Smoot-Hawley Fiasco Averted.
Bruce wrote earlier that the stimulus bill, in it’s current form, invites a Trade War with the rest of the world. Naturally, the protectionist elements of the bill had many of our trading partners both worried and miffed.
The EU, for example, has been struggling with the issue over there, and began tossing off warnings of a trade war. The EU Ambassador to the united States, John Bruton, expressed those warnings frankly.
The EU warnings came in letters to US political leaders in Congress, Timothy Geithner, the Treasury Secretary, and Hillary Clinton, the Secretary of State. Mr Bruton urged them to respect the decision taken by the G20, the world’s leading economic nations, in Washington last November to resist protectionism as a defence against the crisis. They are expected to meet again in London in April.
“Failing this risks entering into a spiral of protectionist measures around the globe that can only hurt our economies further,” he wrote.
“Open markets remain the essential precondition for a rapid recovery from the crisis, and history has shown us where measures taken contrary to this principle can lead us.”
Back in Europe proper, the language was bit less guarded and diplomatic.
The European Commission’s powerful trade department, a bastion of open markets formerly headed by Lord Mandelson, said yesterday that the “Buy American” clause was “the worst possible signal” that could be sent to world trade.
A spokesman said: “We are particularly concerned about the signal that these measures could send to the world at a time when all countries are facing difficulties. Where America leads, many others tend to follow.”
In responding to those concerns, Pres. obama seems to have backed down a bit.
Last night Mr Obama gave a strong signal that he would remove the most provocative passages from the Bill.
“I agree that we can’t send a protectionist message,” he said in an interview with Fox TV. “I want to see what kind of language we can work on this issue. I think it would be a mistake, though, at a time when worldwide trade is declining, for us to start sending a message that somehow we’re just looking after ourselves and not concerned with world trade.”
Congratulations to Pres. Obama for realizing the toxic effect that outright protectionism would have on world trade, and economic recovery.