Competition In Iraq...But Not In America

by Aaron Lukas

Aaron Lukas is an analyst with the Cato Institute's Center for Trade Policy Studies.

January 2, 2004

The Bush Administration released a blueprint this week outlining $13 billion in U.S. government reconstruction spending for Iraq in 2004. As expected, only companies from the 63 nations that officially support the campaign to liberate and rebuild Iraq will be allowed to compete for those funds. When announced last month, that policy elicited an anguished outcry from many quarters, both foreign and domestic. President Bush responded brusquely. "Our people risk their lives," he said. "Friendly coalition folks risk their lives, and, therefore, the contracting is going to reflect that-and that's what the U.S. taxpayers expect."

Undoubtedly, an unstated strategic pragmatism also animates the Administration's policy in Iraq. The president surely hopes that the promise of fat reconstruction contracts will attract new nations into the "coalition of the willing." The fact that France and Germany decided to cancel some of Iraq's sovereign debt shortly after the contracts policy was announced suggests that he may be right.

Reasonable people will inevitably disagree over whether restricting contracts to coalition partners is wise. Critics assert that this will embitter rather than entice potential allies. They also note that fewer contract bidders means less competition, higher prices, and a potentially heavier burden for U.S. taxpayers to shoulder.

Some of the loudest voices raised in opposition to Mr. Bush's policy have been those of the leading Democratic contenders for his job. Fair enough. It's unfortunate, though, that spending federal reconstruction money in Iraq is one of the few places these pols see value in international competition.

Take House Minority Leader Dick Gephardt. On ABC's This Week, he vigorously scolded President Bush, lecturing that "We need to stop making statements that people who weren't part of the coalition can't get contracts."

That's interesting advice coming from a proud protectionist who rallies union faithful with talk of "saving U.S. jobs" and "buying American." Indeed, Gephardt led the fight against the North American Free Trade Agreement in part because he believed that U.S. production contracts would go to Mexican firms. And he sponsored legislation in 1992 to force Japan to sell less to Americans or face an import ban on cars.

It seems it's fine to alienate allies when the issue is giving Americans a choice about how to spend their money. It's only when Gephardt can bludgeon the President with the charge of "unilateralism" that he cheers for more competition.

John Kerry-a one-time free trade Senator who has sadly morphed into a protectionist candidate-also attacked President Bush over the contracts issue. "I think it's a terrible decision," he said. "I think it's a decision that says to the world, 'Our occupation of Iraq is about Halliburton and business and the president's friends.'"

When speaking to primary voters, however, Kerry sees no problem with restricting business to U.S. companies. "At the Fall Foliage festival in Warner, a woman asks what kind of car he drives," reports the Christian Science Monitor. "He hesitates-it's unclear why she's asking. He owns a Chrysler and an old Dodge, he tells her. But she rephrases the question more pointedly: Why not a hybrid? He wanted one, he assures her, but the models available are all Japanese-and he only buys American cars."

So individuals are patriotic when they buy American at home, but the government is virtuous when it doesn't in Iraq. Get it?

Finally, Howard Dean cited the Administration's Iraq contracts policy as an example of the Administration's confrontational approach "all over the world." In a statement, he charged that "this president is preventing entire nations from bidding on contracts in Iraq so that his campaign contributors can continue to overcharge American taxpayers."

Yet in a televised presidential debate, Dean had a different take on the value of international competition. "In the Midwest, our manufacturing jobs are hemorrhaging," he said. "We have to go back and revise every single trade agreement that we have to include labor standards, environmental standards and human rights standards."

Translation: Buying a shirt from a company in Mexico is morally suspect. Awarding U.S. government contacts to Mexican companies in Iraq is sound statecraft.

Whether these Democrats' stance on Iraq contacts stems from a legitimate difference of opinion or from mere political expediency is anyone's guess. The candidates should realize, however, that it's absurd to talk of building bridges with America's allies while simultaneously proposing to block their exports. And if American taxpayers have the right to the best value for their money in Iraq, then surely they have that same right back home.