The Cost of Buy American Mandates on American Jobs

Tuesday, February 16, 2010 - 7:00pm

Reviewing the "Buy American" Requirement on the Recovery Act's Anniversary

February 17, 2010

Download the full report (PDF)

Introduction

February 17, 2010, is the first anniversary of the signing into law of the American Recovery and Reinvestment Act (Public Law 111-5). The U.S. Chamber supported passage of this legislation, which provided a needed stimulus to the U.S. economy, but we had grave concerns with the inclusion of the "Buy American" provision in the law. Unfortunately, our concerns with the Buy American provisions have been realized. They are stunting job growth, slowing the initiation of projects, causing mass confusion, and creating an atmosphere of potential retaliation abroad.

On the first anniversary of the signing of the Recovery Act, the Chamber wants to highlight the ramifications of these counterproductive Buy American provisions in order to demonstrate why their inclusion in future bills will harm our economic recovery and the efficacy of such bills. Notwithstanding the positive effects from the Recovery Act, its impact could have been more pronounced and effective.

 

During debate on the Senate floor, the Chamber applauded approval of an amendment to ensure that the Buy American provisions were implemented in a manner consistent with U.S. obligations under international agreements. While not the complete solution that we needed, it was a helpful modification that limited the negative effects at the federal level.

 

Today, it appears that the Recovery Act 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's Government Procurement Agreement (GPA). However, a significant portion of the dollars that the Buy American requirement has an impact on are being spent at the sub-federal level where the GPA is oftentimes not applicable. As a result, the Buy American requirements are having major consequences on projects administered by state and local governments.

 

The problems with the Buy American provision are being noticed by constituencies at all levels, which instigated the need for the recent agreement announced on February 5, 2010 between the United States and Canada. The agreement allows Canadian companies the right to participate in projects funded under the Recovery Act at the federal, state, and local levels. This agreement is only applicable for Recovery Act funds and not similar requirements in future bills. However, it provides for a fast track consultation process if future pieces of legislation include similar requirements. In addition, Canada and the United States have agreed to offer each other permanent access for the majority of sub-federal level contracts under the provisions of the GPA.

 

This bilateral agreement is a positive development, but we still have tremendous concern with the Buy American provision in the Recovery Act, its negative consequences on projects and U.S. jobs, and its impact on our trade relations around the world.