Printer-friendly version

Date of publication: February 6, 2009

Source: Inside US Trade

By Brian Scheid

Despite changes the Senate made to the Buy American provisions of the stimulus package, major U.S. exporters late this week vowed they will work to strike these rules completely in the conference committee.

They are not satisfied with the Senate’s approval of an amendment co-sponsored by Finance Committee Chairman Max Baucus (D-MT) that stipulates that Buy American provisions in the stimulus will “be applied in a manner consistent with the United States obligations under international agreements.”

The amendment was aimed at assuaging fears that the provision may violate U.S. obligations under the World Trade Organization Government Procurement Agreement or other bilateral agreements.

According to Buy American opponents, the remaining Buy American provisions still pose an obstacle to the international trade cooperation that they say is necessary at this time of global economic crisis. They charge that the provisions run counter to the U.S. commitment to a G20 pledge in November to “refrain from raising new barriers” to trade in the face of the economic crisis.

But supporters of the Buy American provisions argue that the business efforts to kill these requirements are not fueled by the substance, but is an early effort to exert leverage over the trade policy of the Obama administration.

Getting the provisions stripped from the final bill in conference may be hard because the Senate by a strong vote of 65-31 rejected an amendment by Sen. John McCain (R-AZ) to strip all Buy American provisions from the bill. Nine Republicans voted against the McCain amendment on Feb. 4.

House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-MN) on Feb. 4 threatened to actively work against the stimulus bill if the “Buy America” language is removed.

“If it’s not in, I’m not supporting it and I’m bringing a lot of votes with me,” he said after a Feb. 4 session of the House Steel Caucus.

The Senate is expected to wrap up work on the stimulus bill no later than today (Feb. 6), and House and Senate leaders are expected to decide on Feb. 9 which conferees to appoint.

The conferees will likely include House and Senate leaders and members of the Senate Appropriations and Finance and House Appropriations and Ways and Means committees.

During a Feb. 3 press conference, House Majority Leader Steny Hoyer (D-MD) said the Buy American provisions debate would be worked out in the conference committee.

The Senate amendment cosponsored by Baucus with Sens. Byron Dorgan (D-ND), Sherrod Brown (D-OH) and Daniel Inouye (D-HI) was introduced after President Barack Obama publicly said he wanted to find a compromise so that the stimulus bill would not run afoul of U.S. obligations or send a signal that the U.S. was closing its market.

Specifically, the amendment strikes the definitions of the types of projects that would be covered by the “Buy American” provision. It replaces it with language stating that the Buy America provisions “shall be applied in a manner consistent with the United States obligations under international agreements.” The amendment passed by a voice vote on Feb. 4.

As originally written, the Buy American section of the Senate stimulus listed several types of projects that fall under the definition of “a public building or public work” project that would be required to use U.S.-produced iron, steel and manufactured goods.

It said these terms have the meaning they have under section 1 of the Buy American Act and include airports, bridges, canals, dams, dikes, pipelines, railroads, multiline mass transit systems, roads, tunnels, harbors, and piers.

Under the amended language, the projects that would fall under the “Buy American” provisions would simply be defined as “a public building or a public work” without being further defined.

The provisions in the Senate bill as originally written did not violate U.S. trade obligations since the projects outlined were carved out in the U.S. obligations in the WTO Government Procurement Agreement (GPA) and President Obama would also have authority to waive the Buy American provisions for countries that are signatories to the GPA or for other reasons that made them inconsistent with those obligations, sources said.

Proponents say the change means little since the “public building or public work” projects that would have been covered in the original language will still be covered in the final bill and those projects are already exempted from U.S. international obligations because of the exemptions that the U.S. took in the GPA.

The rhetoric over the “Buy American” provision exploded after the the House passed its $819 billion stimulus on Jan. 28 in a 244-188 vote that included a provision that would require the use of iron and steel in infrastructure projects in the package.

The Senate version of the stimulus goes further, requiring the use of iron, steel and manufacturing good in those infrastructure projects.

The first direct signal from a senior administration officials was the comments made by Vice President Joe Biden in a Jan. 29 interview with CNBC, where he refuted claims that the provisions were protectionist. He said he saw nothing wrong with including them since package was focused on generating U.S. jobs.

But within five days, Obama told ABC News that it would be “a mistake right now” to include provisions in the stimulus package “that are going to be a violation of World Trade Organization agreements and in other ways signal protectionism.”

On Feb. 4 White House Press Secretary Robert Gibbs clarified that Obama wants to make sure “that any legislation that passes is consistent with trade agreements and doesn’t signal a change in our overall stance on trade in these economic times.”

The “Buy American” measures were the most heated topic of discussion at the annual World Economic Forum meeting in Davos, Switzerland over the weekend, several sources said.

By early this week, ambassadors of Canada, the European Union and Australia were weighing into the debate with arguments that the provisions ran counter to the need to keep the U.S. market open at a time of economic crisis.

Canadian Ambassador Michael Wilson said in a Feb. 2 letter to Senate Majority Leader Harry Reid (D-NV) and Senate Minority Leader Mitch McConnell (R-KY) that the “negative precedent set here in the United States can have repercussions around the globe and could provoke debilitating beggar-thy-neighbour policies.”

In a Feb. 4 interview with BBC World, Australian Trade Minister Simon Crean said the “Buy American” provisions “invites” retaliation from trading partners.

“[W]hat’s the point of America saying ‘all steel has to be produced here’ if Korea then starts putting bans on U.S. autos, or U.S. beef?” Crean asked. “It’s that retaliation that will send the world into a downward spiral, it will worsen the global crisis that we’re already in.”

These arguments echoed those made by trade associations and corporations lobbying against the provisions letters sent to Congress and in a Feb. 4 letter to Obama signed by 125 companies and business groups.

In a Feb. 4 statement, Public Citizen called criticism from EU and Canadian officials over the “Buy American” provisions “hypocritical” since both Canada and the EU have excluded “broader swaths of their procurement activity” from their GPA commitments than the United States.

For example, Canada has excluded steel, motor vehicles, coal and all construction contracts issued by the Departments of Transport within their GPA commitments, according to Public Citizen.

On Feb. 3, Jack Layton, leader of the New Democratic Party, an opposition party in Canada’s parliament, argued on the floor of the House of Commons that Canada should include its own “Buy Canadian” provisions within the country’s economic stimulus package, according to Peter Julian, a parliament member and the international trade critic in the party’s shadow cabinet.

Such provisions would be legal under WTO and NAFTA obligations, Julian said, but Prime Minister Stephen Harper responded that such provisions could spark a trade war with the U.S.