Why Buy American provision is a bad idea

The House recently passed a $819 billion stimulus bill that would invest significant amount of money in public infrastructure. The bill also includes a provision that a stimulus project should utilize only US manufactured iron and steel. The European Union and the Canadians are pretty much ticked off with this provision and are considering complaining to the World Trade Organization.

This protectionist measure wont help us recover from a recession. Because, if we adopt this measure...the European Union and the Canadians will adopt similar provisions and as a result the whole globalization principle falls through and we revert back to medieval times!

Imagine this...before the financial crisis, the US regulators introduced a clause requiring that the subprime loans from the US should be invested only within US territories. This would have certainly guaranteed a deeper recession than the current one. Thanks to the Europeans and the Canadians, our subprime risk was transferred to their nation and their banks were bankrupt along with ours. Further, the clause would have stymied innovation in the financial industry.

America, as a symbol of Capitalism should continue to promote free market mechanisms it has adopted so far.