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Implications of the "buy American" clause for trade policy in African countries

President Obama on February 17 signed the $787 billion Stimulus package into law. The package is aimed at stimulating production in the US as well as job creation. However, it includes the following clause: 

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 percent.
(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.

Many economists have voiced their concern regarding this clause, labeling it as protectionism. Two concerns with respect to African countries. The first is the implications for trade relations with African countries. Global trade has dwindled since the 4th quarter of 2008 and this "buy American" condition will serve to weaken global trade even further, with African countries suffering the most.  For example, the United States is one of South Africa’s biggest export destinations, especially for manufactured goods including products of iron and steel.  What are the implications of this clause to African countries that export manufactured goods to the US? Another downward revision of growth numbers could be warranted. 

The second area of concern is the resultant disillusionment among Policy makers. Have economic pundits not advised Policy Makers – for decades – that trade liberalization was the key to unlocking their countries’ economic growth potential? Is this clause not undoing the principles upon which trade liberalization is founded? Our African countries have, among other things, huge unemployment problems. The policy lessons that seem to be emanating from this move by the US Government is that protectionism is justified after all if you have problems such as unemployment and poverty, and aim to stimulate economic growth – problems that Africa has been trying to overcome for a long time….Is it not possible that even those that have made strides in liberalizing, like South Africa, could then apply their brakes on further liberalization. 

Comments

Submitted by Clio on
The first duty of any government is to protect the interests of its citizens. If African politicians took their responsbilities seriously, they wouldn't need to complain about the American government just doing its job. Obama is not the President of the World - he's President of the USA and answerable to his own electorate. If African countries want to solve their problems the answer is in their own hands. Look how Rhodesia and South Africa managed to establish thriving economies when they were cut off by sanctions from the rest of the world.

Submitted by Mark Lewis on
The argument here utilizes circular reasoning to support a political viewpoint that stretches credibility. On the one hand the implications of the global financial crisis are planted firmly on the US doorstep, making the point that what impacts the US economy ripples elsewhere. Fair enough...but if we're placing the current context forecasting increasing African poverty projections within that sphere, then it has to be understood that Obama and his administration are trying to fix the source problem first. You can't have it both ways. If a healthy US economy, which includes acceptable job market growth, is consistent with healing the current crisis (and it is), then it follows that in this non-zero sum game that what is done HERE is going to be focused on fixing the problems HERE first, and there will be some unintended consequences abroad. African nations have a long history of being screwed by the G-8 and their corporate fiduciaries, but this is not one of those instances. You make the point that S. African and other policy makers will lose confidence in the US trade partnerships and renounce liberalizing their own trade laws. This is highly unlikely. It requires believing that they're going to respond to the problem by intentionally adopting the very policies they deem counter-active to their own interests...for what? To spite the US? In advance of the dubious proposition that US and other western policy makers adopt considerable African trade reforms, the larger question you ought to be posing has to do with the bloated western economic aid packages propping up corrupt and economically irresponsible regimes. As long as the rest of the world views Africa as a massive welfare state where state-sponsored colonialistic opportunities abound that can suck out profits while returning little or no indigenous value back into local economies we're going to have this problem. One major reason is because so many African leaders are more concerned about maintaining economic aid than fostering accountability to their people through responsible action. Africa needs trade not aid...but expecting to get a break from the west in the current crisis is both unrealistic and it ignores the larger issue...and it's exemplified here. US economic policy is not made by the World Bank, and unlike the "loans" that African nations have been getting there which will never be repaid, this is business not philanthroppy. African leaders are unlikely to find similar altruism in US trade policy, which seems to be what you're suggesting is possible. Nor should they be looking for it. It's time for Africa to stand up and fight for their own economic progress, and while the US and the west absolutely should assist and support that, it's unreasonable to expect that initiative to ignore the issues at home while doing so.

Submitted by Predin on
Well said, Clio. First to add iron and steel are just a part of African exports. Secondly it concerns only the bailout money allocated to support the economy. Perhaps if African countries can lower the prices of exported goods, they can get into the exception of 25 percent.

Submitted by Isaac Zama on
Hello: Does anyone know of any resources/programs out there that assist returning Africans from the diaspora to work in their countries of origin, or in any other African countries? I know of IOM programs, but these are only for the great lakes region, and it appears that it does not permit Africans from other countries to work in other African countries. I am interested in resources that permit University teachers interested in returning to their countries of origins or any other African country to teach at the University. My countries of interest are Central African Republic, Equitorial Guninea, Cameroon, Gabon and Tchad. I would like to teach in any of these countries. Thanks Isaac

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