Protectionism....To do or not to do?

      June 17, 1930, the U.S. Congress passed the Smoot/Hartley Tariff Act and the Great Depression became even more of a disaster, not only for America but the world. This protectionist action raised tariffs on imports and the reaction was a world-wide trade war. History is there to teach us so we do not repeat the mistakes of history. Americans have never been keen students of history, unless it is made in Hollywood. The result has been a steady repeat of the mistakes of the past. The response to the present economic situation is no different...... circle the wagons and look inward. In this case it is the "Buy America", clause in the Obama recovery/stimuls package.

      It must first be understood that unlike, the Parliamentary system of "fusion of legislative and executive powers", which allows the government to propose and pass legislation, by its dominance of the legislature( when it has a majority gov't), in the American system of "separation of powers with checks and balances", the President proposes and Congress disposes ( even though the Democrats have a majority in both the Senate and the House and the President is a Democrat, it does not mean that he gets to do what he wants). The American system forces compromises. The parties are not disciplined( like their parliamentary counterpart). Every elected member's first loyalty is to himself and his re-election, which means representing local needs, even to the detriment of national interests. As such, there is always grandstanding and obfuscation and of course, ideology. The Democrats are wary of the unions who want to protect their workers and the Republicans not only are out to make mischief, but many are ideologically driven.

      Deals have to be made...to save face for some; to show that they will protect their constituents by all; to send a message to Obama that they will not be overwhelmed by his popularity; and to get attention and be invited to the Talk Shows. Politics as theatre is what it is all about and no where more so than in America. Change, is what Obama campaigned on, but America is about incremental change. As I have written previously, revolutionary changes are few and only happen when the direst of situations threaten....the Civil War and the Great Depression, when a leader dares to lead. Obama is trying to do so, but he has to be firm, take to the "bully pulpit", rally his foot soldiers and not cave in. If he allows Congress to snip away at his package this time, they will want more the next time, and that will be the end. He will be just another President bargaining away any chance to solve problems

     Protectionism will not work. It will force other nations to take similiar action. Countries have interests not friends, and they will act in their interests. Protectionism goes against the terms of the W.T.O, and also N.A.F.T.A. in the case of Cnada. The trade between Canada and the USA is about $1.5 billion a day. It is responsible for the creation of millions of jobs in both countries. Imposing a " buy american" clause in the stimulus package will cost Canada billions and thousands of jobs. The US will also pay a steep price in product costs, sales and job losses.

      Canada is not weak. It can deal from a position of strength eg. it is the largest supplier energy to the USA.... oil, gas and hydro. This gives additional leverage to go with NAFTA, WTO also APEC. Use them or lose. By the way, in Canada we have some of the most restrictive trade laws.....between provinces, especially Quebec eg. construction workers and materials from other provinces are not allowed in. Also the Montreal- based Shoe Manufacturers Association of Canada want the Canadian Government to restrict waterproof foot wear from Vietnam and China. It seems everyone wants protection, while complaining about protection.

      C'est la vie.         
                                     

                                     Update...Feb.4.......

      Pres. Obama in interviews on CNN, fOX AND ABC, made it clear that he does not support protectionism and that he is aware of the consequences. Now he has to convince the Democrats in Congress and the Unions.

      Two of his nominees have stepped down, because of income tax problems. The loss of Daschle is bad for Health reform.