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Posts Tagged ‘trade’

Last week’s furore over the controversial ‘Buy America’ clause included in the American Recovery and Reinvestment Act of 2009 — passed by the US House of Representatives on January 28 — ended the week with the White House promising to review the protectionist proposal.
This latest move, which came after outcry from industry bodies and governments across the globe, is likely to be unpopular among US steelmakers, many of which came out in support of the proposal during the week.
“We need to put Americans back to work,” Nucor ceo Dan DiMicco said at a Congressional Steel Caucus hearing last week.
“The best way to do that is with a strong stimulus package that focuses on rebuilding our nation’s infrastructure, including our roads, our bridges, our schools and our buildings, as well as our energy infrastructure, both conventional and alternative.”
“The ’Buy America’ laws are consistent, I repeat consistent, with our international obligations,” he added.
“They have not and will not start a trade war.”
Chairman of the Congressional Steel Caucus Representative Peter Visclosky, a champion of stronger provisions, agreed.
Bottom line
“The bottom line is that requiring American steel to be used in economic stimulus projects is a surefire way to quickly create American jobs, and the American taxpayers deserve to know that their hard-earned tax dollars are being used to revitalise the American economy and help Americans who want to work,” he said.
But others elsewhere were not so sure, and a number of foreign government bodies, including the European Commission, welcomed President Obama’s new tack on the proposed trade legislation, particularly when the US premier took a softer tone in an interview with Fox News.
“I’m encouraged by the words of President Obama,” European trade commissioner Baroness Ashton told MB. “He realises, like we do in Europe, that we need to trade our way out of the current economic difficulties. Trade is part of the solution as it acts as a stimulus.”
But the ’Buy America’ clause has ruffled feathers in more than one nation outside Europe, and Obama and his administration will have to tread carefully if they wish not to trigger further ire in these quarters.
“It’s trade protectionism, which is against the common practice of the World Trade Organisation, but then, so far, it has been more propaganda than reality, so it is still too early to make any formal protest,” said an official at China Iron & Steel Assn (Cisa).
“In a global economy, the market should be the decision- maker, not the government. Even China, a 500 million tpy steelmaker, has to import some products every year, how can the US be different?,” he continued. “The US triggered the financial crisis and global economic recession, which has hit Europe harder. All countries are making an effort to help each other out, and [if the US passes 'Buy America' provisions] it will turn all the other countries against the US,” he said.
And Serdar Kocturk, president of the Turkish Steel Exporters’ Assn, was similarly unimpressed.
“The law favours American producers in government tenders. In this act there are some countries called ‘designated countries’ which are treated like local suppliers. If there is a public interest, if the product is not available and if the cost is unreasonable, some products may be excluded with prior approval,” he told MB.
Trade barriers
“In the past, prices up to 6% higher were acceptable for local suppliers. I think that such protective laws are against free trade practices and it’s not fair. However, we are going through tough times and most nations are not respecting free trade rules — they’re applying trade barriers and tariff barriers,” he added.

The IMF has warned the US against pursuing protectionist policies such as a ”buy American” clause inserted into the US stimulus-package legislation, saying such approaches don’t work and would be harmful to the recovery.
Speaking at a briefing on the outlook for Asia, the IMF’s chief-executive, Dominique Strauss-Kahn, said that in crises, the idea of finding a domestic solution was always tempting.
“The problem is with globalisation, even more than previously, it won’t work. The idea is understandable, but really, no one can believe there is a solution in that direction, and we have to explain and explain again that beggar-thy-neighbour policies do not work,” he said.
The Obama Administration faces its first real test on free trade when it confronts moves by both the Senate and the House to insert “buy American” provisions in the stimulus bill.
Virtually every major trading partner of the US — including the EU, Australia, Canada, Japan and China — has warned that such a move could trigger a trade war and would be a breach of international obligations.
Mr Strauss-Kahn also said the idea that Asia had been decoupled from the rest of the world economy had clearly been demonstrated to be false and that it had held up only because of a delay in the way the downturn affected the region.
The IMF is now forecasting 6.8 per cent growth for China in 2009, down from 9 per cent forecast in November. Developing Asia is expected to growth by 5.5 per cent. But Mr Strauss-Kahn stressed there was “a lot of downside risk”.
He said a driver for recovery in Asia would be an upturn in demand in the US and Europe, which are expected to recover somewhat in late 2009 or early 2010. Asia could be expected to recover in 2010, he said.
Mr Strauss-Kahn stressed that there had been early measures by Asian nations to implement countercyclical responses that should help speed Asia’s recovery.