Why Buy American in the Stimulus Bill?

By Joel D. Joseph

The ancient adage “whoever spends the gold makes the rules” applies to the stimulus bill. The US government has the right, like any consumer, to decide where to spend our money. The Agreement on Government Procurement, signed by President Clinton in 1994, does not override an act of Congress. Further, Europeans and Asians may complain, but their governments are doing the same thing, buying locally-made goods. Finally, it is environmentally sound to purchase steel and other heavy materials nearby, rather than shipping them thousands of miles, polluting the environment in the process.

Agreement on Government Procurement

The Agreement on Government Procurement was an executive agreement, signed by representatives of European nations, the United States, Canada and Japan. This agreement attempts to require governments to open up taxpayer-funded projects to foreign manufacturers. It is noteworthy that the agreement was not signed by Russia, China, India, Brazil or Mexico. The US, China, Russia, India and Brazil are the five largest steel producers on the planet. If we don’t buy Chinese, Russian, Indian or Brazilian steel to rebuild our highways and bridges, these nations have no right to object to violations of the Agreement since they are not parties to it.

The Agreement on Government Procurement was not approved as a treaty (which requires two-thirds Senate approval) and thus does not have the force of law in the US. The Constitution of the US provides that treaties are the law of the land. The Constitution does not even mention executive agreements. In addition, the agreement allows the US to give 60 days notice that it is opting out. We should give notice immediately that the US is opting out of the agreement because the agreement does nothing to help commerce in the US.

Other Governments

The Economist magazine reported recently that the Swedish government has offered Saab and Volvo as much as $3.5 billion in loans and credit guarantees on the condition that the automakers spend that money in Sweden. Sweden is following the ancient rule that “whoever spends the gold makes the rules.”

French President Nicolas Sarkozy wants his country’s carmakers to agree to buy parts from French suppliers in exchange for aid measures, the Financial Times reported. The French government has said it will pump up to 6 billion euros ($7.7 billion) of aid into the battered car industry. In return for the aid, French auto firms must pledge to protect French jobs and scrap executive bonuses.

In the United Kingdom, food buyers for government organizations will be encouraged to buy more British produce, said Hilary Benn, secretary of the British Department of Environment, Food and Rural Affairs (DEFRA). “The government is buying more local food. But there is still a lot more we can do. I want to see an increase in the amount of local, seasonal British food we buy and an increase in the opportunities for small producers and suppliers to tender for government contracts,” he told the Oxford Farming Conference last month.

Going Green

Buying local not only makes sense for governments, it is environmentally sound. Shipping steel, or other heavy materials, thousands of miles, puts a heavy burden on the environment, uses fossil fuels and creating air and water pollution.

Multiplier Effect

The multiplier effect demonstrates that $1 in government spending results in more than $1 being added to economic activity. This happens when a company receives the government dollar and turns around and uses it to pay workers and pay for materials. The multiplier effect is significantly greater when there is a buy American requirement. All of the money stays in the country. If contractors were allowed to buy Chinese steel, the amount paid for that steel would not multiply economic activity in the US.

Not Smoot-Hawley

The US passed the Smoot-Hawley tariff act in 1930, raising tariff rates. A “buy American” provision is not a tariff. The US now has the lowest tariff rates in the world. A “buy American” requirement for infrastructure spending would not be a trade barrier, because it does not prevent consumers from buying a product because of tariffs, duties or other rules of trade.

Police Vehicles

Most Americans do not realize that nearly every police car in the United States is an import. Police here use Fords and Chevrolets that are made in Canada.

The US is the only auto-manufacturing nation where this happens. There is an unwritten rule in France, Japan, Germany, Sweden, Italy and the UK that police vehicles are domestically made.

If we don’t include a “buy American” clause in our stimulus law, we must have our heads in the sand and can’t see what the rest of the world has been doing to us. We will not be erecting barriers to trade. We will not be enacting another Smoot-Hawley tariff. We will merely be exercising the right to spend our own money the way we choose.

Joel D. Joseph is chairman of the Made in the USA Foundation, 9935 S. Santa Monica Blvd., Beverly Hills, CA 90212; email JoelDJoseph@gmail.com; phone 310-922-1856.

From The Progressive Populist, March 1, 2009

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