Buy American

The ‘Buy American’ provision is a type of protectionist policy that economists warn about. The theory is that the stimulus money should be spent on American products… which seems good at first. But one of the major problems with such policy (aside from subsidizing inefficient production) is that they often are followed by retaliatory trade barriers. Such is the case in the following links. The first discusses the ‘Buy American’ provisions, and the second discusses retaliation.

The bottom line is that trade is NOT a zero sum game. Everyone wins by trading, and in this instance it appears as if everyone will lose.