Con: Job-killing buy American’ rules hurt trade and make U.S. less competitive globally
In February, the Senate agreed to revise a controversial “buy American” provision in the stimulus bill. The change ensured that the United States won’t violate trade rules that we not only pledged to uphold, but actually helped write. Such violations could have triggered a tit-for-tat trade war with our allies around the world.
The debate earlier this year showed how easy it is to demagogue the “buy American” issue. In the end, if we refuse to buy foreign-made goods, our trading partners will probably refuse to buy from us. Since the United States is the world’s largest exporter, we have more to lose from a trade war than anyone.
This is why the U.S. Chamber of Commerce has long advocated a “buy American, sell American” strategy. We believe many “Made-in-USA” goods and services are the best in the world. We just want the 95 percent of the world’s consumers who live outside the United States to buy them, too.
Reneging on our promises would have been the equivalent of hanging a “closed for business” sign on the country’s front door. It would say we don’t welcome the foreign companies who employ more than 5 million Americans at good wages, for a total payroll of more than $350 billion.
The U.S. Chamber helped lead opposition to “buy American” mandates in the economic stimulus, and we caught a lot of flak for it. So we were especially pleased when President Obama also warned of the danger posed by “buy American” rules.
In the end, the Senate unanimously approved an amendment to ensure any “buy American” mandates respect our commitments under international agreements. This action may have helped avert a trade war.
However, the final bill did include some “buy American” requirements. Even as amended, they threaten to drive up the cost of government projects.
For instance, “buy American” rules similar to those in the stimulus added $400 million to the cost of reconstructing the Bay Bridge in the 1990s. Who foots the bill? American taxpayers do.
“Buy American” rules also spawn red tape that can delay “shovel-ready” projects and dampen job creation. This is why the Chamber is working with regulators to see these provisions implemented in a way that limits waste and delay.
Another part of a “buy American, sell American” strategy is to encourage other countries to join the same international agreements President Obama urged Congress to respect. The most important of these is the World Trade Organization’s Government Procurement Agreement.
Countries such as China, India and Brazil have not signed the GPA, so U.S. businesses are often excluded from procurement opportunities. China, for instance, has a strategy to promote “indigenous innovation,” and U.S. companies are often not allowed to bid on government contracts.
This is why protests about creeping U.S. protectionism from some foreign capitals ring hollow. Many countries have adopted domestic preferences for state-owned companies, investment restrictions, and import substitution polices that inhibit U.S. exports.
By contrast, the United States has chosen to reject such protectionism and lead by example. As for these countries, they now have an excellent chance to take their own advice, join the GPA, and create a level playing field for American companies.
“Buy American” is part of larger debate about economic isolationism and the U.S. economy. Too few Americans are aware that U.S. exports reached nearly $2 trillion last year. Too many politicians prefer to ignore the facts and demagogue an issue like “buy American.”
We’re pleased President Obama and many members of Congress agreed that erecting barriers to trade and implementing protectionist measures will only hurt our economy and standing in the world. The U.S. Chamber agrees with them that it’s patriotic to buy American—and ensure that we continue to sell American, too.
John Murphy is vice president for international affairs at the U.S. Chamber of Commerce. Readers may write to him at USCOC, 1615 H St. NW, Washington, D.C. 20062-2000; Web site: www.uschamber.com.