v'ܩ Buy American Clause - Why It’s Not as Great as it Sounds
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Buy American Clause - Why It’s Not as Great as it Sounds

February 5th, 2009

There is a “Buy American” clause in the stimulus package currently being debated by Congress. Both the $819 billion stimulus bill passed by the House last week and the Senate version currently being debated require that any projects in the stimulus package use U.S.-made iron and steel. The Senate bill just softened a provision that would have required all manufactured goods used in the projects be U.S.-made. It now matches the House bill only including iron and steel.

On the surface this sounds great. Keep the money in America. However, this has several incredibly obvious problems. First, it doesn’t make any sense to handicap the stimulus package. There are some things that need to be accomplished. If the US companies can’t be competitive and we can do more for our infrastructure using foreign steel, we should use the foreign steel.

John Bruton, the European Union’s envoy to Washington, said it this way, “We believe that to insert protectionist measures in a stimulus bill diminishes the stimulus, diminishes the global effectiveness of the stimulus by introducing artificial barriers to its use.”

It just makes sense to use the dollars we are spending wisely. Helping one sector of the economy in America is not worth the detriment it would have on the effectiveness of the work we are trying to accomplish.

The other problem, which in my opinion is more important, is the hard feelings that will be created among our trading partners. We have in recent times become heavily dependent on exports, and in fact it was the one bright spot of 2008. With the weaker dollar, many American companies made a lot of money by selling overseas. If start trying to be protectionist, other countries will do the same. That will hurt many more Americans than this buy American clause would help.

FedEx CEO Fred Smith said this, “”If the Congress passes this buy-American provision, I can assure you — and we operate in 220-some-odd countries around the world and are a huge part of the import-export infrastructure of the United States — we will get retaliation, and it will be American jobs at risk.”

The BBC said that European and Canadian ambassadors to Washington have already warned that the clause could provoke protectionism and trigger retaliatory moves.

Even President Obama and I agree on this (which let me tell you isn’t something that happens very often). He said this when asked about the clause:

I don’t want provisions that are going to be a violation of World Trade Organization agreements or in other ways signal protectionism. I think that would be a mistake right now. That is a potential source of trade wars that we can’t afford at a time when trade is sinking all across the globe.

This is not a good thing for anybody. Email your Congressmen and let them know that the “Buy American” clause is not something that should be in the stimulus package.