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AFTER passing a 'Buy America' provision in the country's massive economic stimulus plan, US legislators could next be pushing for a 'Hire American' clause that might further stir fears about protectionism.

The 'Buy America' provision in the US$819 billion economic stimulus plan, which the US House of Representatives passed on Thursday, has already drawn sharp protests from major trade partners like Canada and the European Union.

The provision, which builds on the Buy American Act in 1933, states that all public works projects financed by the economic rescue package must be built with US iron and steel.

The Senate, which will begin deliberating its own version of the stimulus package next Monday, is said to be readying plans to expand this 'Buy America' provision to ensure all government-funded projects use mostly products made in the US.
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Vice President Joe Biden told CNBC on Thursday he believed it was legitimate to have some portions of "Buy American" in the stimulus plan and disagreed with those who said it was a harbinger of protectionism.

But European steelmakers objected, saying it would violate U.S. commitments under the World Trade Organization's government procurement pact and European Union officials said they were examining the issue to decide if grounds exist for a WTO complaint.
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We're barely two weeks into the Obama presidency, and a year or more into the global recession, and already the backlash is beginning.

Even worse, from the far corners of the world, we can see the first suggestions of the most pernicious of all possible outcomes materializing. Forget the first 100 days and the honeymoon of a new American leader. The world wants results now, or else.

In Britain, protests are spreading over the use of foreign workers in industries from power plants to oil refineries. Russia awakened last week to protests ranging from Communists in Moscow demanding widespread forced nationalization of industries to workers in Vladivostok seeking an end to tariffs on imported cars.

In France, Christine LaGarde, the nation's brilliant but beleaguered finance minister, laments that the world "situation right now carries two major risks -- social disturbances and protectionism." The term "social disturbances," of course, is a gentle euphemism for a backlash against foreigners.

And in the US Congress, there already are strong rumblings of protectionism. The "Buy America" rule attached to the $819 billion stimulus plan now working its way through the Senate is only a short step from new tariff barriers, not to mention the retaliation such measures would provoke from our major trading partners.

Try to remember America's last depression. Yes, we indeed may be headed in that direction. Though a depression is a 10% contraction in GDP, we just hit minus 3.8% for the fourth quarter of last year.

The one measure that could indeed catapult us that final leg into full-fledged depression would be to revisit the errors of the Smoot-Hawley Tariff -- that catastrophic move by a group of Congressional know-nothings in 1930.

Thousands of factories went idle as total world trade plunged by two-thirds between 1929 and 1934
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