Many “Made-in-USA” goods and services are the best in the world. However, American companies and the workers they employ don’t just want Americans to buy them; we want to sell them to the 95% of the world’s consumers who live outside the United States as well.
These simple realities lie at the heart of the problem posed by efforts to expand the already extensive “Buy American” rules in U.S. law. In short, such efforts threaten to make it more difficult to spur growth and jobs here at home.
Recent history offers a cautionary tale. When Congress approved the American Recovery and Reinvestment Act in 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 for the first time federal regulators forced the “Buy American” rules onto states and municipalities receiving funds under the Recovery Act. The result was red tape and confusion, leading to frustrating delays for so-called “shovel-ready” infrastructure projects. Municipalities unfamiliar with these requirements were obliged to confer with their lawyers to figure out how to comply. The goal of stimulating growth and countering a sharp recession was frustrated. Project costs rose as well.
Moreover, “Buy American” rules pose added difficulties for procurements dependent on manufactured goods produced with inputs from global value chains. For example, the multi-billion-dollar water and wastewater infrastructure sector depends on state and federal procurement. Firms of all sizes compete in this industry, but all rely on some components and inputs from around the globe. Ironically, in the aftermath of the Recovery Act, many U.S.-based manufacturers were prevented from bidding on projects because they found it impossible to avoid sourcing at least a portion of their content from abroad.
Adding insult to injury, “Buy American” rules invite foreign retaliation and threaten U.S. access to export markets and the American jobs they support. Chinese officials, for example, cited the “Buy American” rules as a justification for their own discriminatory “indigenous innovation” policies. Even Canadian provinces threatened to emulate the U.S. moves.
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 were to 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.
The United States should learn from this painful experience. While “Buy American” rules have been a feature of U.S. law for decades, proposals to expand the reach of these provisions appear regularly. Expanding these rules to new sectors—particularly to complex manufactured goods produced on the basis of global supply chains—can be devastating. The Chamber continues to oppose these proposals to expand the reach of “Buy American” rules.