Letter on the "Buy American" mandates in the American Recovery and Reinvestment Act (ARRA) of 2009
June 2, 2009
TO THE MEMBERS OF THE UNITED STATES CONGRESS:
The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, has growing concerns over the impact of the "Buy American" mandates in the American Recovery and Reinvestment Act (ARRA) of 2009. As you know, the Chamber supported passage of this legislation, which provided an urgently needed stimulus to the crumbling U.S. economy, and only now are we seeing significant portions of the money flowing to our economy.
At the time, we noted the risk that "Buy American" provisions would backfire on the United States and harm American workers and companies. Consequently, the Chamber applauded Congressional approval of an amendment to ensure these provisions are implemented in a manner consistent with U.S. obligations under international agreements.
Further, on April 2 the United States joined with other G20 nations in pledging that stimulus measures would "refrain from raising new barriers to investment or to trade in goods and services" and would "rectify promptly any such measures." This included a promise to "minimize any negative impact on trade and investment of our domestic policy actions, including fiscal policy."
Today, it appears ARRA funds are being disbursed at the federal level in a manner consistent with U.S. obligations under international agreements such as the World Trade Organization (WTO) Government Procurement Agreement. However, the Government Accountability Office estimates that state and local governments will administer about $280 billion in ARRA funds. Local governments are not bound by these international agreements, nor are many state governments.
As a result, the "Buy American" requirements are having a major impact on projects administered by state and local governments, resulting in declining trade and lost jobs for American workers. This is particularly damaging to the U.S. business relationship with Canada—America's largest trading partner. In water and wastewater infrastructure, for example, Canadian firms are now being excluded from U.S. municipal contracts and retaliation by Canadian municipalities could result in $3 billion in lost business for U.S. water and wastewater equipment manufacturers.
In addition, the "Buy American" rules are being interpreted in a way that bars some U.S.- based manufacturers from bidding on projects. Many U.S. manufacturers rely on global production chains that integrate components from U.S. and foreign sources. American manufacturers are finding it difficult to comply with these new "Buy American" rules because it is often impossible to avoid sourcing at least a portion of their content from other countries. The timing and cost for this disruption — coming in the midst of the worst economic recession in decades — could hardly be worse for U.S. manufacturers.
The law of unforeseen consequences is exacting a heavy toll. The Washington Post recently reported that 600 United Steel Workers in Pennsylvania, whose union lobbied for the "Buy American" rules, may even lose their jobs as a result. We are sending exactly the wrong signal to our trading partners, and a retaliatory spiral may already be underway.
Today, the Chamber urges you to reject the inclusion of "Buy American" provisions in future legislation. Two bills that have passed the House, the "Water Quality Investment Act of 2009" and the "21st Century Green High-Performing Public School Facilities Act," have included "Buy American" mandates. These bills authorize billions of dollars in spending over years and risk inciting further retaliation from our trading partners.
The Chamber is also urging the administration to instruct state and local officials to emulate the federal government's approach to implementing the ARRA's "Buy American" rules. This may require specific guidance allowing state and local governments to treat non-U.S. manufactured products and parts from designated countries the same as the federal government.
As more ARRA funds are contracted, the adverse impact of the legislation's "Buy American" mandates will become more visible, further demonstrating why additional requirements should not be included in other bills. The Chamber urges you to act now to ensure the U.S. economy is not unnecessarily harmed by these and future "Buy American" rules.
R. Bruce Josten