Obama between protectionism and world trade

Obama is in the unenviable position of trying to tame two wild horses with regards to his economic policies. One one hand, he had campaigned on the direct promise to create millions of new jobs for Americans. On the other, he understands the need to steer away from the path of short-sided protectionism that led to the beggar-thy-neighbour policies of the Great Depression era. The former aims to placate angry Americans loosing their jobs; the latter anxious foreign governments waiting to see whether the U.S. would block their exporters from a peace of the 800 billion pie.

The task seems much harder said than done. To ensure that the fiscal stimulus will have the desired effect of job creation, the congressional bill includes the controversial 'Buy American' clause, allowing only U.S. steel, iron and manufactured goods to be used in any government funded projects included in the stimulus package.

This has enraged the Europeans who have threatened retaliatory measures. U.S. exporters like Caterpillar and General Electric, who were looking to tap into the billions of construction projects planned by European governments, are concerned at the prospects of loosing business abroad as a result of foreign backlash against 'Buy American'.

Obama and his economic policy team certainly have a difficult circle to square. Let's see where this tug-of-war between protectionist impulses and neoliberal economics leads us.