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Obama Passes His First Trade Test

Authors: Edward Alden, Bernard L. Schwartz Senior Fellow, and Jeremy Haft
February 6, 2009
Forbes Online

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For those worried about a headlong rush into 1930s-style protectionism, the apparent compromise over the so-called "Buy America" provisions in the huge economic stimulus bill should be re-assuring. The message it sends to the world is that the U.S. understands that Ben Franklin's maxim now applies on a global scale: If we do not hang together, we shall surely hang separately.

If there is any comfort to be found in the current crisis, it is that the world's major economic powers have so far mostly avoided the beggar-thy-neighbor policies that were so disastrous the last time they were tried.

A detailed review by the World Trade Organization last month concluded that "to date, most WTO members appear to have successfully kept domestic protectionist pressures under control," which in the current economy is no small accomplishment.

The compromise on "Buy America," if it holds, will add to that record. In practical terms, the Senate's pledge that the U.S. government will not violate WTO rules by preferring domestic over foreign companies in stimulus spending is mostly inconsequential. WTO rules already allow most countries to favor their own suppliers for government procurement contracts, and the U.S. and others will continue to do so.

But President Obama has, on the first real test of his trade philosophy, sent a clear signal that those rules remain a bright line that will not be crossed. That should encourage other countries to do the same.

 

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