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article imageObama Stimulus Package Violates NAFTA

By Carolyn E. Price     Jan 30, 2009 in Politics
In what many are calling a clear violation of the North American Free Trade Act, a clause in President Barack Obama's stimulus package was added, that bans foreign iron and steel from being used in funded infrastructure projects.
One of the measures in President Barack Obama's stimulus package includes the controversial "Buy American" clause that would require all iron and steel used in infrastructure projects funded by the over $800 billion in stimulus monies be "Made in America".
Stockwell Day, who is the Trade Minister in Stephen Harper's Conservative Government, says that it looks as though the "Buy American" clause violates the North American Free Trade Agreement (NAFTA) as well as the WTO's free-trade principles. Day did not say whether Canada would file a formal complaint.
On the whole, the inclusion of this clause in the Obama stimulus package should be worrying to Canadians. It could be seen as a clear signal that America is moving towards protectionist measures and leaves many wondering how long will it be before the decimated Detroit Big Three car makers or the aerospace industry.begin demanding similar support and protection.
Understandably, the American Steel Industry lobbied hard for this clause to be added to the stimulus package. As reported in the New York Times in early January, the steel industry lobbied the Obama transition team to have the clause inserted into the bill. The chief executive of Nucor Corporation, Daniel R. DiMicco, said at the time:
What we are asking is that our government deal with the worst economic slowdown in our lifetime through a recovery program that has in every provision a ‘buy America’ clause.
However, not all industry groups are in favor of protectionist measures and a coalition of major exporters, including Boeing, Caterpillar and General Electric are concerned about a major free trade war breaking out and possible retaliation by foreign governments over the issue. In fact, the US Chamber of Commerce, the National Foreign Trade Council and the Aerospace Industries’ Association all joined together last week and wrote a letter to Speaker of the House, Democrat Nancy Pelosi, expressing their concerns:
If the United States further restricts access to our market [that is overseas consumers], these other countries will certainly follow our lead, shutting US exporters and their workers out of hundreds of billions of dollars of new business, while propping up their own national champions, to the detriment of the United States.
One issue we urge you to bear in mind as you prepare this legislation is the vitally important role that international markets play in sustaining US jobs and the role they will play in economic recovery. Without sales abroad and access to inputs, many US workers would be out of a job.
Canada exports 7 billion dollars worth of steel annually and about 40 percent of the steel made in Canada is sold in the United States. We can be sure that this issue will be high on the "to be discussed" list during President Obama's first visit to a foreign country on February 19th, when he visits Prime Minister Stephen Harper in Ottawa.
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