The reckless stupidity of "Buy America"

The Buy America provisions in the House stimulus bill were bad enough. The Senate version threatens to make them even worse, extending them from government purchases of steel to government purchases of all manufactures. These measures are possibly illegal in international law, flatly contradict a commitment that the US made at the G20 summit in November, and (most important) are likely to hurt the economy more than help it. Is this the new spirit of US multilateralism? Smoot Hawley, anyone?

Read the analysis by Gary Hufbauer and Jeff Schott of the Peterson Institute.

Based on economic and legal analysis, the authors conclude that the Buy American provisions would violate US trade obligations and damage the United States' reputation, with very little impact on US jobs. They estimate that the additional US steel production fostered by the Buy American provisions will amount to around 0.5 million metric tons. This in turn translates into a gain in steel industry employment equal to roughly 1,000 jobs. The job impact is small because steel is very capital intensive. In the giant US economy, with a labor force of roughly 140 million people, 1,000 jobs more or less is a rounding error. On balance the Buy American provisions could well cost jobs if other countries emulate US policies or retaliate against them. Most importantly, the Buy American provisions contradict the G-20 commitment not to implement new protectionist measures--a commitment that was designed to forestall a rush of "beggar-thy-neighbor" policies.

What should be done? The best result would be to simply delete the Buy American provision in the House-Senate conference. Next best would be to keep the House version, applying the Buy American restriction only to iron and steel, but stating explicitly--in either the statutory text or in the legislative history--that the public interest waiver is intended to be used to avoid violations of US trade obligations. The third option is a presidential statement--preferably before legislation is finalized--that the United States will respect its international obligations when it applies the Buy American provisions.

Presented by

Never Tell People How Old They Look

Age discrimination affects us all. Who cares about youth? James Hamblin turns to his colleague Jeffrey Goldberg for advice.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Never Tell People How Old They Look

Age discrimination affects us all. James Hamblin turns to a colleague for advice.

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

Video

Pittsburgh: 'Better Than You Thought'

How Steel City became a bikeable, walkable paradise

Video

A Four-Dimensional Tour of Boston

In this groundbreaking video, time moves at multiple speeds within a single frame.

Video

Who Made Pop Music So Repetitive? You Did.

If pop music is too homogenous, that's because listeners want it that way.

More in Business

Just In