By Jennifer Wishon, CBN News Reporter

February 16, 2009

CBNNews.com - Buy American. It sounds patriotic - like the right thing to do.

It's also a requirement of the economic stimulus package recently passed by Congress.

But not everyone agrees it's a good idea.

Caterpillar, recognized for its yellow engines, tractors and backhoes, is keeping a close eye on how the new stimulus plan plays out. They expect spending on infrastructure projects to boost their sales.

But executives are really watching how other countries react to the language in the bill that requires supplies for those projects - like iron and steel - be "Made in America."

"While it may sound good to say "Buy American," we know from history that those type of isolationists or protectionist measures end up doing far more harm than good in the long run," Jim Dugan, Caterpillar spokesman, said.

Can Tariffs Protect The Economy?

Dugan is referring to tariffs imposed on imports by Congress in 1930 at the beginning of the Great Depression. The idea was meant to protect struggling American industries. But it instead made a bad economy worse. Between 1929 and 1934 world trade declined by 66 percent.

For companies like Caterpillar, the problem is 50 to 80 percent of the products manufactured here in Illinois are exported. The fear is that if America turns inward, other countries will, too. The result: thousands more American jobs will be lost.

"We've already heard from politicians in many other countries, if the United States takes this action, we're going to be forced to do the same," Dugan said.

Indeed, concern from European politicians about the "Buy American" provision led President Obama and members of Congress to make clear the U.S. was not going to impose any anti free-trade protectionist measures.

Analysts at the Alliance for American Manufacturing say buying American will protect taxpayer investments. They say "buy American" is far different from the tariffs of the 1930s.

"It has been consistently applied to every major infrastructure expenditure that we've had in the united states since WWII," Alliance director Scott Paul explained.

800,000 Manufacturing Jobs Lost Last Year

According to the Alliance, 800,000 American manufacturing jobs were lost last year alone. In the past decade 40,000 American factories have shut down.

At a time when Americans need jobs and billions are being spent on infrastructure improvements, Paul says buying American in a manner consistent with world trade agreements just make sense.

"For every manufacturing job you create, that job will support four or five other jobs in the community," he said.

Businesses and economists across the globe will be watching the impact of the "Buy American" provision.

Meanwhile, jobless Americans will be watching too, waiting each day for jobs to return to their communities.