Buried in the porky pig ‘stimulus’ plan is an expansion of the ‘Buy American Act’ to exclude foreign steel from any infrastructure project financed under the plan. I didn’t know that steel was used in condom manufacturing, but we’ll leave that for another discussion.
The geniuses in Congress passed the BAA in 1933 in a further attempt to protect American industry during a depression that they did so much to create. Apparently, the Smoot-Hawley Tariff didn’t do enough to damage the world economy, so they doubled down. And protectionism was one of the things that turned a recession into the Great Depression. Even the Russians understand that protectionism is a bad idea.
But not those lovable lugs in Congress. They’re stuck on stupid. And the Europeans are very upset about the BAA and may retaliate against U.S. companies doing business in the EU. They’re already talking about retaliating against European companies that use foreign labor. The situation is so dangerous and contagious that Caterpillar – which sells heavy construction equipment around the world – has spoken out against the BAA expansion:
Nations including China and many in Europe are preparing to spend billions of dollars of taxpayer money on stimulus projects. American companies are angling for a piece of those pies, and retaliatory measures against U.S. companies, executives argue, could significantly complicate those efforts. This week, a European Commission spokesman threatened countermeasures if the Buy American provisions are approved.
“There is no company that is going to benefit more from the stimulus package than Caterpillar, but I am telling you that by embracing Buy American you are undermining our ability to export U.S. produced products overseas,” said Bill Lane, government affairs director for Caterpillar in Washington. More than half of Caterpillar’s sales — including big-ticket items like construction cranes and land movers — are sold overseas.
“Any student of history will tell you that one of the most significant mistakes of the 1930s is when the U.S. embraced protectionism,” Lane said. “It had a cascading effect that ground world trade almost to a halt, and turned a one-year recession into the Great Depression.”
And Secretary of Income Tax Evasion Tim Geithner seems to be doing his best to ignite a trade-war with the Chinese. This week he accused the Chinese of ‘manipulating’ their currency – a word that old China hands will tell you was chosen to offend.
More change you can believe in.
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