Editorial: The Peril of ‘Buy American’

(New York Times)

It’s not surprising that Democrats in Congress could not resist adding a “Buy American” provision to the fiscal stimulus bill earlier this year. It might seem sensible (or at least politically useful) to ensure that taxpayer dollars would be used exclusively to support American jobs.

But as states and municipalities start spending stimulus money, the idea is starting to look as counterproductive as it should have looked from the beginning. It is sparking conflict with American allies and, rather than supporting employment at home, the “Buy American” effort could ultimately cost American jobs.

Foreign and domestic companies that employ hundreds of workers in this country cannot bid for government projects because they cannot guarantee the American provenance of all the steel, iron and manufactured goods in their supply chain, as the provision requires. Others are scrambling to figure out whether American-made alternatives exist to replace their foreign inputs.

The steel company Duferco Farrell, for example, has cut about 600 jobs in Pennsylvania after it lost orders from its biggest customer because some of its goods are partly produced abroad. The Westlake Chemical Corporation of Houston has lost sales to a Canadian vinyl pipe maker that is cutting back production because it can’t bid for some American jobs.

America’s trading partners expected more of President Obama, who signed a declaration against protectionism at the summit of the biggest nations in April. He convinced Congress to add a clause to its “Buy American” effort promising Washington would meet its international obligations. But cities and some states are not bound by the rules of the World Trade Organization and the North American Free Trade Agreement. Read more here.