‘Buy American’ Debate Is Not Dead Yet

The near-$1 trillion spending bill working its way through Congress has all the hallmarks of business as usual in Washington. It includes billions of dollars for home-state pet projects, billions more in spoils for majority-party benefactors, and numerous provisions that its sponsors hoped would elude close scrutiny.

One such provision is the Buy American requirement, which restricts competition to domestic suppliers on infrastructure projects financed through the spending bill. The provision clearly violates U.S. commitments under various international agreements to allow most major trading partners to compete for government procurement. And it invites frivolous waste of the kind reserved for people spending other people’s money.

By limiting competition, expanded Buy American requirements mean that taxpayers would get the smallest bang for their infrastructure buck. Cordoning off the market for U.S. suppliers would mean higher price tags, fewer projects funded, and fewer people hired. And by abrogating our obligations to allow major trading partners to compete for those projects, any short-term increases in U.S. economic activity and U.S. job creation likely would be offset by lost export sales–and the jobs that go with them–on account of copycat protectionism abroad.

Buy American requirements have been a part of U.S. procurement rules for 75 years. But those restrictions have been eased over the decades. Under various international agreements, the United States grants waivers to most major trade partners from many of the law’s restrictions. But the House-passed and original Senate-proposed legislation would supersede the waivers and raise considerably the threshold for issuing case-specific exemptions to foreign firms that wish to bid on procurement projects funded from the legislation.

On February 3, one week after passage of the House-version of the spending bill, President Obama finally broke his silence over the issue, expressing aversion to “sending a protectionist message” and opposition to provisions that could “trigger a trade war.”  The president’s comments were expected to soften the stance of some proponents of Buy American in both chambers.  Indeed those comments appear to have made some impression in the Senate.

Although the Senate voted down an amendment by Sen. McCain to exempt all of the infrasturcture spending in the bill from Buy American laws, it agreed to insert an amendment (sponsored by longtime trade skeptic Byron Dorgan, of all people) to ensure that the Buy American clause would be “applied in a manner consistent with United States obligations under international agreements.”  But that’s still no guarantee.  Unless the Buy American language is stripped entirely or the legislation includes language explicitly granting the waivers that currently exempt most of our major trade partners, there will be room for interpretation.

And there is still the problem of the House of Representatives, where the President’s concerns have not registered with the Congressional Steel Caucus or the chairman of the House Transportation Committee, James Oberstar, who said, “If [Buy American provisions are] not in, I’m not supporting this package and I’ll bring a lot of votes with me.”

So, will congressional Democrats very publicly shun their president on this issue or can they resist their growing habit of acting unilaterally and provocatively on trade?  The issue remains quite unresolved.