"Buy American." Photo: Wedingo (flickr)

The controversial "buy American" provision in the economic stimulus packages has added fuel to the firey protectionism debate and has the power to hurt Americans and the world alike.

The "buy American" provision requires all public works projects funded under the recently passed stimulus to use only American steel, iron, and manufactured goods. The clause also changes how the government awards contracts for these projects. Normally, contracts are given any company that can do the best job for the lowest price. But under the new clause, an American company will be awarded the contract if their bid is less than 25 percent higher than foreign companies.

What does all this mean? It means goods from countries like China, India, and 100 other developing countries cannot be used in infrastructure projects funded by the stimulus. Burton G. Malkiel, a professor of economics at the Princeton University, explains to China View why in the past "buy American" has resulted in a reduction in trade for the U.S. and the rest of the world:

In 1930, just as the world economy was sinking, the U.S. Congress passed the Smoot-Hawley Tariff Act, which essentially shut off imports into the U.S., he recalled. "Our trading partners retaliated, and world trade plummeted," said Malkiel. "Most economic historians now conclude that the tariff contributed importantly to the severity of the world-wide Great Depression...Later, as one of his last acts, President Herbert Hoover made the situation even worse by signing a 'Buy America Act' requiring all federal government projects to use American materials."

British Prime Minister Gordan Brown joined the chorus, urging against the "buy American," arguing that:

The thing we know about protectionism is in the end it protects nobody, least of all the poor.... It would be short-sighted at this time to renege on promises we've made to the poor.

The U.S. Chamber of Commerce and numerous heads of state have come out in protest against the clause. Brazil is even planning to challenge the clause at the World Trade Organization.

Protectionism during recessions has been known as "beggar thy neighbor" policy, because in trying to protect ourselves we hurt others. In other words, if one country puts up trade barriers, their policies hurt their neighbors, which can prompt these neighboring countries to adopt the same harmful barriers. We are all a part of the global economic crisis, we can't get out of it alone. The New York Times Op-ed columnist Douglas Irwin explains why "buy American" could harm the U.S. economy in the future:

American manufacturers have ample capacity to fill the new orders that will come as a result of the fiscal stimulus [...other countries are] right to be concerned. Once we get through the current economic mess, China, India and other countries are likely to continue their large investments in building projects. If such countries also adopt our preferences for domestic producers, then America will be at a competitive disadvantage in bidding for those contracts.

President Obama made an important anti-protectionist statement yesterday while in Canada — assuring America's largest trading partner that despite his critiques of Nafta while on the campaign trail, the Obama administration plans to "enhance" trade, rather than create barriers between the the two countries.

Now is a time where we've got to be very careful about any signals of protectionism, because as the economy of the world contracts, I think there's going to be a strong impulse, on the part of constituencies in all countries, to see if they can engage in beggar-thy-neighbor policies.

Obama took the opportunity to reiterate his pledge to revamp Nafta side agreements to include environmental and labor protections, stating:

My hope is that as our advisers and staffs and economic teams work this through, that there's a way of doing this that is not disruptive to the extraordinarily important trade relationships that exist between the United States and Canada.

Many General Motors manufacturing jobs has moved overseas. Photo: ifmuth (flickr)

Guess which media outlet is offering an insightful "We the People" series covering unemployment in the Midwest and other pressing U.S. election-year issues? The Kansas City Star? Perhaps the Chicago Tribune or the New York Times? Try Al Jazeera.

In "Jobs," the Dubai-based publisher examines how Dayton, Ohio is dealing with unemployment after losing more than 250,000 jobs in the last eight years. Dayton has been hit hard by outsourcing of manufacturing jobs, rising employment and increased home foreclosures. As one person put it, "the people are here but the jobs are not."

Watch part one of Jobs: End of the Line on YouTube

Watch part two of Jobs: End of the Line on YouTube

Photo: snowsoulmate (flickr)

A small farmer in Oaxaca, Mexico is spreading knowledge of ancient farming techniques to discourage citizens from abandoning their land.

The Mixteca highlands, where Jesús León Santos resides, is home to some of the most barren land in Mexico. However, in the last two decades, León and a group of farmers have worked to reclaim and reforest the land. Farmers are getting bigger yields a reason to stick around by adopting long-discarded farming techniques.

As the land has begun to produce again, Mr. León has reintroduced the traditional milpa, a plot where corn, climbing beans and squash grow together. The pre-Hispanic farming practice fixes nutrients in the soil and creates natural barriers to pests and disease.

Although the yields are tiny in comparison to mechanized, bulk-producing farms located elsewhere, they're enough to provide the option for people to remain on their own land — and in their own country.

Mexican farmers continue to abandon their land and migrate to the U.S., some because their soil is unproductive or they can no longer compete under Nafta. And those who remain face escalating global food prices. As one former Oaxacan farmer put it to AP, "Not only are farmers not growing food, but we are going hungry because we can't afford the foreign food that drove us off our farms."

León’s aspiration is to give options for a better life in Mexico itself. So far, his strategies have given some farmers an opportunity they haven't had in centuries.

For those of you interested in learning more about the Mixteca highlands and how farmers are implementing ancient agricultural practices, check out the book The Other Game: Lessons from How Life is Played in Mexican Villages.

The New York Times reports that despite concern over Nafta among Mexican farmers and U.S. big sugar companies, in time Nafta should make the U.S. consumer and the Mexican farmer better off.

Today, Business Week takes a look at how Mexico is benefiting under Nafta -- but why the free trade agreement hasn't solved all of Mexico's economic woes.

There's no question that the country has benefited greatly from Nafta: Mexico has become the world's 15th-largest exporter, sending abroad $272 billion of merchandise in 2007 ($43 billion of which was oil). It transformed a $3 billion trade deficit with the U.S. in 1993 into a $75 billion surplus in 2007. Mexico went on to sign free-trade agreements with 41 other countries, attracting some $223 billion of foreign investment in 15 years.

So, why did tens of thousands of angry Mexican farmers take to the streets in late January, demanding that Nafta be renegotiated? Because after a decade and a half of free trade, Mexico's economic transformation is incomplete, and many Mexicans are blaming Nafta for a plethora of problems that have more to do with bad government policies than with free trade.