Cat cautions against “Buy American”

If you still need any proof that the stimulus bill being debated now in congress is rash and ill-considered take a look at what some are saying about the “Buy American” provision in the bill. Caterpillar spokesman Jim Dugan cautions that such provisions could ignite an international trade war that would be detrimental to every industrial economy. This is not mere speculation. Many economists blame the Smoot-Hawley Tariff Act of 1930, which imposed heavy tariffs on imported goods, for turning the 1929 stock market crash into the Great Depression.  Smoot-Hawley, resulted in a 66 percent reduction in world trade.

Additionally, one might ask members of congress what they mean when say “Buy American,” given that  Honda, Hyundai and Mercedes Benz cars are made in Alabama, Volkswagen is building a plant in Tennessee, Toyota trucks roll off an assembly line in San Antonio and Sany (a Chinese equipment manufacturer) is setting up factories in Georgia…not to mention that Caterpillar, Cummins, Deere, Wirtgen, Volvo Construction Equipment, etc., etc., are thoroughly intenational. When Smoot-Hawley was enacted there were no trans-national corporations and if today’s congress gets it’s Mini-Me version of Smoot-Hawley II passed it could have drastically worse consequences. We doubt congress is ignorant of this history or these international relationships and can only assume they’re throwing these provisions into the bill to curry favor with the unions and other special interest groups. Short term gain for them. Long term pain for everyone else.

The senate is said to have softened the Buy American provisions somewhat. And President Obama has even asked that the provision be stricken from the bill–encouraging developments but also indicative that the whole stimulus bill is a hastily-concocted, politically-motived mess loaded with unknowns and legislative landmines that will continue to blow up in our faces for years to come.