Obama to Canada: Sorry
On Thursday, two days after triumphantly signing an economic stimulus measure that he had fought for nearly since taking office, President Obama will go to Ottawa to apologize for it.
As is traditional for U.S. presidents, Obama will make his first official foreign trip to Canada, this country’s biggest trading partner. There, he will quickly learn that the protectionist sentiments so popular with Democrats on this side of the border don’t play at all well to the north. Canadians -- as well as Chinese, Europeans and others -- are deeply worried about the “Buy American” provision in the stimulus legislation.
The final version signed Tuesday states that only U.S. steel and other materials will be used in the public works projects funded under the $787-billion measure, unless doing so would violate existing trade agreements. In practice, this is largely symbolic -- foreign materials were already discouraged in such infrastructure projects under existing laws -- but the message it sends to our trading partners is disastrous. It says, in a nutshell, “We’re not going to buy your products, but we expect you to keep buying ours.”
There’s a reason why few historians or economists are protectionists. In the wake of the Depression, Congress raised tariffs to protect U.S. farms and factories, and other countries responded by hiking their own tariffs. Global trade plummeted as a result, and the effects of the Depression grew dramatically worse. Similarly, the Buy American provision of the stimulus measure might add a handful of jobs in the U.S. steel industry, but if other countries retaliate by targeting U.S. exports, the gains will be more than wiped out by other domestic job losses.
To his credit, Obama seems to understand this. Last weekend at the Group of 7 summit in Rome, Treasury Secretary Timothy F. Geithner went out of his way to assure restive finance ministers that Washington remains committed to free trade. Obama himself spoke out against the Buy American provision earlier this month. But he also doesn’t shy away from pandering to the Democratic Party’s anti-trade wing, going so far as saying during the presidential campaign that the North American Free Trade Agreement should be renegotiated (a political maneuver that was undercut when Obama’s economic advisors privately told Canadian officials that the candidate didn’t really mean it).
On Thursday, Obama will probably have to waste time reassuring Prime Minister Stephen Harper that Buy American doesn’t mean “Don’t Buy Canadian.” Instead, he should be explaining to members of his party that protectionism not only won’t save jobs, it will make an already bad situation far worse.
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