Study: "Buy American" provisions bad for jobs, worse for reputation

Special Report:Global Financial Crisis

WASHINGTON, Feb. 3 (Chinese media) -- The "Buy American"

provisions approved by the House together with the 819-billion-dollar stimulus

package would violate U.S. trade obligations and damage its reputation, with

very little impact on jobs, a new study said on Tuesday.

"The negative job impact of foreign retaliation

against Buy American provisions could easily outweigh the positive effect of the

measures on jobs in the U.S. iron and steel sector and other industries," said

the study conducted by Gary Hufbauer and Jeffrey Schott, both economists at the

Peterson Institute for International Economics.

The "Buy American" provisions generally prohibits the

purchase of foreign iron and steel for any stimulus-funded infrastructure

project.

The study estimates that the additional U.S. steel

production fostered by the "Buy American" provisions will amount to around 0.5

million metric tons.

This in turn translates into a gain in steel industry

employment equal to roughly 1,000 jobs.

"The job impact is small because steel is very

capital intensive," the study said. "In the giant U.S. economy, with a labor

force of roughly 140 million people, 1,000 jobs more or less is a rounding

error."

The massive tax cuts and spending package has moved

to the Senate. Its own version extends the "Buy American" initiative beyond the

House's iron and steel mandates to include all U.S. manufactured goods,

according to news reports.

On balance the "Buy American" provisions could well

cost jobs if other countries emulate U.S. policies or retaliate against them,

warned the study.

Most importantly, the "Buy American" provisions

contradict the G-20 commitment not to implement new protectionist measures -- a

commitment that was designed to forestall a rush of "beggar-thy-neighbor"

policies, the study said.