The Obama Stimulus Requires U.S. to Buy American (or European or Japanese or Canadian or Mexican or Australian…)

In an effort to placate critics of the U.S. Congress’s stimulus package, the final revised version apparently has toned down the earlier House of Representatives proposal requiring recipients of stimulus money to “Buy American” iron and steel only. Here is the additional provision added by the Senate, and I believe it survived the final version(all emphasis is added by me):

SEC. 1604. USE OF AMERICAN IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.

. . .

(d) This section shall be applied in a manner consistent with United States obligations under international agreements.

A few observations:

• It confirms what only a few extreme internationalists would deny: the U.S. Congress has the power to enact statutes that violate international obligations and U.S. international agreements. Indeed, it does so frequently and blatantly all the time. The existence of provision is actually somewhat unusual because it actually tries to avoid such a violation. Note that without such a provision, there is no domestic recourse for any company or individual to challenge this law, even though it would undoubtedly violate international agreements.
• Taken seriously, this provision creates a gaping exemption in the Buy American provision.  Recall that under the WTO Government Procurement Agreement, the U.S. is obligated to: “provide immediately and unconditionally to the products, services and suppliers of [other GPA signatories] treatment no less favourable than … that accorded to domestic products, services and suppliers.”  Now there aren’t that many signatories to this agreement, but it does include top U.S. trading partners like Canada, the EU, and Japan. NAFTA Chapter 10 extends this obligation to Mexico. And the U.S. – Australia FTA Chapter 15 extends this obligation to Australia. And Singapore, Chile, Colombia, Israel, etc. So it is not really  “Buy American” anymore.
• I am somewhat skeptical, though, that section (d) here will receive perfect compliance. So we may see a fair amount of WTO litigation as these provisions go into effect. 
• How much does the “International Law” argument matter? Arguably, it matters more than I suggested in my earlier posts, since Congress is apparently trying hard to avoid international law violations, but still wants to be somewhat protectionist.  On the other hand, the ugly threats of trade wars by major U.S. trading partners may matter more.  Here, international law provided a nice compromise since it allows the U.S. to look good in the eyes of its main trading partners. And indeed, if Brazil and China are truly angry (and they seem to be the two biggest exporters who would be affected), they could always sign the WTO Government Procurement Agreement and magically qualify for stimulus money!