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Study: 'Buy American' Provisions Bad for Jobs, Worse for Reputation

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The "Buy American" provisions approved by the House together with the US$819-billion stimulus package would violate US trade obligations and damage its reputation, with very little impact on jobs, a new study said on Tuesday.

"The negative job impact of foreign retaliation against Buy American provisions could easily outweigh the positive effect of the measures on jobs in the US iron and steel sector and other industries," said the study conducted by Gary Hufbauer and Jeffrey Schott, both economists at the Peterson Institute for International Economics.

The "Buy American" provisions generally prohibits the purchase of foreign iron and steel for any stimulus-funded infrastructure project.

The study estimates that the additional US steel production fostered by the "Buy American" provisions will amount to around 0.5 million metric tons.

This in turn translates into a gain in steel industry employment equal to roughly 1,000 jobs.

"The job impact is small because steel is very capital intensive," the study said. "In the giant US economy, with a labor force of roughly 140 million people, 1,000 jobs more or less is a rounding error."

The massive tax cuts and spending package has moved to the Senate. Its own version extends the "Buy American" initiative beyond the House's iron and steel mandates to include all US manufactured goods, according to news reports.

On balance the "Buy American" provisions could well cost jobs if other countries emulate U policies or retaliate against them, warned the study.

Most importantly, the "Buy American" provisions contradict the G20 commitment not to implement new protectionist measures -- a commitment that was designed to forestall a rush of "beggar-thy-neighbor" policies, the study said.

(Xinhua News Agency February 4, 2009)

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