Global Trends by Martin Khor
Monday 23 February 2009
A protectionist “poison” in US stimulus bill
A US$787 billion fiscal stimulus bill signed last week by President Barrack Obama has been attacked as having a “poisonous” protectionist section that only American-made goods can be used in government projects.
Last week, President Barrack Obama signed a US$787 billion “fiscal stimulus package” passed on to him by the United States Congress.
It was hailed in
But outside the
The protectionist clause especially affects developing countries, since most developed countries are to a large extent exempted from this buy-American condition.
The bill stipulates
that none of the funds appropriated may be used for public works projects
“unless all of the iron, steel and manufactured goods used in the project
are produced in the
It commented that “history and economics have told us, facing a global financial crisis, trade protectionism is not a solution, but a poison to the solution.”
On Monday, a spokesman
"Some countries raised clauses to prioritise the purchase of products of their own countries in their economic stimulus packages," said Yao Jian. "We express deep concern about these measures."
In contrast to the
World Bank President,
Robert Zoellick, attending a G7 finance Ministers’ meeting in
The response from
other developed countries was muted. When a draft of the bill containing
the Buy American clause was made known a few weeks ago, it led to protests
from political leaders in Europe and
Obama then promised that the bill would be amended to avoid protectionism. The final bill adds this line: “This section shall be applied in a manner consistent with US obligations under international agreements.”
This is taken to
mean that the buy-American principle would not be implemented if it
violates the obligations the
This is cold comfort to most developing countries because the WTO’s multilateral rules do not forbid a country from having buy-local measures in government projects.
The WTO does however have a plurilateral agreement on government procurement (GPA), under which members agree to open up their procurement business to other members of the agreement through a schedule listing the sectors offered and the extent offered.
There are currently
39 members in the GPA, most of which are developed countries. Only three
developing country members of the WTO –
Under the stimulus
It is also to keep
open its offers contained in the procurement chapter of the free trade
agreements it has signed. Only a few developing countries have signed
up to FTAs with the
The clause that the Buy American condition in the stimulus package will be applied in a manner consistent with US obligations under international agreements seems to have placated the other developed countries, since their companies’ market access in the GPA and FTAs will be maintained.
The bill also enables least developed countries to have access. However the LDCs generally lack the supply capacity to take advantage of this.
The larger developing countries, such as China, India or Brazil, that are more equipped to potentially benefit from the stimulus package are the ones that may be affected by the Buy American clause.
This may explain why the Xinhua opinion article described the protectionist measure as “poison”, especially since Chinese officials said the country did not have a buy-local clause in its own fiscal stimulus package.
The Xinhua commentary said that “There is no doubt that the re-emergence of trade protectionism will not only stimulate trade disputes, cause an impact on the international trade system, but also exacerbate poverty in the world and give rise to more tragedies…Trade protectionism will only deepen and prolong the crisis.”