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January 30, 2009

Whats wrong with Protectionism?

POLITICS - For several days now American and Canadian lawmakers and economists have been bickering back and forth about Barack Obama's stimulus package which calls for all the iron, steel, textiles and manufactured products to be used to be "Made in USA". The United States House of Representatives passed the $819 billion stimulus package Wednesday night that effectively bars foreign materials from infrastructure projects receiving the federal funds.

The idea is relatively simple. By buying only American goods to build American public works projects such as roads, bridges, museums, schools, hospitals, etc. it will boost the American economy dramatically.

So what is wrong with it?

Well, it tends to piss off Canadians, Mexicans and foreigners because it cuts them out of loop and is criticized as being "Protectionist".

Well, what is wrong with Protectionism? Will it hurt competitors in other countries? No, because this is a STIMULUS package. Its above and beyond the normal. The competing companies overseas will continue to do business-as-usual and will be unaffected. What it will do is boost local companies by providing jobs and opportunities to expand.

I am Canadian and I support Obama's idea. I think Canada should do the same thing with its $34 billion stimulus package. An American stimulus package using American steel/etc and a Canadian stimulus package using Canadian steel/etc.

China, India and the EU claim that Protectionist barriers will harm world trade... whoop dee do! Maybe we are trading too much already? Americans have been buying too much crap made in China and overseas and Canadians are equally guilty. There has to be a balance between competition and protectionism, otherwise the system will fall apart due to rapid unemployment like it recently did.

Technically its not even full Protectionism anyway. Foreign substitutes for American-made products will be allowed if the American content drove up the cost of a project by 25% – much higher than the 6% to 7.5% price advantage allowed under current NAFTA regulations.

So will this hurt the regular Canadian steel industry et al? No. Because this is above and beyond the norm. Anyone who tells you differently is really just fussing over nothing or they're asking for handouts.

See Also:
NAFTA II - Expanding the North American Free Trade Agreement
Can Canada's industrial base survive Asian Competition?
American Economy Lacks Manufacturing
Canada's Worker Shortages

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