'BUY AMERICAN' ;IS IT ANOTHER SMOOT-HAWLEY ACT?

SENATOR SMOOT; THE ARCHITECT OF THE ACT

The 'buy american' clause in the Obama's 819 billion USD stimulus package has raise eye brows of many countries including India. The wave of prtectionism is blowing across the globe. The restriction in H-1B visa by USA and tightening of screws by British immigration authorities with regard to job seekers from Asian especially from coutries like India have set in this trend which will be imitated if not retaliated by many other countries across the globe. 

Similar steps had been taken by the USA after the great depression of 1930, when republican senator Reed smoot from Utah and another republcan C Hawley from Oregaon drafted America's most negative legislation called Smoot-Hawley bill which was passed by House in May, 1929. It was widely opposed by the contemporary economists of America itself, but since Hoover had made promise to the farmers of such protection, he got it implemented.It proved disastrous for not only Amrica but for the whole Europr if not the whole world. Similar retaliatory steps were taken by Britain, France, Germany and a host of such countries. They raised their tariff walls against the American goods and the export of American good fell down sharply. According to date available on the wikipedia, the export of USA fell from 2341 million dollar in 1929 to 784 million dollar in 1932. Result was catastrophic, the American Industries had to cut down production as the export fell,this led to job cuts. The figures suggest that the unemployement which was 7.8% in 1930 rose to 25.1% in 1933.

It seems that Americans have not learnt anything from history. Although Obama is opposed to this clause, the republicans are again doing the same mistakes. This clause may benifit US economy in short term but in long term this would result in negative growth of America. The export of software industries and aircrafts to countries like India, China and Brazil may go down if these countries resort to same kind of retaliatory measures.

This clause also goes against the ethos of free trade economy. If we talk in terms of a global village how can we resort to such a primitive and economically naive steps. Time has come for the Americans to ponder that much water have spilled since the first depression. World is changing and the room on the chess board is shrinking.

According to the latest figures released by the Commerce department of USA, the GDP has underwent contraction by more than 6%. Earlier it was estimated that the contraction would be less than 3% but it went more than the estimate. Obama's stimulus package lauched by the US administration is expected to show its positive results after a couple of months. This unprecedented contraction in GDP is due to decrease in domestic spending which is all time low. The figures suggest that the American export has underwent downward trend highest ever since 1970s. The Buy American clause in the stimulus package, on principle, is opposed by Obama but it is not being conceived in wider perspective.