Business | Economy
Americans seek a local fix
During the long boom in the US economy from the 1990s, it became common to argue that the era of widespread American protectionism was over. The political clout of trade-sceptical lobbies including textiles and steel had shrunk; industries such as carmaking were keener on knocking down barriers to investment abroad than raising trade tariffs at home.
- By Alan Beattie, Financial Times
- Published: 23:11 February 9, 2009
During the long boom in the US economy from the 1990s, it became common to argue that the era of widespread American protectionism was over. The political clout of trade-sceptical lobbies including textiles and steel had shrunk; industries such as carmaking were keener on knocking down barriers to investment abroad than raising trade tariffs at home.
Such triumphalism now looks premature. As shown by the debate over Buy American provisions on federal spending in the economic stimulus Bill before Congress, the stars are coming into alignment for a protectionist resurgence.
The economy is in recession and unemployment is rising; the US continues to run a large, if diminishing, trade deficit; the dollar remains strong; and the Democrats, whose already lukewarm affection for trade has further diminished this decade, are in charge of both houses of Congress and the White House.
Douglas Irwin, professor at Dartmouth College and a trade history expert, notes similarities with the 1980s, when a recession brought forth many calls for particular industries to be protected.
"But the difference then was that there was a Republican president, so the Democrats in the House could act tough on trade in the knowledge that the White House would block it," he said. "These days they need to be a lot more careful."
Barney Frank, chairman of the House financial services committee, said he understands concerns about the Buy American provisions but added that public suspicion of international trade is intense. His solution is to create a better system of cushioning people from the shocks of recession and trade:
"There's localised pain and diffuse benefits. Until you relieve the localised pain better, the average American will block things like trade and outsourcing," he told ABC television.
Opinion polls have suggested that people blamed growing inequality in wages largely on the effects of competition from cheap-labour economies, notably China. Now the recession has hit, observers say, the US public is looking primarily to its own government rather than world cooperation to solve things. John Bruton, European Union ambassador to Washington, said that since the crisis began on Wall Street, "there is a feeling that America can fix America's problems on its own".
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