It seems innocuous enough, doesn't it? You're in government, you want to kick-start your economy with a spending package, and you want the money to be used to create jobs at home. Meanwhile, your local producers are saying that without your assistance, they will lay off workers. So you spend money, you create jobs, those workers pay taxes, and the money comes back to you. A win-win.

So sensible, indeed. No doubt that's what our own government thought when they put a buy-local provision in the stimulus package announced late last year. We all applauded.

Well, we did until a few days ago. Then the Americans announced their own proposed massive stimulus package, indicating that they, too, would play that game. When word came from Washington that Congress would impose a 'buy American' requirement on the stimulus package, the world shuddered.

If America goes this route, other countries will follow. The danger is that the criss-crossing drawbridges that made for a global economy will then get drawn up. And if there are few things economists can agree on, here's one: when the American Congress responded to the 1929 stock market crash with a protectionist trade law - the infamous Smoot-Hawley tariff - it turned the world recession into the Great Depression.

Protect your producers

By enabling countries to realise their comparative advantages, trade raises productivity. Thereby, economies grow, and workers are employed. Of course, the perfect arrangement is to protect your producers, but export freely to your neighbours. But that is a bit like hoping your spouse will let you keep a lover. In trade politics, once you protect your own, your neighbours follow suit. Hence, the fear that America might launch a protectionist spiral.

Besides, protectionist trade legislation doesn't necessarily create jobs. Research in the US has found that by inflating the prices the government pays producers, 'buy American' provisions reduce the money left over for government to spend on other things. Thus, the provisions protect existing jobs, but create no new ones - indeed, they likely impede new job-creation. Employed workers remain safe, as do corporate profits. But the mass of unemployed derive no benefit, and their ranks swell.

Happily for us, US President Obama has criticised the 'buy American' provision. But unhappily, he faces stiff resistance in Congress, where the Democratic majority, emboldened by the recent election, is pushing protectionism. So the world will watch uneasily as the US debates the stimulus package, and as the global economy - already in recession - teeters on the brink of depression. It may now be closer than we thought.

Defensive postures

In the midst of a storm, our instinct is always to retreat into our own yards and lock the doors. Now is not the time for defensive postures. Now, more than any, our leaders must venture out and take bold action. Caribbean leaders face a golden opportunity in April, when the hemisphere's leaders, Obama included, will be assembled in Trinidad for the Summit of the Americas. We need to send a strong message that reversing free trade is anathema. But we'll be hard-pressed to pick the splinter from the American eye if we've stuck a plank in our own.

It's not that consumers should refrain from buying local. Personally, I prefer getting my produce from the local market, because I'm willing to pay a premium to get food from a farmer who lives, in effect, down the road. But I'm off the global radar, and trade theory allows me to buy what I want. But when governments do the same thing, and worse when they make it policy, the world notices. And things could get ugly.