Buying protectionism

U.S. must be careful with finance policies

If the United States lapses into protectionist activity, “It can only trigger retaliatory action, and we don’t want to go there.”

So spoke Stockwell Day, Minister of International Trade, when he referred to the Buy American Campaign, currently part of the Obama administration’s $825 billion stimulus package, working its way through Congress. As it stands, this bill would only allow U.S.-forged iron and steel to be used in the infrastructure projects that Obama has made the backbone of his resurgence strategy. When the plan was released, it was met with international resistance and lobbying, chiefly from Canada and Europe, America’s largest trade partners.

Day is very correct. We don’t, as a nation, want to go into the realm of retaliatory action. It was retaliatory protectionism, the finance equivalent of an arms race, which turned the recession of 1929 into the Great Depression.

The other retaliation – suing the U.S. under Chapter 11 of NAFTA – is not a lot more optimistic. At best it would be a lengthy process, raise tensions between the governments, and increase anti-Canadian sentiment in the States; at worst, we stand a chance of having our own dear-to-our-hearts protectionist practices reviewed (I haven’t seen much Canadian water being sold to the United States, and would like to keep it that way).

On the other side of the Harper cabinet, Finance Minister Joe Flaherty said that Canada would not engage in retaliatory tactics regardless of the progress of the bill. “There is a clear consensus here that protectionism needs to be avoided, that protectionist is a direction we need not go,” quotes The Globe and Mail.

It was retaliatory protectionism, the finance equivalent of an arms race, which turned the recession of 1929 into the Great Depression.

Really though, they are both wrong. I’ll apologize to international development studies, conflict resolution studies, politics and economics students who probably get more than enough of this already, but can anyone say ‘Prisoner’s Dilemma?’ Once one actor defects there is no way for the others to reach an optimum outcome, whether or not they play by the rules. Neither Day’s hardball stance nor Flaherty’s stoicism will result in a win for Canada’s producers or consumers. The only way for us to get out of this mess is to convince the U.S. to cooperate.

Day currently seems optimistic that Obama will make an exception for Canadian imports in the bill, as there was seven years ago in the last U.S. restriction on foreign steel.

Obama’s studied look of brow-furrowed concern aside, his job is safe for the next four years. The protectionist pork barrels are being added on Congressmen and, soon, Senators, some of whom face re-election in the looming Nov. 2010.

While Day’s negotiations may well go through, hopefully in time for a cheery presidential visit on Feb. 19, this issue has made it clear that Canada needs to be addressing our trade independence and the strength of multi-lateral partnerships, as well as our ability to canvass lawmakers in Congress for Canadian needs, not just the shiny new president.

Steve Currie is a biochemistry and international development studies student at the University of Winnipeg.

Published in Volume 63, Number 20 of The Uniter (February 12, 2009)

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