Congress approved protectionist measures in a $789 billion stimulus bill Friday that U.S. trading partners have warned could spark a trade war.
The bill, however, left the Obama administration some room to maneuver to appease other countries who say it will benefit U.S. companies unfairly.
The stimulus bill was approved by the House Friday afternoon and by the Senate later in the evening. It now goes to President Barack Obama who is expected to sign into law quickly.
Major partners, including the European Union and Canada, say the legislation favoring U.S. steel, iron and manufactured goods for government projects could undermine pledges by the leaders of major economies not to resort to perfectionism during the world economic downturn.
Requirements known as “Buy American” were softened as the bill progressed through Congress and after strong criticism from abroad. Senate and House negotiators agreed to a version that would require the government not to violate trade agreements when implementing the law.
The bill also allows the Obama administration and state governments to waive requirements to favor U.S. companies if they deem it in the U.S. public interest and if they publish a justification.
The dispute has put Obama in a difficult position. While campaigning last year, he raised questions whether U.S. trade agreements contained sufficient protection for labor and environmental standards. He has warned recently, however, about antagonizing trading partners and has made clear that passage of the overall stimulus bill is needed urgently to mend the U.S. economy.
In several television interviews last week, he said the stimulus package should not include protectionist language that could trigger a trade war. But now that it does, he is likely to sign it anyway. The measures appear, however, to give the administration discretion about how to implement spending decisions, given the requirement of meeting trade obligations.
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President Obama visited the Caterpillar factory in East Peoria, Illinois this last week.
Caterpillar says it pays $100,000 in tariffs on each piece of heavy equipment it exports to Columbia, because the U.S. Congresss has failed to pass the free trade agreement….
Now with this “buy American” provision in the stimulus it is likely the U.S. will find trouble with other trading partners…
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President Hu Jintao of China (AFP/File/Louisa Gouliamaki)