PPB August 2016

56 •

PPB

• AUGUST 2016

GROW

American

Dragon

Act) applies only to mass transit

projects funded at least partly by

federal grants with a value of

over $100,000. All three require

that a preference be given to

domestic manufacturers, but all

have provisions that allow for

foreign sourcing when a U.S.

alternative is either unavailable

or too expensive.

Given these provisions, one

wonders why the power of fed-

eral, state and local governments

to establish a preference for

U.S.-made products and services

in federal government bids

would be traded away as a con-

cession in international trade

deals. I realize the horse may

have already left the barn on this

one, but government should be

extending these types of prefer-

ences, not trimming them. Not

only does Buy American legisla-

tion create or maintain U.S. jobs,

it also sends the message that

our federal, state and local gov-

ernments value U.S. manufactur-

ing. And if only a limited per-

centage of state government

purchases stay in the U.S.

because of these laws, then it is

business worth having for U.S.

manufacturers.

In spite of the obvious bene-

fits, constituencies opposed to

Buy American laws make strik-

ingly similar arguments against

them. Here is a recap of the

arguments typically made and

why those arguments are wrong.

ARGUMENT NO. 1:

Buying

American would raise the costs

of the project.

Yes, the price of the project

may be higher, but if all compa-

nies bidding for the project are

under the same Buy American

constraints, then the playing field

would be level for all of those

bidders.

We must also consider the

total

cost to the city, state or fed-

eral government. If the price to

the government entity for the

Buy America project is X-per-

cent higher, is that X-percent

premium covered by the taxes

paid by the U.S. workers

employed

because

of the Buy

American provision? Conversely,

if those jobs are lost due to the

lack of the Buy American provi-

sion, what is the cost to the gov-

ernment entity of unemployment

and other benefits?

Thus, although the price of

the project may be higher, the

difference between the higher

price and the actual cost to gov-

ernment may be ameliorated, or

eliminated, by these other fac-

tors.

ARGUMENT NO. 2:

It’s imprac-

tical; some intermediate parts

may not be available here in

the U.S.

Yes, that’s possible in some

cases. However, both the Berry

Amendment and Buy American

Act have loopholes that allow

federal government agencies to

buy overseas if the price from

U.S. vendors is too high or the

product is not available domesti-

cally. And these waivers are used

often. In a report released by

Sen. Chris Murphy (D-CT) in

May 2015, it was reported that

the Department of Defense

alone had granted over 307,000

waivers to the Buy American Act

between 2007 and 2015,

amounting to over $176 billion

in purchases. Most of the waivers

were granted because the prod-

ucts purchased were to be used

overseas.

As for the Berry

Amendment, a loophole already

exists that allows the

Department of Defense to buy

outside the U.S. if the value of

the contract is below $150,000.

One of the dirty little secrets of

government procurement is that

purchasing agents will sometimes

split one large contract into sev-

eral smaller contracts—each

below the $150,000 threshold—

to avoid the need to source from

a U.S. manufacturer. Given wrig-

gle room like this, can one really

believe that it’s impractical to

buy American?

ARGUMENT NO. 3:

Since work-

ing conditions are deplorable in

most low cost manufacturing

countries, by buying there we

help create better living condi-

tions for the jobless in those

countries.

This is a public relations

argument often used by multi-

national manufacturers, brands

and big box retailers to justify

offshoring. It’s ironic when large

corporations characterize their

sourcing model as a form of phi-

lanthropy for developing

nations, when what the sourcing

model truly reflects is the slogan

“always the low price.” For

example, it’s apparent that

apparel importers started sourc-

ing in Bangladesh not to help

the Bangladeshi people, but to

buy at the lowest possible price.

It is only since the Tazreen fac-

tory fire that those same compa-

nies are now touting their sense

of “social responsibility” for the

people of Bangladesh as the rea-

son for not moving their apparel

purchases to another country (or

back to the U.S.).

Of course, anyone with a

shred of empathy is concerned

about the poor in developing

countries. But should that con-

cern drive government purchasing

policies? Should U.S. government

procurement be a form of social

welfare for other countries? Is

that not the role of foreign aid?

ARGUMENT NO. 4:

We should

let the free market rule and

buy where the goods are

cheapest. In the long run, it’s

better for all.

Not only does

Buy American

legislation

create or

maintain U.S.

jobs,

it also

sends the

message that

our federal,

state and local

governments

value U.S.

manufacturing.