Doug Palmer reports that the stimulus bill passed by the House today includes "Buy America" provisions for government purchases of steel (and purchases of cloth for TSA uniforms): House approves "Buy America" steel measure. Anthony Faiola reports that the 'Buy American' Rider Sparks Trade Debate.
Both Palmer and Faiola report that efforts will be made in the Senate to expand the provision to cover more goods.
This action expands "Buy America" provisions already in U.S. government procurement law. As the Chamber of Commerce (and other organizations) noted in a recent letter:
U.S. law already imposes significant Buy American mandates on products purchased by the Federal government, as well as additional mandates for federally funded highway projects. These provisions generally require the use of American products except in specifically defined circumstances...
But this is still a bad idea. The Chamber pointed out several problems. The bill will:
- Undermine America’s leadership in the global response to the worldwide financial crisis by turning our backs on the November 15, 2008 G-20 Joint Declaration commitment that “within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.” We believe that any expansion of Buy American-type provisions in the economic stimulus legislation would be counter to that commitment and American leadership thus far.
- Shut U.S. companies and their workers out of the economic stimulus programs being initiated around the world. Inclusion of new trade-restrictive proposals would send precisely the wrong signal to governments around the world that are undertaking their own economic stimulus programs. The list of countries moving forward with their own economic recovery programs – many of whom are major markets for American goods and services – is growing. Already, China, Germany, Great Britain, France, Australia, India and other countries have initiated or are preparing to initiate major new infrastructure and other stimulus projects. If the United States further restricts access to our market, these other countries will certainly follow our lead, shutting U.S. exporters and their workers out of hundreds of billions of dollars of new business, while propping up their own national champions to the detriment of the United States. At a time when American exports are one of the few bright spots of the U.S. economy and markets are weakening overseas, the U.S. Congress should be taking actions to promote U.S. exports, not undermine them.
- Unnecessarily delay and undermine the economic stimulus goals of this legislation. Current provisions already require that supplies for public use in federally funded highway projects be manufactured in the United States substantially all from articles, material or supplies mined, produced, or manufactured in the United States. With such a huge infrastructure task ahead, adding additional restrictions will only delay the ability of projects to move forward, delay job creation and delay economic recovery.
- Diminish competition and efficiency in the contracting process, which will result in lowering the quality and cost-effectiveness of our infrastructure improvements.
- Violate the United States’ international commitments, depending upon the actual proposal. The United States, through its membership in the World Trade Organization Government Procurement Agreement (GPA) and several bilateral and regional trade agreements, has guaranteed non-discriminatory access to the procurement markets of many of our largest trading partners. In return, the United States has agreed to provide non-discriminatory access to our own procurement markets for projects above certain dollar thresholds. The U.S. approach, crafted over successive Democratic and Republican Administrations, preserves many safeguards in our procurement rules for American goods and firms, including Buy American provisions for some projects, as well as small-business preferences. If the United States expands or enacts new Buy American-type provisions that abrogate U.S. GPA or our other trade agreement commitments, the United States and U.S. firms will face retaliatory sanctions in other markets and jeopardize our ability to open other foreign government procurement markets to U.S. goods and services.
The Washington Post was also concerned (Trade Test):
"Buy American" sounds patriotic, but paying more than necessary for steel diverts resources that could create jobs in other industries. Worse, it raises the prospect of retaliation against American exporters by U.S. trading partners. The director-general of the European steel industry trade association already has threatened to take the United States before the World Trade Organization if the steel provision passes. (Notably, European stimulus programs do not bar U.S. steel or other products -- yet.) "Buy American" would violate the Nov. 15 G-20 joint declaration, which committed the United States to "refrain from raising new barriers to investment or trade in goods and services" until November 2009.
We do not underestimate the plight of the U.S. steel industry and its workers. Just five months ago, steel plants were operating at 91 percent of capacity; today, because of the collapse in automaking and construction, capacity utilization is 43 percent, according to the Iron and Steel Institute. Alas, the same could be said of many other industries -- including some that, unlike steel, do not stand to benefit from the federal effort to save General Motors and Chrysler. Caterpillar, a huge exporter, just laid off 20,000 workers. We can see why U.S. Steel might support a law that puts Caterpillar's overseas sales at risk. But why is it in the national interest?
Elaborating one of the Chamber's points, a loss of cost-effectiveness means taxpayers' will get less for their tax dollar in terms of new transportation, communications, or green infrastructure.
A minor point: if some of our stimulus leaks out it will stimulate our trading partners, making them better markets for our exporters.
The trade agreement relating to government procurement is described here: Government Procurement Agreement.
Jan 29: minor edits.
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