It's a bit rich for the European Union to express outrage at American protectionism, but the bureaucrats of Brussels are nevertheless right about the absurd "Buy American" provision in the "stimulus" bill. From the FT:
EU officials have expressed concern that the requirement for companies to use US steel and manufacturing products in projects funded by the bill could encourage a wave of protectionist measures from other countries.
The European Commission says it will examine any legislation to determine whether it violates a World Trade Organisation treaty signed by the US, EU and Japan. Signatories of the Government Procurement Agreement must open government contracts to foreign companies.
"If the provisions finally passed by the Senate and approved by President Obama infringe the provisions of the GPA, to which the US is a signatory, this is something we will have to consider taking them to the [WTO] over," said Peter Power, EU trade spokesman.
Mr Power indicated that the EU was hoping to make its position clear to Washington before a bill was approved.
In Sunday's New York Times, economist Douglas Irwin, author of the terrific book Free Trade Under Fire, warns the "buy American" crowd that if we are forced to pay inflated prices for American steel, for instance, the stimulus package will produce the unintended (but easily foreseen) consequence of hurting American companies doing business abroad:
American manufacturers have ample capacity to fill the new orders that will come as a result of the fiscal stimulus. In addition, other countries are watching closely to see if the crisis becomes a general excuse for the United States to block imports and favor domestic firms. General Electric and Caterpillar have opposed the Buy American provision because they fear it will hurt their ability to win contracts abroad.
They're right to be concerned. Once we get through the current economic mess, China, India and other countries are likely to continue their large investments in building projects. If such countries also adopt our preferences for domestic producers, then America will be at a competitive disadvantage in bidding for those contracts.