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Reject “Buy American” Rules

When the American Recovery and Reinvestment Act was approved in February 2009, it included “Buy American” rules that stirred concern at home and abroad. The U.S. Chamber applauded the inclusion of an amendment requiring that these rules be applied “in a manner consistent with U.S. obligations under international agreements.” This action largely resolved the issue at the national level, but federal regulators forced the “Buy American” rules onto states and municipalities for the first time.

The U.S. Chamber has long advocated a “Buy American, Sell American” strategy. The rationale is simple: Outside the United States are markets that represent 80% of the world’s purchasing power, 92% of its economic growth, and 95% of its consumers. “Buy American” rules that invite foreign retaliation threaten U.S. access to export markets and the American jobs they support. Chinese officials, for example, regularly cite the “Buy American” rules in the Recovery Act as a justification for their own discriminatory policies.

The purely domestic impact is also costly. The “Buy American” rules in the Recovery Act delayed so-called “shovel-ready” infrastructure projects by generating red tape and confusion. Many Recovery Act projects were stalled while municipalities conferred with their lawyers to figure out how to comply. Also, the “Buy American” rules have been interpreted in a way that bars some U.S.-based manufacturers from bidding on projects because they find it impossible to avoid sourcing at least a portion of their content from abroad.

The U.S. Chamber released a study that found the cost of “Buy American” rules in the Recovery Act was high. While such rules may create a limited number of U.S. jobs, these gains quickly evaporate as other countries implement “buy national” policies in their own stimulus programs. If foreign governments lock U.S. companies out of just one percent of this total spending, the Chamber estimated net U.S. job loss could surpass 170,000.

Congress should learn from this painful experience. Proposals to include “Buy American” provisions in pending legislation appear regularly, but the Chamber continues to fight these proposals — successfully, in many cases.

Chamber Recommendations

  • Congress should reconsider the high cost of “Buy American” rules and the red tape, higher costs, and trade retaliation they spawn — and reject such provisions in future legislation.
  • Administration officials should use their existing authority to lift the burden of “Buy American” mandates from states and municipalities and allow much greater flexibility where such rules already exist.