Ordered by Congress to "buy American" when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.
Outrage spread in Canada, with the Toronto Star last week bemoaning "a plague of protectionist measures in the U.S." and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts — the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.
This is not your father’s trade war, a tit-for-tat over champagne or cheese. With countries worldwide desperately trying to keep and create jobs in the midst of a global recession, the spat between the United States and its normally friendly northern neighbor underscores what is emerging as the biggest threat to open commerce during the economic crisis.
Rather than merely raising taxes on imported goods — acts that are subject to international treaties — nations including the United States are finding creative ways to engage in protectionism through domestic policy decisions that are largely not governed by international law. Unlike a classic trade war, there is little chance of containment through, for example, arbitration at the World Trade Organization in Geneva. Additionally, such moves are more likely to have unintended consequences or even backfire on the stated desire to create domestic jobs.
This is a disaster in the making. The passage of the protectionist Smoot-Hawley tariffs under Herbert Hoover took the severe recession of 1929 and turned it into a full-blown global depression by choking off international trade. The last thing you want to do in a recession is put barriers in the way of people making money, which is just what Smoot-Hawley did – and now the Democrats and the President want to repeat the Republicans’ mistake? The last three decades have seen a massive expansion of globalized, interlocked capitalism, in which jobs in Ohio might be dependent on sales in India of products made with parts from Canada. Obama’s boneheaded move takes a giant ax to that structure and threatens to chop it to pieces — along with any hope of real recovery, which depends on trade.
I just don’t get it. You would think a Columbia and Harvard-educated lawyer, whose campaign and supporters told us time and again that we should vote for him for his thoughtfulness and superior judgment, would remember what he should have learned in basic economics: trade generates wealth. But then this is another example of Barack Obama’s disturbing ignorance of History, not just Economics.
I can’t believe he’s this stupid; no one gets to the Presidency who’s that dumb (no matter what ever so tolerant liberals say about conservatives). Is it just the naive arrogance of one who assumes he (and we) will suffer no consequences for his actions, as Dan Riehl suspects? Or is it, as Jim Geraghty argues, all about the taking, expanding, and retention of power?
You tell me.
(hat tip: Tigerhawk)
RELATED: Instapundit gives a graphic example of how Obama preaches one thing and then does exactly the opposite. Maybe he thinks we’re the stupid ones?