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Trans-Atlantic Disagreements Over Stimulus Grow

Financial Times:

Disagreements between the European Union and the US over how to combat the global recession widened on Tuesday as EU governments made clear they had little appetite for piling up more debt to fight the collapse in output and jobs. Finance ministers from the 27-nation bloc insisted in Brussels that it was doing enough to support world demand and did not need at present to adopt another fiscal stimulus plan, as Washington is urging.
The US-European differences are casting a shadow over next month’s summit in London of leaders from the G20 group of advanced and emerging economies, an event to be attended by Barack Obama on his first visit to Europe as US president.

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David on :

I think the EU is dithering. Especially Germany's export-dependent economy has fallen off a cliff. Manufacturing orders are down 38% from a year ago they continue to fall nearly 10% each month. Ironically, Germany's massive current account surplus positions it well to be a motor for demand stimulus. But Angela Merkel is her "Swabian Houswife" mode. I just read the interview with Paul Krugman in Stern where he blasts Germany for not taking bolder action.

Don S on :

Will wonders never cease - David and I agree on something. OK, I can kind of see where Germany is coming from on this. Given the demograpics of an aging Germany and an aging Europe, the chances that domestic demand can be pushed to the levels of what the US stimulus package is attempting might not be possible. BUt I can also see David's POV (and presumably Obama's to some degree). The US is stimulating to 5.5% of GDP, Europe to 1.5%. The biggest hooraw to date over the stimulus internationally was about the requirement to purchase US steel for stimulus, and many solemn warnings that any attempt to limit the benefits of the US stimulus package to US employers, workers, and goods would be most unwise. From the US POV given how little the effort Europe is making toward stimulus, this appears effectively to be a demand that Europe recieve it's 'fair share' of the US stimulus without Europe lifting a finger to ensure that the US derives equal benefit from Europe. Sounds kind of familiar, doesn't it? Has to be a big disillusionment for Obama and his most fervent supporters, but should it really come as any surprise? Europe has been behaving this way for many years. The details differ from President to President, but Europe has done this to every President since George Herbert Walker Bush. Now it's Obabma's turn. Congresss is not going to take this supinely. Expect more 'Buy American' measures in the near future....

Marie Claude on :

Congresss is not going to take this supinely. Expect more 'Buy American' measures in the near future.... uh ? not Chinese ? well Don, you're the good guis, we know that, though we'll never tell you :lol:

Marie Claude on :

umm, ho ? something goes bizarre in the celestial empire http://www.bloomberg.com/apps/news?pid=20601087&sid=a3T8nKCSM8xA&refer=home

Pat Patterson on :

Is that link correct because it simply goes to an ad page at Bloomberg?

Marie Claude on :

http://online.wsj.com/article/SB123692233477317069.html

John in Michigan, USA on :

This question of whether the stimulus spending should force recipients to use US products is very interesting and complex. For a free trader like myself, "Buy American" provisions are undesirable. Also, the WTO rules are quite clear: non-tariff barriers to trade are, generally speaking, just as illegal as traditional, tariff barriers. Therefore, Buy American" provisions will almost certainly be considered an illegal subsidy by the WTO. Recall President Bush's attempt to stimulate the US Steel market via tariffs in March, 2003. [url=http://www.forbes.com/2003/12/05/cx_da_1205topnews.html]Forbes Magazine has a good account of how that turned out[/url]. So, my first question: Will Obama use a similar strategy to the hated Bush administration -- permit some "Buy American" provisions to attach themselves to a bill, and then trust that the WTO will force him to remove them in the coming year? Is that a pro-free trade, pro-WTO strategy, or an abdication of responsibility? Another interesting question is what Keynesian theory says about the "Buy American" question. Traditional Keynesian theory uses a simple, macro-economic formula that treats any sort of spending as stimulative -- building a needed bridge is no different than paying workers to dig a hole and then fill it up again. So, a traditional Keynesians would say that "Buy American" makes no difference to the forumla, so we might as well keep it in the bill if it helps it pass. Neo-Keynesians have realized the absurdity of this over-simplification, and preach that stimulus is only effective when it is used for projects that increase the national wealth. So, consider a project such as a needed bridge that adds to the national wealth. The bridge will cost $100 million, or $150 million if there are "Buy American" provisions. Would the neo-Keynesian position be that the difference, $50 million, represents $50 million worth of hole-digging that does not add to the national wealth? Of course, these questions could apply to any country debating a stimulus, not just the US.

Pat Patterson on :

Some of the stimulus money is for wind power and one of these green collar companies, Knight & Carver, that is elgible is based in National City CA. They also are covered by the "Buy American" provisions. Where it becomes ridiculous, one to pick favored industries and second to demand purchases be made of domestic companies first is that some 80% of the blades and turbines K&C make are made across the border in Mexico and finished in the US. In regards to the rather half-hearted attempt to get more American steel purchased it is noted that because that measure failed the steel industry was forced to speed up its modernization and cut costs. Which created a situation where the US is one of the lowest cost producers of finished steel in the world. Some people simply never learn and if they had there way we would still be producing masts and ambergris for the Royal Navy and the Court of St.James.

Pat Patterson on :

So let's begin by placing a tariff on every Chinese made import? All forms of gambling are showing drops of anywhere from 19.2% in Atlantic City to 26% in Las Vegas. MGM stock is now worth 1/50th of what it was worth just 18 months ago. http://news.yahoo.com/s/nm/20090315/us_nm/us_casinos_atlanticcity

Marie Claude on :

you seem to know better than us, hey, enlightened ! farms subsidies exist in the US too, umm, your master don't let you surf on american waves ? what is Zcech Vehicle manufacturing ? still Trabant LMAO Buy European is the motto, by extension, certainly not chinese !!!

Pat Patterson on :

This kind of Czech vehicle? http://www.defenseindustrydaily.com/images/LAND_Pandur_II_8x8_w_RCWS-30_lg.jpg It's even got one that fires an Israeli missile. Or a Skoda? Plus I'm still trying to figure out what YL meant by a $50 million bridge?

Marie Claude on :

page not found

Pat Patterson on :

Marie-This worked, its the same picture of a Czech APC but from a different source. http://vm.aganet.pl/images/photoalbum/album_8/land_pandur_ii_8x8_w_rcws-30_lg.jpg

Marie Claude on :

Austrian, then it needs a "bail out" ! http://www.armyrecognition.com/News/2007/january/Actualites_militaires_janvier_2007_FR.htm

Pat Patterson on :

Right! Source I used described the Pandur as being built in Czech Skoda factories but not accurate. As to bailout, who knows!

Marie Claude on :

some funny story there : http://news.goldseek.com/GoldSeek/1236665100.php

Solipson on :

I think Dr. Merkel does have a realistic view of the current situation. She even said that the situation is the most dire since 1945. Which is a bit harsh, because we had great products then as well (Tigers, ME262's, MG42's, V2's etc.) but we had not a reduction in demand, nobody wanted to buy them in 1945. I mean production went to zero :-)

John in Michigan, USA on :

Yeah DON you really should have given a better example DON!

Don S on :

John, I wish to personally apologize for the misunderstanding here. It was the result of a failed mind-channeling experiment London to Michigan. I focussed very hard on making you write that, but obviously failed to communicate the full nuances of my idea. Next time I'll try the phone instead of brain-waves which obviously attenuate with distance..... ;)

John in Michigan, USA on :

Really, it is I who should apologize. What was I thinking?!?

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