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'Buy American' Issue Raises Its Thorny Head
By Richard McCormack
The first important test as to whether U.S. economic policy will change with a new presidential administration is unfolding in Washington. "Buy American" provisions being included in the massive economic stimulus packages have raised the ire of the multinational business community and their representatives in Washington, while hardening the resolve among companies and organizations lobbying on behalf of domestic manufacturers and workers.
The debate has raised emotions to a fevered level among implacable adherents on both sides of the free trade debate.
The scuttle was kicked off by the U.S. Chamber of Commerce after it learned of provisions in the American Recovery and Reinvestment Act of 2009 requiring that stimulus funds be used to buy only American-made iron and steel and textiles. That provision passed in committee by a vote of 55 to zero. A much broader provision that includes all manufactured goods did not make it into the House version of the bill, but it did in the Senate, due to the work of Sen. Byron Dorgan (D-N.D.), author of the book "Take This Job and Ship It."
Those supporting the Buy American provision have been stupefied by the opposition from the Chamber, the National Association of Manufacturers, editorial writers and companies such as General Electric and Caterpillar, which just announced job layoffs for 20,000 workers. They claim that the Chamber and big multinational companies that have shipped production offshore are raising red herrings about "protectionism," and are wrongly questioning the legality of the provisions under international rules. None of this is germane, argue the Buy American proponents, because it has already been addressed in law and through WTO government procurement agreements. Moreover, they ask, what is an emergency economic stimulus intended to do? Stimulate the manufacturing sector of overseas competitors?
"We have the worst economic circumstances we've had since the Great Depression and manufacturing in America is in a total and complete free fall," says United Steelworkers Union president Leo Gerard. "If the objective is to use taxpayer dollars -- those are my dollars -- to put people back to work in America and put the economy back on its feet, then the last thing we should be doing is buying products that are made offshore."
In a conference call with members of the press, Gerard twice repeated Obama's campaign pledge when the presidential candidate "hit the nail right on the head and said that this [financial sector collapse] is the final verdict on a failed economic policy."
But virtually all of Obama's choices for his economic team are of the "free-trade" persuasion. Obama told ABC News on Feb. 3 that including Buy American provisions in the stimulus "would be a mistake right now" and that it would be "a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe."
Obama's thinking aligns closely with traditional Washington corporate interests. In a Feb. 2 letter to the Senate leadership, National Association of Manufacturers president John Engler wrote: "[E]ven though this section may be well intentioned, NAM members are very concerned that the new 'Buy American' provision in the bill will potentially backfire on the United States and end up harming American workers and companies across the entire U.S. economy."
On Feb. 3, Sen. John McCain, echoed that sentiment, and said when the debate over the Buy American provision hits the Senate floor he will bring with him pictures of former Sen. Reed Smoot and Rep. W.C. Hawley, sponsors of the Tariff Act of 1930 because protectionism was the reason a recession turned into the Great Depression. The same thing will happen again if not stopped. "Consult any historian," McCain said of the Smoot-Hawley legislation. "It is a matter of history" that protectionist legislation put the country into economic turmoil (although there are many people, including economic historians and Nobel Laureates, who refute the claim).
The Chamber of Commerce isn't sitting still, either. "Some have slammed the U.S. chamber for opposing 'Buy American' provisions, calling our position 'economic treason,' " says chamber president Thomas Donohue. "Try economic patriotism." Donohue was so worked up over the allegations, he called in his quotes for the press release from Davos, Switzerland, where he was attending the World Economic Forum. A U.S. Chamber of Commerce spokesman said the chamber has received a "really positive" response for its opposition to the Buy American proposal. "Our members are so aware that these types of measures are not the type of route we should be going," he said. "This is a pretty huge step toward protectionism."
That is not the case, say those in support of the legislation. The Buy American provisions are not tariffs on imported products. "I want to be clear that our efforts are in no way to stop or slow international trade," says Sen. Sherrod Brown (D-Ohio), and a supporter of the provision. "Enforcing Buy American already on the books and applying them to the stimulus bill is without a doubt the right thing to do -- it is what people all over my state talk about."
Other organizations, such as the Public Citizen Global Trade Watch, are busy countering the chamber's arguments, stating that the business groups are engaged in a "fact distorting PR and lobbying effort" that has led to front-page newspaper stories about the potential launch of a global trade war. Such claims are "false" and "ridiculous," says Public Citizen's Lori Wallach.
The argument that Buy American provisions will trigger retaliation from foreign countries "is a fool's game," adds USW president Gerard. "I think there is a substantial level of hypocrisy in that. The president of France said unequivocally that France was going to help France's auto industry, but France's money is going to be spent in France. I didn't hear anybody over here yelling and screaming about that. You're going to get the Caterpillars and Wal-Marts standing up waving their red flag trying to scare the hell out of people and my response to that is really quite simple: if a huge domestic manufacturing trade deficit is so good for the economy, why doesn't any other nation want one? In America, we try to tell American citizens that having a trade debt is good for America...No other nation wants the economic mess America has created."
The only opposition to the proposal comes from newspaper editors, a few senators and "the companies that have outsourced so much of their work and have cost American jobs," claims Sen. Brown. "This whole corporate-driven agenda clearly hasn't worked for American workers and the American economy."
The debate is even quite entertaining. Lou Dobbs on his CNN program on the evening of Feb. 2, said that it was "absolutely stupefying" that the U.S. Chamber of Commerce would be "brazen" enough to come out against the Buy American provisions. "Anybody who thinks the U.S. Chamber of Commerce represents small business in this country, you're hallucinating, let me assure you," he said. The chamber, he continued, "represents multinationals without any allegiance whatsoever to the national interests and without any apparent interest to the common good of the American people."
Dobbs asked reporter Bill Tucker on the live broadcast if NAM had weighed in on the issue. At that time, NAM had not. "Where are the little darlings?" Dobbs asked. "I think people are starting to figure out...how hoodwinked they've been" by groups purporting to represent the interests of America.
Dobbs then asked viewers to go to his Web site and participate in a poll: "Do you believe the fact that the U.S. Chamber of Commerce believes 'Buy American' is a bad idea shows just how much trouble our nation is in?" By early the next day, 4,216 people had voted; 90 percent of them (3,782) in the affirmative.
The letter opposed to the Buy American provisions was developed by the Emergency Committee for American Trade and was signed by the following organizations:
- Aerospace Industries Association
- American Business Conference
- American Council of Engineering Companies
- Associated Builders and Contractors
- The Associated General Contractors of America
- The Association of Equipment Manufacturers
- Business Roundtable
- The Coalition for Government Procurement
- Coalition of Service Industries
- The Information Tech. Association of America
- National Defense Industrial Association
- National Foreign Trade Council
- United States Council of International Business
- U.S. Chamber of Commerce
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