Posted on 09/18/2009 9:09:18 AM PDT by SeekAndFind
Earlier today, Doug Bandow weighed in with some commentary on the problems that Buy American provisions are creating for both Canadian and American businesses. Let me reinforce his view that such rules are anachronistic and self-defeating with some thoughts from a forthcoming paper of mine about the incongruity between modern commercial reality and trade policies that have failed to keep pace.
Even though President Obama implored, “If you are considering buying a car, I hope it will be an American car,” it is nearly impossible to determine objectively what makes an American car. The auto industry provides a famous example, but is really just one of many that transcends national boundaries and renders obsolete the notion of international competition as a contest between “our” producers and “their” producers. The same holds true for industries throughout the manufacturing sector.
Dell is a well known American brand and Nokia a popular Finnish brand, but neither makes its products in the United States or Finland, respectively. Some components of products bearing the logos of these internationally recognized brands might be produced in the “home country.” But with much greater frequency nowadays, component production and assembly operations are performed in different locations across the global factory floor. As IBM’s chief executive officer put it: “State borders define less and less the boundaries of corporate thinking or practice.”
The distinction between what is and what isn’t American or Finnish or Chinese or Indian has been blurred by foreign direct investment, cross-ownership, equity tie-ins, and transnational supply chains. In the United States, foreign and domestic value-added is so entangled in so many different products that even the Buy American provisions in the recently-enacted American Recovery and Reinvestment Act of 2009, struggle to define an American product without conceding the inanity of the objective.
The Buy American Act restricts the purchase of supplies that are not domestic end products. For manufactured end products, the Buy American Act uses a two-part test to define a domestic end product: (1) The article must be manufactured in the United States; and (2) The cost of domestic components must exceed 50 percent of the cost of all the components. Thus, the operational definition of an American product includes the recognition that “purebred” American products are increasingly rare.
Shake your head and chuckle as you learn that even the “DNA” of the U.S. steel industry, which pushed for adoption of the most restrictive Buy American provisions and which has been the manufacturing sector’s most vocal proponent of trade barriers over the years, is difficult to decipher nowadays. The largest U.S. producer of steel is the majority Indian-owned company Arcelor-Mittal. The largest “German” producer, Thyssen-Krupp, is in the process of completing a $3.7 billion green field investment in a carbon and stainless steel production facility in Alabama, which will create an estimated 2,700 permanent jobs. And most of the carbon steel shipped from U.S. rolling mills—as finished hot-rolled or cold-rolled steel, or as pipe and tube—is produced in places like Canada, Brazil and Russia, and as such is disqualified from use in U.S. government procurement projects for failure to meet the statutory definition of American-made steel.
Whereas a generation ago the cost of a product bearing the logo of an American company may have comprised exclusively U.S. labor, materials, and overhead, today that is much less likely to be the case. Today, that product is more likely to reflect foreign value-added, regardless of whether the product was “completed” in the United States or abroad. Accordingly, Buy American rules and trade barriers of any kind (as appealing to politicians as they may be) hurt most American businesses, workers, and consumers.
It’s time to wake up and scrap these stupid rules.
CATO, you can buy chinese sh*t all you want. I’ll stick with US made
‘Buy American’ is nothing more than a political stunt designed to help politicians get re-elected. It doesn’t help create new jobs.
I understand it sounds great to say we want stimulus funds to buy stuff made by Americans. It’s simple to think we’ll get the most out of these funds by buying everything from American companies. But that logic is too simple.
The truth of the matter is we live in an interconnected world.
Right now, American companies manufacture products in China, Canada, Mexico, and many other places around the world. And foreign companies have manufacturing facilities in the US and employ American workers.
I read an article in the Wall Street Journal earlier this week that points out just how bad the situation is.
The article points out cities are trying to put American workers back to work rebuilding our outdated sewage systems. But essential parts of these systems are built in Canada.
Thanks to the ‘Buy American’ provision, these projects are being delayed. The cities are being forced to seek an exemption from the provision. The result is American workers who could be working on these infrastructure products aren’t.
There aren’t any official statistics on how many projects are being delayed because they need foreign made parts. And there’s no list of how many exemptions have been sought.
But I can tell you only $13 billion of the stimulus funds have been paid out so far. And that’s a far cry from the amount of funds that are available. I don’t think its a leap to say stimulus funds are being delayed because of the ‘Buy American’ provision.
>> I’ll stick with US made
Good idea - try ‘n find it.
Have been doing so for years. That’s why I largely shop online. The WalMarts/Targets/Sears/HomeDepots are stocked with crap.
If you really believed that, you'd probably have to turn off the power to your home since you're indirectly paying for Chinese made power distribution equipment when you pay your electric bill.
You can’t. I bought a set made in the Phillipines. An ally, not a communist enemy.
What chinese made power distribution equipment. I’m a power engineer, and that is one area that US made still is dominant.
Exactly.
Why should Government be allowed to get between me and the people I want to buy stuff from? Unless of course it’s something evil like cigarettes or non-Union cars?
Before long, the effete traitors will have to move to their communist country of preference, and a little after that, no one on this planet will work high steel for them during lightning storms or stand in pools of water to do welding.
My shoes are 100% made in usa. My jeans are 100% made in usa. As is my bunkbed for my kids I just bought (could have saved $100 and got it from china), my new screwdriver set, the nice vase I bought my wife, the new light fixture for my gate, etc etc.
It takes some research, and some phone calls, but no more time than standing behind fat ladies in stretchy pants at walmart waiting to buy their chinese versions.
Why would they declare war on us when they can wage it silently while dumb****s in stretchy pants shop at walmart to help em build their war machine.
Having Americans suspicious of China is not a unusual idea.
Cato doesn’t make products. We can’t all work at think tanks, stupid.
Hehe, I’ll buy Chinese: http://www.lahiguera.net/cinemania/actores/jet_li/fotos/49/jet_li.jpg
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