A watered-down “Buy America” provision will be part of the U.S. stimulus package. Yesterday, on Meet The Press, senior White House adviser David Axelrod took pains to note that the provision respects U.S. treaty obligations.
The text backs up Axelrod’s assertion. Practically speaking, then, the “Buy America” provision will not have much of an effect on how the stimulus money gets spent. Because it would be more or less impossible to enforce favoritism for domestic suppliers without violating treaty obligations.
Nevertheless, Chinese authorities are not pleased. As a Xinhua news agency editorial put it, “[F]acing a global financial crisis, trade protectionism is not a solution, but a poison to the solution.”
So we’ve got measures that don’t provide any protection for American companies — but that are raising fears that America is turning protectionist. In other words, protectionism without the protection.
One of my colleagues characterized this as the worst of all worlds, but I wouldn’t go that far. Real protectionism would be worse, and I suspect Chinese authorities are firing a rhetorical shot across the U.S. bow, to ensure that the U.S. understands there will be consuequences if we go any further down the protectionist path.