Apparently the staff of The NY Times subscribes to The Canadian Press too. Or, as I’d like to believe, they read The Strategic Sourceror religiously. Either way, I opened to page A26 this morning to see some nice follow up coverage on the “Buy American” situation. The editorial touched on some of the information we already knew, but also brought to light three other concerns my original blog-post and our friends in Canada did not take into consideration.
Do American-Made Alternatives Exist?
And, if so, can the American origin of such alternatives be proven? In some markets the answer to this question may very well be no. There are some commodities and services that have been outsourced offshore so effectively for so long that a viable US-based solution may be difficult to find. As far as origin verification goes, some raw materials pass through so many “hands” that it can often be difficult to pin down a commodity’s true country of origin with a reasonable effort.
Intermediate Finishers Get the Shaft
The article also points out that companies that use goods which are fully or partially produced in other countries to conduct business can be excluded from bids for doing so. It cites two companies, Duferco Farrell of Philadelphia and Westlake Chemical of Houston, as having experienced loss of business and layoffs as a result of “Buy American” stimulus clauses.
Canada Isn’t Alone
According to the Times article, Canada is not the only US trade partner considering retaliation against the protectionist provisions. Australia, Brazil, the EU, Japan, and Mexico are all considering a response. If these trade partners all decide to retaliate by enacting legislation that would bar the import of American goods and services, the US could suffer greatly. According to stats provided in the article, the suffering could be to the tune of as many as 650,000 lost jobs. In light of the fact that an earlier study conducted by members of the Peterson Institute for International Economics estimated “Buy American” provisions could “save” 9,000 American jobs, the author of the editorial seems justified when he ends with, “Indeed, whether it is from the point of view of diplomacy or of job creation, ‘Buy American’ is a terrible idea. One that could make the global recession worse.”
While I agree with a lot of this “Buy American” bashing, I think it’s important to put the bashing into context. “Buy American” is a great personal philosophy. Even though I caved and bought a Honda last summer, I believe that Americans buying American (Which is partially a function of American companies being innovative and staying competitive-see After 101 years, why GM failed) is the backbone of driving domestic economic growth. It was a short-sighted, glib decision for politicians to apply this same personal philosophy to trade policy. America is no longer the center of the industrial universe. We live in a world that has become a global network of interconnected supply and demand nodes. Protectionism is not a viable policy.
Do American-Made Alternatives Exist?
And, if so, can the American origin of such alternatives be proven? In some markets the answer to this question may very well be no. There are some commodities and services that have been outsourced offshore so effectively for so long that a viable US-based solution may be difficult to find. As far as origin verification goes, some raw materials pass through so many “hands” that it can often be difficult to pin down a commodity’s true country of origin with a reasonable effort.
Intermediate Finishers Get the Shaft
The article also points out that companies that use goods which are fully or partially produced in other countries to conduct business can be excluded from bids for doing so. It cites two companies, Duferco Farrell of Philadelphia and Westlake Chemical of Houston, as having experienced loss of business and layoffs as a result of “Buy American” stimulus clauses.
Canada Isn’t Alone
According to the Times article, Canada is not the only US trade partner considering retaliation against the protectionist provisions. Australia, Brazil, the EU, Japan, and Mexico are all considering a response. If these trade partners all decide to retaliate by enacting legislation that would bar the import of American goods and services, the US could suffer greatly. According to stats provided in the article, the suffering could be to the tune of as many as 650,000 lost jobs. In light of the fact that an earlier study conducted by members of the Peterson Institute for International Economics estimated “Buy American” provisions could “save” 9,000 American jobs, the author of the editorial seems justified when he ends with, “Indeed, whether it is from the point of view of diplomacy or of job creation, ‘Buy American’ is a terrible idea. One that could make the global recession worse.”
While I agree with a lot of this “Buy American” bashing, I think it’s important to put the bashing into context. “Buy American” is a great personal philosophy. Even though I caved and bought a Honda last summer, I believe that Americans buying American (Which is partially a function of American companies being innovative and staying competitive-see After 101 years, why GM failed) is the backbone of driving domestic economic growth. It was a short-sighted, glib decision for politicians to apply this same personal philosophy to trade policy. America is no longer the center of the industrial universe. We live in a world that has become a global network of interconnected supply and demand nodes. Protectionism is not a viable policy.
There's a good article in Canada's national newspaper today about Canada's response to the Buy American provisions.
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