Less than two weeks into office, U.S. President Barack Obama faces a dilemma over protectionist provisions in a massive economic stimulus bill: backing the measures could set off a trade war; opposing them could trigger a backlash from his supporters, according to AP. The choice involves «buy American» provisions attached to White House-backed stimulus legislation moving through Congress. They would require major public works projects to favor U.S. steel, iron and manufactured goods over imports. Some Democratic lawmakers and interest groups allied to the president support the measures, but international allies and trading partners are already warning that favoring U.S. companies would breach U.S. trade commitments and could set off tit-for-tat countermeasures around the world. The two largest U.S. trading partners already have spoken out against the measures. On Thursday, Canadian Prime Minister Stephen Harper expressed concern and the European Union warned that it would not «stand idly by» if such measures were passed. On Friday, Brazil's president Luiz Inacio Lula da Silva also criticized the measures. Canada's International Trade Minister Stockwell Day voiced strong objections to the «buy American» provisions when he met with interim U.S. trade representative Peter Allgeier at the World Economic Forum in Davos, Switzerland, this weekend. But after the meeting, Day was hopeful that Canada will be exempted from the protectionist provisions in the stimulus bill moving through Congress. «Following the discussions I've had, and with the interventions we've made on a number of levels I'm cautiously optimistic that something can be worked out,» Day said in a conference call with reporters on Saturday. Day said the U.S. president has certain abilities to waive parts of the legislation if they go against the obligations of the North American Free Trade Agreement _ which links the U.S., Canada and Mexico _ and other international pacts aimed at liberalizing world trade. «They are looking for ways to handle our concerns,» Day said. «The administration is very aware. There seems to be a desire to do something to mitigate the effects of the legislation going through, if it does go through.» In November, world leaders, who gathered in Washington for the G-20 summit in November to consider how to right the global economy, pledged to avoid protectionism. But since taking office Jan. 20, Obama has said little on trade and has yet to nominate a trade representative. While campaigning, he argued that the Bush administration's strong support of free trade agreements should be moderated by including environmental and labor protections. «The jury is out on how this administration is going on trade policy,» said Steven Schrage, an international business analyst at the Center for Strategic and International Studies. «This will be a key test.» Asked about the protective provisions Friday, White House press secretary Robert Gibbs would say only that the administration is reviewing them. The provisions are likely to find support among Americans outraged that money from a stimulus package likely to top $800 billion could go to foreign competitors of US firms. «I believe that when taxpayer dollars are used, they should support the things produced here at home,» Democratic Sen. Byron Dorgan, author of one of the provisions, said in a statement. Many analysts say the measures reflect the interests of small sectors over the larger economy, which could suffer from reduced trade and higher steel prices. «The result, according to my calculations, is that the U.S. will lose more jobs than it will gain,» said Gary Hufbauer, an economist with the Peterson Institute for International Economics, a Washington think tank. «We are going to poison the wells of world commerce, if we do this.» The provisions are in a bill already approved by the House of Representatives and a different version under consideration in the Senate. The Senate version states that none of the funds from the stimulus may be used for a project «unless all of the iron, steel and manufactured goods used in the projects are produced in the United States.» The House version leaves out manufactured goods. Obama, who has argued that stimulus measures are urgent, is unlikely to block passage of any bill approved by the Congress. But he could press lawmakers to remove the protectionist measures before it is passed. «The problem is that Obama has not said anything yet,» said Dan Ikenson of the libertarian Cato Institute. Both versions of the bill include language that would allow the president to waive the protectionist measures, if he decides that would be in the economic interests of the United States. But passage of the measures could in itself unnerve trading partners and encourage other countries to take similar protective action. Day said the provisions in the stimulus bill are similar to the U.S. Smoot-Hawley Act of 1930, a tariff law which he said had exacerbated the Great Depression of the 1930s. «In a time of global downturn countries should not be lapsing backwards into protectionist activity. That only results in other countries then wanting to put up barriers and the last thing we need now is a retaliatory trade war,» Day said. Obama is scheduled to make his first foreign trip as president to Canada on Feb. 19. Day said it is a major issue for Canadian Prime Minister Stephen Harper. «If it's not resolved by the time the president arrives here, I just know how concerned our PM is on this,» Day said.
