The Senate, under prodding from the Obama Administration, yesterday diluted the provisions in the stimulus package mandating that bill beneficiaries “Buy American”. The White House utilized a provision that ensures that no proviso in the bill would violate existing trade pacts. From the New York Times:

The White House had been seeking assurances that any requirements barring purchases from abroad did not significantly expand existing law or violate existing trade treaties. The language approved by the Senate said such provisions should be “applied in a manner consistent with United States obligations under international agreements.”

More than 50 nations are covered by treaties with the United States, and thus may be entitled to exceptions to the restrictions. Many of those countries, and the European Union, have issued protests about the legislation.

As Obama moves away from some of the protectionist sentiment he expressed during the campaign he had a warning shot fired from Democrats concerned about protecting American jobs with the federal money spent in this bill.

Even as the protests from Europe poured in, Democratic lawmakers from steel-producing states warned Mr. Obama that if he backed away from the provisions, they would oppose the whole stimulus bill — perhaps an empty threat, but perhaps not.

“If it’s not in, I’m not supporting this package and I’ll bring a lot of votes with me,” said Representative James L. Oberstar, the Minnesota Democrat who is chairman of the House Transportation Committee.

Whether the diluted trade provision is in or out in the stimulus President Obama is going to have a tough time threading the needle on trade. There is a confrontation coming on this issue, and that looming battle is likely to be expedited by the massive job losses we are experiencing. Treaties or not it is not easily explainable to the public that U.S. tax dollars should be buying foreign iron and steel that employ workers outside the United States, especially when such products have in the past been “dumped” at below market rates onto the U.S. market. The President needs to establish firmly that free trade must mean fair trade. Protecting American jobs and what little is left of our manufacturing base will mean telling our trading partners some things they do not want to hear. That conversation must occur now.