Part Thirteen of my diary series on the History of Supranational Corporations. This section covers the Democratic Party, the Obama Administration, and free trade policies.
This is a book manuscript I am working on which I am posting one part at a time as it is finished.
Links to the previous sections are below.
Part One: The Anti-Corporate Revolution of 1776
http://www.dailykos.com/...
Part Two: The Robber Barons
http://www.dailykos.com/...
Part Three: The Progressive era
http://www.dailykos.com/...
Part Four: The Roaring Twenties
http://www.dailykos.com/...
Part Five: New Deal and World War 2
http://www.dailykos.com/...
Part Six: The Organization Men
http://www.dailykos.com/...
Part Seven: The Man
http://www.dailykos.com/...
Part Eight: the Reagan Revolution
http://www.dailykos.com/...
Part Nine: The Multi-National Wars
http://www.dailykos.com/...
Part Ten: NAFTA and WTO
http://www.dailykos.com/...
Part Eleven: The Failed American Century
http://www.dailykos.com/...
Part Twelve: Opposition
http://www.dailykos.com/...
The Democratic Party And Fair Trade
The Democratic Party had always been ambivalent about free trade agreements. The party leadership has, since the days of George HW Bush, been enthusiastic supporters of the New World Order, including globalized free trade. It was, after all, President Bill Clinton who passed NAFTA and who helped form the WTO framework.
There was, however, some Democratic resistance to NAFTA and, subsequently, to new free trade deals. This opposition usually took one of two forms; one group of Democratic legislators objected to free trade agreements on protectionist grounds. Most often these were from districts where industries were located that depended heavily upon being shielded from cheap imported products, such as automobiles, textiles, steel or agriculture—or legislators who received heavy funding from labor unions that shared the protectionist views of their corporate “partners”. Another group of Democrats, who often referred to themselves as “fair traders”, were not protectionists and didn’t object to free trade agreements in principle, but were opposed to the lack of environmental and worker safeguards in these agreements, and wanted stronger regulations written into the treaties before they would accept them.
By 2006, moreover, the actual effects of NAFTA on both American workers and on the country of Mexico had become painfully apparent, and many political candidates found it to be good politics to speak out against trade agreements. In the 2006 elections (in which the Democrats won big), no incumbents lost who campaigned against expanded free trade agreements, while in 7 Senate races and 28 House races, “fair trade” candidates either beat “free trade” incumbents or won open seats formerly held by free-traders.
Yet the Democratic Party’s approach to trade pacts remained schizophrenic. In 2004, the Central America Free Trade Agreement (CAFTA) was opposed by both Republicans and Democrats. The treaty barely squeaked through the House of Representatives on a 217-215 vote. In 2006, however, Congress refused to ratify an agreement with Vietnam which would have granted Permanent Normal Trade Relations to that country, and would have led to a bilateral free trade pact and endorsement of Vietnam’s entry into the WTO. House Speaker Nancy Pelosi and much of the party leadership voted in favor of the agreement.
When the Bush administration began a new series of bilateral trade negotiations with a number of countries, the Democratic party leadership announced in May 2007 that it would support those efforts—despite the apparent lack of enthusiasm for such agreements on the part of many Democratic legislators. And when the free trade agreement with Peru came to a vote in 2007, it passed with bipartisan backing, despite active lobbying against it by environmental and labor groups.
Obama Administration and Trade Policy
When Barack Obama assumed office in 2009, the schism within the Democratic Party over trade policy was forced into the open. Obama had himself, as a Senator, been a “fair trade” supporter, and had criticized the existing free trade agreements for their lack of worker and environmental protections. As a candidate he said, “It is absolutely critical that we engage in trade, but it has to be viewed not just through the lens of Wall Street, but also Main Street, which means we’ve got strong labor standards and strong environmental standards and safety standards, so we don’t have toys being shipped in the US with lead paint on them.”
As President, however, Obama surrounded himself with advisors who were former Clinton officials and who, along with the supra-national corporations, viewed the end of protectionism and the expansion of the free trade network as an absolute necessity. And Obama himself had supported this view during the campaign: “There are some who believe that we must try to turn back the clock on this new world; that the only chance to maintain our living standards is to build a fortress around America; to stop trading with other countries, shut down immigration, and rely on old industries. I disagree. Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off.”
In addition, a number of conservative supporters of the globalist corporate framework, who had been driven away from the Republican Party by the neocon agenda of unilateral American nationalism, had now turned to the Democratic Party instead. Obama had received far more corporate campaign funding in 2008 than the Republican candidate; they now expected that he would support their rules-based free-trade agenda just as Clinton had. And since the resistance of the G20+ bloc to the Dohan Round had made it politically impossible (at least for now) to expand the multilateral WTO framework, the only remaining option was to continue the neocon strategy of pursuing bilateral free trade pacts between the US and individual nations.
The other alternative—dropping free trade agreements altogether—was utterly unacceptable to nearly everyone. The corporations wanted to avoid, at nearly any cost, the lethal trade wars that had characterized the 1980’s, and nothing was more to their interests than a stable uniform set of global trade rules that everyone played by. Even critics of the WTO framework realized that international trade rules were a vital necessity. Brazilian Foreign Minister Celso Amorim pointed out that simply repealing trade agreements would lead to “the law of the jungle” in which the economically powerful countries would simply run roughshod over the weaker, with impunity. This sentiment was echoed by British economics writer George Monbiot, who noted, “The only thing worse than a world with the wrong international trade rules is a world with no trade rules at all.”
At the same time, Obama signaled that both new and already-existing trade agreements needed to be modified along “fair trade” ideals, and that under his administration progressives would have at least some input on trade policy. When the Advisory Committee on International Economic Policy selected a subcommittee to look at the portions of trade agreements dealing with the investment market, the group was co-chaired by the AFL-CIO’s Policy Director, and included Sarah Anderson of the Institute for Policy Studies. Although the opinions of the private sector lobbyists carried the most weight, Anderson noted, her own presence was “one of many signs of the new opportunities for advocates of progressive change in Washington.”
But in many cases, the Obama administration has not gone further than talk. During the campaign, Obama pointed out “NAFTA’s shortcomings were evident when signed”, promising that he would reopen the treaty to add “binding obligations to protect the right to collective bargaining [and] binding environmental standards so that companies from one country cannot gain an economic advantage by destroying the environment.” But by the midterm elections in 2010, no attempt had been made to resubmit either NAFTA or CAFTA with strengthened labor or environmental protections.
In January 2010, Obama announced that he planned to move forward on three of the Bush bilateral free trade agreements, with South Korea, Panama and Colombia. During the 2008 campaign, Obama had criticized some provisions of the South Korea agreement, and in a June 2010 meeting with South Korean President Lee Myuk Bak, Obama asked that the renegotiations be finished by the time of the November G20 meeting in Seoul. Two of the acknowledged sticking points were South Korea’s strict emissions standards, which make it hard for US automobiles to enter the market, and its restrictions on American beef, imposed after the 2003 mad-cow disease outbreak. In December 2010, it was announced that a newly-tweaked agreement was reached, and the treaty would be submitted to Congress for approval.
The reaction was swift. The changes being accepted by Obama were minor, and while they benefited the politically-powerful auto workers union and a few large American industries, the altered proposals did nothing to strengthen the agreement’s treatment of labor or environmental protections, and the enforcement procedures continued to give unelected trade officials, meeting in secret, unilateral power over democratically-elected governments. In other words, the new agreement contained none of the “fair trade” improvements that Obama had pledged himself to obtaining, and was substantially the same agreement presented by Bush back in 2007. The Public Citizen Global Trade Watch group noted, “The current text includes the extraordinary investor rights that promote offshoring and expose domestic financial, environmental and health laws to attack in foreign tribunals. Signed before the financial crisis, the pact calls for financial services deregulation that is at odds with the lessons we’ve learned from the economic crisis and that may conflict with recent reforms made by both the U.S. and Korea. The pact also explicitly forbids reference to the International Labor Organization’s conventions that establish internationally recognized core labor standards. During the 2008 presidential campaign, candidate Obama pledged to chart a new course for American trade policy that could create jobs. In speeches, town hall meetings, questionnaires, mailings and paid advertisements in key swing states, Obama said that he would exclude from the pact language the damaging foreign investor rights and their private enforcement that threaten public interest safeguards and promote job-offshoring. He also said he would include strong, enforceable labor and environmental protections. The Korea pact fails on all these scores.”
Democratic Senator Sherrod Brown, the sponsor of the proposed TRADE Act (which would re-examine all existing trade agreements to strengthen them according to “fair trade” principles), also rejected the Korea deal, calling it another “NAFTA-style” agreement: “I continue to believe it is a dangerous mistake to pursue the same kind of trade deals that ballooned our deficit and led to massive job loss. We simply cannot keep barking up this tree as American companies fold and American workers face prolonged unemployment.” Democratic Congressman Mike Michaud, Chairman of the House Trade Working Group and sponsor of the House version of the TRADE Act, also condemned the agreement: “We had what I thought was a productive meeting just a few weeks ago at the White House on changes we’d like to see in the agreement. At the time, we told the President that we believe the agreement as it exists now has several fundamental problems that go beyond the issues with beef and autos. But after talking to Ambassador Kirk today, I learned that these concerns were not addressed. I had hoped for more from this White House, which campaigned on a need to change the way we negotiate trade agreements so that they truly benefit American workers and businesses. The deal reached today, while beneficial to the auto industry, falls far short of that goal.”
Significantly, neither the White House nor the Democratic Congressional leadership had, by the time of the midterm elections, supported the TRADE Act (“Trade Reform, Accountability, Development and Employment Act”). According to some reports, however, Obama did express support at the G20 meeting for restarting the stalled Dohan Process talks to expand WTO’s authority.
Democratic House Majority Leader Steny Hoyer announced his support for the Korean trade agreement: “This is an important step forward to expand the reach of American exports, which will help create more American jobs.”
A number of groups and interests, including key Democratic constituencies, remained adamantly opposed to any more free trade agreements, just as they had been opposed to NAFTA and CAFTA.
Environmentalists
The opposition to free trade agreements by environmental groups has been largely based on the principles of “fair trade” (or, as several organizations refer to it, as “sustainable trade”). It is generally not global trade or internationally-uniform trade policies they object to, but the unfair one-sided corporate-weighted manner in which this is currently being accomplished.
Greenpeace, one of the largest environmental organizations in the world, says, “Greenpeace opposes the current form of globalization that is increasing corporate power. . . .The World Trade Organization (WTO) promotes free trade for the gain of private interests, over and above our health and the environment. It is fatally flawed and is moving the world in the wrong direction—away from peace, security and sustainability.”
“The WTO is secretive, non-transparent and undemocratic. Meetings are by invitation only, are hidden from public view, and are closed to direct public input. The WTO puts trade on the highest pedestal—before our health and the environment. This is because the WTO is driven by narrow corporate interests, like genetic engineering companies and the agri-business. . . . The WTO threatens crucial environmental agreements . . . So-called ‘free trade’ is speeding up the use of natural resources such as water, forests, fisheries and minerals, much faster than they can be regenerated.
“In essence, the WTO is a tool of rich and powerful countries. Poorer countries are losing out in the interests of the industrialized world.”
“We demand that the World Trade Organization (WTO) adopts a policy of trade that truly works for all and that preserves and restores the environment. We support global environmental standards. Trade must not take priority. Governments must work to achieve sustainable development. This means integrating three things: environmental, social and economic priorities.”
The Sierra Club, the oldest and largest environmental group in the US, argues for “responsible trade”: “While trade agreements have the potential to promote more sustainable and just development, NAFTA did very little to safeguard our environment or communities that depend on it. It transferred enormous power from democratic governments to multinational corporations and faceless global market forces—and today communities across North America are at greater risk.”
“NAFTA has allowed environmentally irresponsible companies to continue their offenses outside US borders where regulations are less stringent or poorly enforced . . .NAFTA also gave multinational corporations the power to by-pass the domestic judicial system and directly challenge environmental and public interest laws in secret tribunals.”
“We can do better! In an increasingly globalized world, global warming and environmental degradation have no borders, and it is vital that our trade agreements reflect that reality. Trade agreements should promote a higher quality of life for all, not simply serve as vehicles to increase corporate profits. We must learn from the failed trade agreements of the past and stake out a different course for the future where people’s lives and livelihoods are protected and respected.”
In December 2010, Sierra Club announced its opposition to the newly-revised South Korea free trade agreement.
Friends of the Earth International, which had long been an opponent of free trade agreements, says: “Bilateral or multilateral free trade agreements have been signed or are being negotiated in many countries. All these agreements have impacts on peoples, nature and the society. At the same time, they represent legal frameworks that perpetuate a development model that promotes exploitation, unfairness, and inequality, while securing rights for corporations.”
Social Justice and Anti-Poverty Organizations
A wide variety of social justice groups are opposed to the current structure of free trade agreements, arguing that this framework gives too much power to multinational corporations and does not adequately protect the rights of consumers, the poor, or indigenous peoples. These organizations call for modifying trade policies along “fair trade” lines.
Oxfam International says: “Trade generates incredible wealth, and links the lives of everyone on the planet. However, millions of people in poor countries are losing out because the rules controlling trade heavily favor the rich nations that set the rules.”
“World trade rules have been developed by the rich and powerful on the basis of their narrow commercial interests. Rich countries and powerful corporations have captured a disproportionate share of the benefits of trade, leaving developing countries and poor people worse off. Trade rules should be judged on their contribution to poverty reduction, respect for human rights, and environmental sustainability.”
“Instead of robbing half the world of a proper living, trade could help millions of poor farmers and workers in developing countries beat poverty, and change their lives for good . . . Oxfam’s Trade Campaign presses decision-makers and governments for new trade rules—fair rules to make a real and positive difference in the fight against poverty.”
Amnesty International, one of the largest and most-respected human rights organizations in the world, does not take any position on free trade agreements, but as the WTO was debating the Dohan Round in Hong Kong in 2005, Amnesty released a statement declaring: “While trade agreements have created new opportunities for some and can have a positive human rights impact, they have also at times been associated with patterns of growing inequality and deteriorating social conditions, including denial of human rights for the poorest and most marginalised sectors of the population.”
“Assessments of the effects of trade liberalisation have generally concentrated on how they affect countries’ overall economic growth. Very little, if any, work has been carried out by governments to assess the potential human rights impact of trade liberalization and in particular to outline what complementary measures are needed to ensure that all sectors of society, including the marginalised, the poor and those who experience systemic discrimination, can benefit from trade agreements.”
”An example of particular concern to Amnesty International is that of stringent trade-related intellectual property rules. The strict enforcement of rules on pharmaceutical patents can and often do hinder access to essential medicines for all. Where trade agreements result in a retrogression in access to essential medicines, governments which implement these agreements risk violating the right to the highest attainable standard of health.”
“Amnesty International would urge all leaders of the 148 governments to ensure that human rights obligations are a central consideration during the forthcoming WTO meeting.”
Doctors Without Borders is a respected international organization which works for full access to medical care by people around the world. The organization’s concerns about free trade agreements center around “intellectual property rights”, which often limit the ability of poor nations to access vital medicines and pharmaceuticals: “At the 2001 Ministerial Conference in Doha, Qatar, Members of the World Trade Organization (WTO) adopted the groundbreaking Declaration on the TRIPS Agreement and Public Health, which unequivocally recognised that access to medicines should have primacy over commercial interests. The Doha Declaration confirmed some of the key flexibilities in the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), and encouraged countries to interpret the treaty in a manner that would protect public health and promote access to medicines for all.”
“Since Doha, some Members have attacked both the spirit and intent of the Declaration, putting the interests of their pharmaceutical industries ahead of the health of the world's poor. . . . Contrary to the spirit of Doha, the United States, European Union, Canada, Switzerland, and Japan negotiated fiercely at the TRIPS Council to handicap any proposed solution by introducing unnecessary procedural complications and/or limitations.”
“The US has been pursuing a number of regional or bilateral trade agreements that would, in effect, weaken or even completely annul the Doha Declaration. Negotiations to tighten patent protection are underway in regions heavily burdened by disease. . . . By exerting pressure on countries to adopt TRIPS-plus provisions, the US is going back on its word and breaching the commitments it made when it agreed to the Doha Declaration.”
Internationalism vs Protectionism
The environmentalist and social justice organizations which oppose the current free trade agreements are supporters of “fair trade” ideas. At core, these critics—even those which are based in the wealthy nations—share the same democratic goals as the people in the developing world who are the target of these trade agreements, and their basic strategy for combating the defects in these trade agreements is by joining with indigenous environmental and human rights groups as allies in common cause.
In contrast are the “protectionist” critics of free trade agreements. Unlike the “fair trade” opponents, the “protectionist” critics are concerned only with defending their own interests (which usually involve maintaining some position of privilege). Rather than viewing as allies those foreign people who are affected by trade agreements, the protectionists view them as opponents and enemies whose interests are diametrically opposed to their own, and rather than the strategy of joining with others in common cause, the “protectionists” pursue the strategy of zealously guarding their own narrow interests against those they see as their antagonists.
There are two basic groups within the “protectionist” camp—one based on ideological interests, and one based on economic interests.
America First!
When George HW Bush made his “new world order” speech in 1990, spelling out his corporatist vision of a multilateral world, it unwittingly fed into a largely hidden subculture of right-wing extremists and fundamentalist religious fanatics and emerged as an elaborate conspiracy theory that has, in a series of new iterations, seeped even into mainstream politics. While the lunatic Right, represented by groups such as the John Birch Society, had been ranting for decades about “Communist plots” to impose “one-world government” on the US (the Birchers declared that President Eisenhower was a secret Communist, that fluoridated drinking water was a Kremlin plan to weaken Americans, and that the civil rights movement was run by Communists), the New World Order became the klaxon call for a whole array of far-right conspiracy kooks, ranging from theocratic fundamentalist Christians to the Patriot Militia movement to white supremacist racists. During the Reagan/Bush years, as the United States slid further and further to the right, the Birchers became mainstream, and even US Congressional representatives began repeating, in all apparent seriousness, conspiracy theories about liberal politicians taking guns away from citizens so we would be defenseless when UN troops with black helicopters invaded America and imposed global tyranny on us; even former Presidential primary candidate Pat Robertson wrote a book entitled The New World Order, which repeated nearly every paranoid right-wing story involving Jews, the Illuminati, liberals, Marxists, the Federal Reserve, and global secular humanists. “Patriot Militia” groups began appearing in the South and West—these were self-styled “citizen-soldier units” who dressed in fatigues and practiced military drills to be able to fight the looming new world government. The bombastic rhetoric from the militia movement declaring that they were “at war with the Federal government” culminated in militia supporter Timothy McVeigh’s bombing of the Federal Building in Oklahoma City. The entire far-right movement was overwhelmingly white, and many of these groups were either openly or guardedly racist—the openly neo-nazi and “Christian Identity” groups ranting against the “Zionist Occupation Government”, and the thinly-veiled garden-variety bigots using codewords to rail against immigrants, gays and civil rights.
During the neocon years, the Republican Party lost popularity, and as the saner people left, the party fell more and more into the hands of the extremists—and when Barack Obama became the nation’s first African-American President, the nuttiness spread from the Republican Party to the mainstream media. The “Tea Party Movement”, a loose conglomeration of fundamentalist end-timers, creationists, global-warming deniers, anti-government activists, bigots, anti-immigrants, and Bircher-types, concocted silly stories that Obama was a secret Muslim terrorist, that socialist Marxism was about to take over the United States, and, of course, that the liberals wanted to end American sovereignty and place the US under a world government. These fantasies were breathlessly repeated by entertainer/pundits on Fox News Network. Meanwhile, various Tea Partiers demonstrated the depths of their extremism by advocating that only property-owners should be allowed to vote, that states should be given the “nullification” right to ignore Federal laws, that the Civil Rights Act and the Fourteenth Amendment should be repealed, and that various states should secede from the US. Now that the Cold War was over and the rightwing kooks had lost their traditional Communist boogieman, they seemed determined to refight the Civil War instead.
As the Republican Party and its Teabagger base descends deeper into nuttiness, the traditional pro-business agenda of the party, including its staunch support of the corporate rules-based trade system, has begun to fall away. Recent polls indicate that 61% of self-identified Tea Partiers think that free trade agreements have hurt American interests (compare that with the 64% of labor union members who agreed). In the 2010 elections, the Republican slate, heavy with Teabaggers, was also heavy with opponents of free-trade agreements; according to Public Citizen’s Global Trade Watch, defenders of free trade agreements ran in 37 races, and half of them lost. By contrast, 75 Republicans ran as critics of free trade agreements, against pro-free-trade opponents, and 43 of them won; in another 60 races, both the Democrat and the Republican candidates ran as critics of free trade agreements.
For most of them, it appears as though it’s not actually free trade the Teabaggers oppose, but simply the global political structure which interferes with the free market. As Tea Party favorite Ron Paul says, “I consider myself the strongest advocate of free trade. I don’t want any tariffs and I don’t want any barriers. I want to really trade. But I just don’t like the international government organizations, because that becomes managed trade for the benefit of some companies. So I’m not much into nor do I support WTO and NAFTA and all these agreements, because those are only tools for when you're being undermined, you go there to get your tariffs put on, to try to get fair trade, so to speak. But that’s managed trade.”
Conversely, several Tea Party favorites, including Rand Paul, Jim DeMint, and Marco Rubio, have all been vocal supporters of free trade agreements. Teabagger goddess Sarah Palin, in an “open letter” to the newly-elected Republicans, declared, “There in the insulated and isolated Beltway you will be far removed from the economic pain felt by so many Americans who are out of work. Please remember that if we want real job growth, we must create a stable investment climate by ending the tidal wave of overly burdensome regulations coming out of Washington. Businesses need certainty–and freedom that incentivizes competition–to grow and expand our workforce. . . You will also have the opportunity to push job-creating free trade agreements with allies like Colombia and South Korea.” More to the point, the prime money supplier of the Tea Party organizations, the corporate front group Americans for Prosperity, has long been a cheerleader for free trade agreements.
The leadership of the Republican Party still favors expanded free trade agreements, but is no longer sure if its new influx of rank-and-file legislators will go along. (Ironically, that is a problem also faced by the Democratic Party, whose pro-free-trade leadership also faces rebellion from its members.) McCain adviser Douglas Holtz-Eakin notes, “The question is how will newly elected Republicans behave? The leadership and think tanks in Washington may support free trade and open markets, but if you go out to real America, it's not there.”
Buy American!
Although the WTO free trade apparatus was the result of corporate input and was largely set up in accordance with their own design, there are a handful of industries in the US which view trade agreements as threats to their economic interests.
The most obvious example is the heavily-subsidized agribusiness. American farm subsidies originally began as a government program to help small farms survive in times of bad weather, poor crop yields, or periodic price downturns. If this were still its goal, the Federal farm subsidy program could give every family-owned farm in the United States an income of twice the poverty level at a cost of less than $5 billion. Instead, after most of the small family farms were wiped out by corporate consolidation, the US was spending over $20 billion a year on subsidies, most of which went to large rich agribusinesses like Archer Daniels Midland (almost three-fourths of farm subsidies go to the richest 10% of farms).
The original 1947 General Agreement on Tariffs and Trade (GATT) did not include any restrictions on agricultural subsidies. This was done at the insistence of the United States, which wanted to continue its support of small farmers. When the structure of the World Trade Organization was being negotiated, in the early 90’s, the agribusinesses had become politically powerful enough to protect their interests, and when the developing nations demanded that farm subsidies be eliminated as part of the WTO agreement, the United States cut a deal instead, agreeing to partially reduce its subsidies if the smaller nations in turn accepted US strengthening of intellectual property and patent rights, particularly for pharmaceutical companies.
When the Dohan Round to expand WTO began, the developing nations united into the G20+ bloc and demanded that the US and Europe eliminate its agricultural subsidies entirely, opening their large markets to food and farm products from the poor nations. This would have been a tremendous help for the world’s poorest small farmers, but it would have resulted in tremendous loss of money for agribusiness, both through loss of subsidies and by loss of market share to cheaper foreign food imports. One study showed that under no-tariff free trade rules, the price of imported sugar in the US, which was heavily propped up by tariffs and quotas, would drop by 22%, and the amount of imported sugar would increase by some $478 million.
When the US and Europe refused to budge on farm subsidies, the Dohan talks collapsed.
Similar situations also exist in other US industries, including steel, automobiles, and textiles. Corporations in these industries are utterly dependent upon protectionist economic policies, and are politically powerful enough to protect their interests. They are all in favor of free trade—for every industry except theirs.
The Obama Stimulus Plan
When the $900 billion American Recovery and Reinvestment Act (the “Stimulus Bill”) was passed in 2009, it contained this provision:
“SEC. 1605. USE OF AMERICAN IRON, STEEL AND MANUFACTURED GOODS.
(a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States.
(b) Subsection (a) shall not apply in any case or category of cases in which the head of the federal department or agency involved finds that—
(1) applying subsection (a) would be inconsistent with the public interest;
(2) iron, steel and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or
(3) inclusion of iron, steel and manufactured goods produced in the United States will increase the cost of the overall project by more than 25%.
(c) If the head of a federal department or agency determines that it is necessary to waive the application of subsection (a) based on a finding under subsection (b), the head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived.
(d) This section shall be applied in a manner consistent with United States obligations under international agreements.”
The Stimulus plan’s “Buy American” provisions were painted by supporters as a way to insure that the economic benefits of the bill would stay in the US. The Alliance for American Manufacturing argued, “If we're going to try to create American jobs, we need to direct stimulus money to American firms. . . When we're investing hundreds of billions of dollars, tax dollars, into infrastructure, into economic recovery, we want to make sure we're creating jobs in the United States and not in China.”
In reality, of course, the provision was intended as a protectionist aid for the politically powerful steel industry, and particularly the Steelworkers Union, a key Democratic constituency. American steel factories were running at less than half of capacity, with 40% of their workforce laid off. “What we’re already seeing is that demand is going down,” explained a spokesman for the American Iron and Steel Institute, “but imports of Chinese finished steel is going up because they are subsidizing it. What we’re saying is that this is a stimulus package to promote American jobs. We ought to maximize every dollar in that bill toward that end. If you were building a bridge in West Virginia, you wouldn’t bring in German workers to do it. Materials should be no different.” The Steelworkers Union also sent its members on a series of talks with legislators to win support for the provision. In Ohio, one Union official declared, “Buy American, the whole ideal is that we’re rebuilding the infrastructure of the United States with tax dollars, American tax dollars and the idea is that is going to create American jobs, they’re predicting that's going to create 133,000 jobs for Ohio with the stimulus money.”
Outside of the industries that would benefit from the protectionism, however, the Stimulus Bill’s “Buy American” requirement met instant opposition from American corporations and their political supporters. The president of the US Chamber of Commerce issued a statement against the provision: “If we refuse to buy foreign-made goods, then our trading partners will refuse to buy from us. And since we are the world’s largest exporter, who will be hurt more?” A number of American-based corporations joined in the opposition. One of these was Caterpillar, which actually stood to reap windfall profits from the proposal. During the Multinational Wars in the 1980’s, Caterpillar had faced crippling competition from Komatsu, and was one of the chief proponents of protectionist trade policies. Now, however, times had changed—like most other American corporations, Caterpillar now made over half its profits through foreign sales, and was moving an increasing portion of its manufacturing capacity overseas. As a result, the corporation was now an enthusiastic supporter of the rules-based WTO framework, and spoke out strongly against the “Buy American” bill: “There is no company that is going to benefit more from the stimulus package than Caterpillar, but I am telling you that by embracing Buy American you are undermining our ability to export U.S. produced products overseas.”
A measure to delete the “Buy American” provision was introduced by Senator John McCain, and failed 31-65. But by pointing out that the provision violated WTO rules, critics did force Congress to adopt modifying language that allowed for exceptions to the provision, and that explicitly stated that the provision could not be utilized to violate WTO rules.