To read 3 articles that deal with U.S. trade protectionism in the Obama Stimulus Package now before the U.S. Congress click here, click here, and click here.

The ‘Buy American’ provisions in the Stimulus Package require major public works projects to favor U.S. steel, iron and manufacturing over imports, leaving out manufactured goods.  It is suggested, in my view sensibly, that if these measure are passed a trade war could result.  So far, Canada, the European Union (the U.S.’s two largest trading partners), Brazil, Japan and India have all spoken out against trade protectionist measures.  Some commentators believe an American protectionist policy would cost the U.S. more jobs that would be gained.  For background, trade protectionism was introduced by the U.S. at the beginning of the Great Depression and lead to the worldwide retaliation – this in the early 1930’s long before the extent of economic globalization that now exists.

I live in Toronto.  From the time I learned of the U.S. bail-out of its Automotive Industry I have been concerned about U.S. protectionism and introduction of a formalized ‘Buy American’ policy.  The N.A. Auto Industry is a fully integrated industry essentially without borders.  Approximately 20% of all vehicles sold in the U.S. are assembled in Canada – a % highly disproportional to the Canada/U.S. 10:1 population demographic.  Loss of Ontario auto jobs related to auto assembly plant closures would be devastating to the Ontario economy, and even more so if auto parts production by ‘parts feeder companies’ not owned by the automakers also was affected.  This is but one example of the negative economic impact a formalized and active ‘Buy American’ policy could have on Canada.  A litany of similar issues would arise in the cases of U.S.’s other major trading partners.  I will follow this issue in subsequent posts.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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