President Obama takes his first foreign trip Thursday, but domestic politics will loom large as he tackles the explosive issue of protectionism in a meeting with Canadian Prime Minister Stephen Harper, the leader of the United States' largest trade partner.As I'm sure you all remember, back during the primaries (feels like years ago huh?!), Obama caused a huge fuss with Canada and free traders when he said that he would pull the US out of NAFTA if it could not be re-negotiated. He has taken this line when speaking to critically important, free trade-sensitive domestic political audiences (unionized workers, workers in Pennsylvania and Ohio, etc.) in order to gather their support.
At issue is a controversial so-called "Buy American" provision requiring the use of U.S.-produced iron, steel, and other manufactured goods in public works projects funded by the $787 billion economic stimulus bill.
Several Democratic-leaning unions and domestic steel and iron producers favor the provision; a large number of business and trade organizations are opposed.
Administration officials altered the language in the final version of the stimulus bill to ensure that the provision will not trump existing trade agreements such as the North American Free Trade Agreement, known as NAFTA. Canadian companies will therefore still have the chance to sell products used in stimulus-funded projects.
Canadian government officials, however, are still concerned by what they perceive as rising protectionist sentiment in the United States that could potentially spark a trade war and, in their opinion, deepen the global economic crisis.
However, back during the NAFTA-Canada fuss last year, Austan Goolsbee, an Obama economic advisor, met with Canadian government officials and assured them that Obama's NAFTA comments were merely a political tactic (or strategy?). Is the "Buy American" clause within the stimulus bill and other protectionist overtones merely another tactic aimed at satisfying the political demands of a relatively strong domestic political audience, or is it something that will actually be implemented and followed up on? My bet is that it's all a bunch of cheap talk aimed at his political base. What do you think?