Viewpoint: The Downside of “Buy American”
EDITOR’S NOTE: A group of 28 industry associations — representing equipment manufacturers, technology businesses and trade groups — sent the following letter to congressional leaders late last year:
As Congress moves forward on new legislation to bolster job growth in the United States, we strongly urge you to reject proposals to include new, restrictive “Buy American” provisions, which will undermine, rather than foster, U.S. job growth.
At a time of significant unemployment, particularly in sectors meant to benefit from infrastructure and stimulus spending — such as construction, construction equipment and manufacturing — any jobs’ legislation should seek to get money spent quickly and in the most efficient and effective manner without delay. The “Buy American” provisions are antithetical to that objective. In fact, new more restrictive “Buy American” provisions, such as those included in the American Recovery and Reinvestment Act (ARRA), will significantly delay the implementation of job-creating projects and diminish competition and efficiency in the contracting process, with a resultant lowering in the quality and cost-effectiveness of infrastructure improvements. The result will be delayed projects, fewer projects funded and fewer Americans put back to work.
Inclusion of “Buy American” provisions at the sub-federal level, particularly the municipal level, where water, schools, housing and many other projects are initiated, is highly troubling. For example, the vast majority of major inputs into drinking water and wastewater infrastructure projects is already American-made, including pipe and structural steel. This market, however, also depends on incorporating numerous specialized pieces of equipment, a significant portion of which is produced through international production and supply chains with trade agreement partners from whom the federal government can procure, but which new “Buy American” provisions would prevent local governments from using. According to the U.S. EPA, as of November 11, 2009, only $1.3 billion of the $6 billion in ARRA funds for the drinking water and wastewater State Revolving Fund programs has been committed, which is largely due to delays, concerns and confusion relating to “Buy American” rules. Despite the waiver process, the end result of these “Buy American” provisions has been to slow local governments’ ability to fund and start “shovel-ready” projects.
Such provisions will also create enormous unfunded administrative burdens on local officials not experienced with international trade and customs rules that will further delay procurements going forward, further impeding the swift and effective expenditure of job-creating funds.
The U.S. Chamber of Commerce released a study in September that found the cost of “Buy American” rules in ARRA is substantial, especially as other countries implement mirroring “buy national” policies of their own. If foreign governments lock U.S. companies out of just one percent of their own stimulus spending, the net U.S. job loss could surpass 170,000.
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