[Note: updated on 8.6.2010]
What is the Buy American Act?
The Buy American Act was passed under President Hoover in 1933. Its intent was to help American-owned companies by requiring the US government to buy products made in the USA.
The Buy American Act was tailored more specifically to purchases associated with transit-related projects costing over US$100,000. Projects authorized by the Federal Transit Administration (FTA) and the Federal Highway Administration (FHWA) are constrained by strict regulations detailing from where it is acceptable to purchase materials.
What’s the significance?
The Buy American Act puts foreign countries with competitive markets or lower prices at a disadvantage. The Act does mitigate this effect in circumstances where the FTA or FHWA deems it appropriate to buy products made outside the US (usually in cases of large price discrepancy or unavailability within the US).
As the Obama administration debates whether to strengthen or lessen the provisions in the Buy American Act, more foreign and domestic players are sharing their opinions. Canada, the US’s main trading partner, is staunchly opposed to these regulations and wishes to be exempt from its rules. Many European countries are also watching closely to see what becomes of the Act. Both have warned of possible “do not Buy American” provisions emerging from their governments should the act go through. Simultaneously, unions and lobbyists for the steel industry are putting pressure on leaders to heighten regulations. It remains unclear what the outcome will be, but forming bilateral trade agreements with Canada and each European country seems exceedingly complex and unlikely.
Who’s talking about it?
Senator Fritz Hollings thinks a trade war is more necessary than a war in Afghanistan and that "Enforcing the 'Buy American' Act would create more jobs"...Paul Krugman, writing in his blog for the New York Times, reminds us that while there is a strong “case against protectionism…these are not normal conditions” and Buy American may be better for the short-run....Kevin Drum’s take is that while it makes sense to spend stimulus money on American goods, using the Buy American slogan will only generate hostility towards the US…In a Room for Debate posting, union VP and machinist Roger Simmermaker says it’s all about returning to the American ideals of “self-sufficiency, self-reliance and independence”…Sherrod Brown, Democratic Senator from Ohio, couldn’t agree more. He insists that Buy America is flexible, not in violation of WTO agreements or trade laws, and is a choice – “Do we want to use billions in tax dollars to create jobs in Ohio or in China?”….Well I think we know the answer to that question, but so far it doesn’t seem to be that simple.