President Joe Biden’s first address to a joint session of Congress announced a great many breaks with the recent past. But in one very important way, Biden’s approach represents a depressing continuity with the defeated Trump administration: the turn from free trade to Buy American.
All the investments in the American Jobs Plan will be guided by one principle: “Buy American.”
American tax dollars are going to be used to buy American products made in America that create American jobs.
The way it should be.
“Buy American” is not a new idea. In fact, it was enacted into law in March 1933 as the final act of the Herbert Hoover administration.
The Great Depression and the Second World War discredited Hoover’s protectionism. Year by year, decade by decade, the U.S. government led the world to more open competition. Government procurement, unfortunately, has lagged far behind—a protected zone in which U.S. suppliers can overcharge U.S. taxpayers. The 2009 Recovery Act, for example, required federal purchasers to favor U.S. suppliers unless the favoritism would inflate the cost of the whole project by 25 percent or more. That’s a lot of scope for price gouging, and suppliers have made the most of it. The Peterson Institute for International Economics estimates that the existing “Buy American” rules could add about $100 billion a year to federal spending.
That’s why trade advocates within the U.S. government have struggled for decades to open procurement to international competition, and to force foreign governments to reciprocate. This slow, tough work is made tougher by America’s own dirty hands. Still, by the early 2010s, the U.S. had negotiated deals with major trading blocs and nations including the European Union, Japan, the United Kingdom, and South Korea to open a total of $1.7 trillion of government procurement to nondiscriminatory competition.
Under NAFTA and other agreements, Canadian and U.S. companies also gained rights to bid on each other’s government projects.
This fitful and imperfect progress abruptly stalled with the election of President Donald Trump. He issued repeated executive orders attempting to tighten “Buy American” rules as part of his larger policy of waging a trade war against the rest of the world. For a brief while, it seemed that Trump’s self-harming trade policy might discredit the protectionist ideology that animated it. But no. Biden promises not only to continue the policy, but now to expand it.
Biden talked a lot in his speech on Wednesday night about the challenge from China, a real and urgent concern. But China, which never signed any agreements to open its procurement market, has a very different kind of economy from the nations with rule-of-law market economies that have signed the World Trade Organization’s agreements on procurement. Excluding China from the benefits of those agreements is more than fair. But Biden seems to want to undo 40 years of market opening that aimed to level the field for U.S. exporters abroad—and to secure better value for U.S. taxpayers’ procurement dollars at home.
Biden’s “Buy American” policy and rhetoric are an abdication of American leadership on trade. It’s a waste, it’s a shame, it’s wrong—and at the moment, there seems to be no elected figure in either party willing to stand against it.