The arguments for protectionism get louder the deeper the economy sinks. At Lindsey Oil Refinery, employees have been protesting the decision to ship in 400 Italian and Portuguese workers at a time when UK unemployment is beginning to accelerate. In the US, President Obama’s stimulus package carries a crucial section of small print: all projects financed by the $800bn bailout have to source US iron and steel, rather than imported materials. And in Spain, where over one million men under 30 are now unemployed, Industry Minister Miguel Sebastian has launched a "Made in Spain" initiative, aimed at persuading citizens to spend their hard-earned euros on Spanish produce.
On a very basic level, you can see where the protectionists are coming from. Even Jamie Oliver is at it. As governments all over the world acquiesce to huge bailouts, aren’t the people entitled to choose where all this public money is going? According to the BBC, Ohio Democrat Tim Ryan has calculated that using wholly domestic input (iron and steel from US sources) for future infrastructure projects will create an extra 77,000 jobs across the country. His position isn’t exactly isolated. When help is needed, it’s human nature to treat the neighbours first. Charity doesn’t travel well when there are problems closer to home.
But that’s where the logic ends. In a global economy, companies must look after their exports as well as domestic demand. That’s why US firms General Electric, Boeing, and Caterpillar (each of whom are about as “American” as apple pie) have all spoken out against Obama’s bailout. According to the BBC, more than half of Caterpillar's sales are exports. “We’ve got to keep our markets open if we expect other countries to keep their markets open,” says Caterpillar CEO James Owens.
He’s absolutely right. The last thing the world needs right now is a tit-for-tat trade war. While it’s been inaccurately reported that the wave of protectionism that followed the Wall Street crash of 1929 was the chief cause of the Great Depression, it certainly lengthened the pain. Obama must choose between his election pledge of standing up for US workers and developing a foreign trade policy that stimulates growth on both sides of the Atlantic.