Aussie plea on US trade restrictions

Canberra Times

Aussie plea on US trade restrictions

By Anne Davies

30 January 2009

Australian officials are intensively lobbying lawmakers on Capitol Hill to reconsider new "Buy American" provisions that were attached to the $US819 billion ($1.25 trillion) stimulus package passed by the House of Representatives on Wednesday, amid fears that they will usher in a new era of protectionism and harm Australia’s steel exports to the US.

The provisions, which were attached to the bill by Democrat, Peter Viclosky from Indiana, one of America’s hard-hit manufacturing states, appear to dramatically extend pre-existing US provisions requiring US steel to be used in Transportation and road projects. They would extend the US preference to all projects funded under the stimulus plan and include construction projects where Australian companies such as Bluescope Steel, have been making significant inroads.

However, the bigger fear is that provisions could spark a new trade war as other countries, facing similar downturns to the US, adopt provisions to assist their local industries.

The Australian Ambassador to the US, Dennis Richardson said on Thursday that the team in Washington was following the issue closely.

"We would certainly look to the US to meet its international obligations," he said.

The Buy American provision would be a serious setback for Australia, which is a major exporting nation. In the Free Trade Agreement with the US, Australia secured much greater access to US government procurement, although there remain some restrictions on steel sales for transport projects.

It would also appear to run contrary to the commitment the G20 leaders gave in Washington before Christmas to avoid taking measures that affect free trade during the global financial crisis.

The provision has so far only passed the US House of Representatives, but similar - arguably broader provisions - are to be found in the draft that will go to the Senate next week. The bills then go through a harmonisation process, before being presented to President Barack Obama for signing.

The proposals will be an early test of the President’s commitment to free trade. He will be under enormous pressure from steel unions, which supported him during the election to sign the bills, but he has also pledged a more open engagement with the world.

There is also evidence that the protectionism that emerged during the great Depression prolonged it by several years and set back free trade for decades.

The Buy American provisions are also being opposed by the major US companies, such as Caterpillar, GE and others with large export markets, because they fear retaliation from their major markets. The companies say that proposals pushed by companies such as US Steel Corp. and Nucor Corp. to limit spending in the stimulus plan to American-made iron and steel.

"You would be creating an ample basis for countries to close their markets to US products," said Karen Bhatia, GE’s senior counsel for international law in Washington.

The US Chamber of Commerce and other business groups warned of the possibility of a trade war and a deepening of the global recession in a letter on Wednesday to congressional leaders.

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