulus bill lacking strict “Buy American” provisions will only encourage more consumption of foreign goods with borrowed foreign money – which helped produce today’s economic crisis in the first place.”.. “Any attempts to remove the amendment by multinational, outsourcing special interests should be defeated.” Rep. Peter Visclosky, D-Ind., who introduced the House’s Buy America amendment said, “It’s not protectionist – there are no tariffs or barriers being created. Its’s about the **US steel industry running at or below 45% capacity**, and the objective is creating jobs.” ** Arguments AGAINST: ** Many are calling the provision “economic nationalism,” and economists everywhere say its gonna backfire. From the Economist: - At some moments in this crisis it has shown the way—but the “Buy American” provisions in the stimulus bill are alarmingly nationalistic. It would send a disastrous signal to the rest of the world that the champion of open markets is going it alone. - It would not even boost American employment in the short run, because—just as with Smoot-Hawley—the inevitable retaliation would destroy more jobs at exporting firms. - Political consequences would be far worse than the economic ones. Trade encourages specialization, which brings prosperity; global capital markets allocate money more efficiently than local ones; economic co-operation encourages confidence and enhances security. World trade may well shrink this year for the first time since 1982. Even if there were no policies to undermine it, globalization is suffering its biggest reversal in the modern era. policies designed to put something right at home can inadvertently eat away at the global system. As countries try to save themselves they endanger each other. [economist] Some items working their way into the economic stimulus package bear a suspicious likeness to "earmarks" -- the budgeting tactic that critics have scorned as wasteful and that President Obama said he wants to avoid. Earmarks typically target spending at a particular city or region, industry or contractor, often on the basis of political clout. Project (cost un-estimated) : || ** What it is: ** Requires that the Department of Homeland Security purchases uniforms for 100,000 employees from U.S. textile and apparel manufacturers. || ** Why it sounds like an earmark: ** Amendment from Rep. Larry Kissell, D-N.C., who worked for 27 years in the textile industry before being elected to Congress. || This is the exact kind of spending that is nice for one company or industry (steel or textiles) but has a negative, wasteful effect over all. Nearly a third of all steel purchased in the US comes from overseas, primarily for construction and cars. US steel mills only about 70% of domestic demand. The US will be using a whole lot of steel over the next few years. 100s of billions of dollars are going to be pumped into everything from new bridges to new energy systems. If we can buy SOME of our steel from the Chinese for 10% or 20% less, we should. Shopping at Whole Foods is awesome, but you don’t go there for your staples like your toilet paper because you want your money to stretch as far as it will go. Such naked protectionism may violate international trade rules. The European Commission has already said it might challenge such a move if it were signed into law, and that they would be watching very closely for international trade violations. The proposal flies directly in the face of the G-20 agreement reached in November, when world leaders decided not to raise new trade barriers in 2009. - Bush admin. Imposed several “safeguard” tariffs on certain steel products from various foreign countries in an attempt to prevent US steel mills from closing. - Foreign steel makers found other markets [China, Middle East countries], and when the US demand for steel increased again in 200, steel prices went up 48% in a year according to the Labor Department. The Smoot-Hayley protectionist ideology of the pre-Great Depression era exacerbated the situation. The act, which signed into law US tariffs on over 20,000 goods to record levels: - Caused American exports and imports to plunge by more than half; 66%, from US$44. Billion (1929) to US $1.5 billion. - Overall world trade declined by some 66% as well between 1929 and 1934 - Unemployment was at 7.8% when the Smoot-Hawley act passed in 1930, but jumped to 16.3% one year after, and was up to 25.1% by 1933. - Boycotts broke out and foreign govs moved to raise rates against American products. 34 formal protests were lodged with the Department of State from foreign countries. American exporters fear retaliation against their goods, both in places like China, at whom the steel provisions are aimed, and in rich countries, which are already slipping in their own similar reforms. - Both Caterpillar, GE have opposed the Buy American provision because they fear it will hurt their ability to win contracts abroad. (GE gets half its revenue from abroad.) Peter O’toole, spokesman for General Electric (GE, Fortune 500): “We believe it invites reciprocal restrictions on US exports.”. “When you take competition out, it drives prices up. We’re in a globalized world.” - If GE and Caterpillar are right, and China, India and other countries keep their large investments in building projects but adopt similar policies with their preferences for domestic producers, the US will be at a competitive disadvantage for those contracts. Coordinate: - The first principle is co-ordination—especially in rescue packages, like the one that helped the rich world’s banks last year. Countries’ stimulus plans should be built around common principles. - combined plans are also more economically potent than national ones Tolernace: - Each nation’s stimulus plan should embrace open markets, even if some foreigners will benefit. - financial regulators should leave the re-regulation of cross-border banking until later, at an international level, rather than drawing up rules with long-term consequences now. Multilateralism: - The IMF and the development banks should help to meet emerging markets’ shortfall in capital. They need the structure and the resources to do so. - The World Trade Organisation can help to shore up the trading system if its members pledge to complete the Doha round of trade talks and make good on their promise at last year’s G20 meeting to not create any new trade sanctions.
 * Stimulus Package "Buy American" **
 * Recent Context [economist]: **
 * It’s What American’s want **
 * We Need to ensure the Steel Companies survive **
 * Does not Violate Trade Laws **
 * Safeguards to Protect Taxpayers, Growth **
 * Not Protectionist, and the Steel Industry is Running Less than Capacity Anyways! **
 * Trade is GOOD **
 * Sounds like earmarks! **
 * The “uniforms”
 * We don’t produce enough + its expensive! **
 * Drawing Opposition Global Scale, + Breaking own promises **
 * Previous efforts in recent history: **
 * Other historical examples: **
 * Plus, our own companies in US are objecting: **
 * Alternative ways in which we could act to save our economy (from the Economist) **