Buy America gets challenged again

Posted on April 2, 2009 by Frank Di Giacomo, Publisher

Although not the major objection, a loud outcry to the stimulus legislation just signed into law was raised over Buy America provisions in the bill. The kind of misinformation being raised about the issue could be a signal of things to come, and the public transportation industry must be prepared to deal with it.

Buy America attacks create misinformation

As the bill was being debated shortly after President Obama was inaugurated, a chorus of conservatives began throwing a series of charges at the proposals. They contended that the bill was too big, spent too much on things that “were not stimulative” (never mind that any spending generates economic activity as the money is spent into the economy) or that there was not enough infrastructure spending. Others said there was too much infrastructure spending, calling it “pork.” At the other end of the political spectrum, some liberal economists worried that the bill was not big enough to stimulate the economy as much as is needed.

Then, as the bill was headed for passage, another objection was raised: protectionism. Opponents charged that the bill contained “Buy America” provisions that could “trigger a trade war” of the kind that helped worsen the Great Depression or was propping up obsolete companies. While these provisions remain intact in the final legislation, we in the industry should take this minor squabble as a warning that a big debate about this issue could be coming within the federal surface transportation authorization debate scheduled to take place later this year.

First, though, we must dispel the myth that the Buy America provisions of federal transportation policy, which have been with us since the 1970s, are protectionist or anti-trade. Rather, they are incentives for transit agencies to use U.S. tax dollars (or, more lately, money borrowed from Asian sovereign wealth funds) to procure hardware made in America to create or preserve American jobs. By the way, European and Asian nations dealing with their own economic crises have enacted massive infrastructure investments with their own incentives to ensure that the money gets spent in their own economies. As President Obama said of the U.S. strategy, “spending is the whole point.”

Let us remain united

The other major point about Buy America is this: it is existing, settled U.S. law — and it has worked. Sure, the regulations implementing the law are complicated and arcane, but because of this policy many companies headquartered in other countries have invested in the U.S. marketplace, spending millions if not billions of dollars to build factories and hire American workers. Would they have done so without the law? Possibly, but certainly not to the levels they have were there no minimum requirements. More than that, because the law has existed for so long and has worked, it would be grossly unfair to the companies who have made those investments to allow competition from those who have not.

Countries all over the world recognize the need for government investment to jump-start their economies, build their heavy industry, and keep or add more higher-wage jobs, especially in industries that grow a greener economy. The last thing the U.S. needs is to pursue some purists’ notions of what international trade should be — even though it never has been what they think.

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