Wednesday, February 04, 2009

Buy American: Bad for Jobs, Worse for Reputation

WASHINGTON (Reuters) - "Buy American" provisions under consideration in Congress as part of a huge economic stimulus bill could create only 1,000 new steel industry jobs and might cost as many as 65,000 across a number of sectors, a new study said on Tuesday.

"The negative job impact of foreign retaliation against Buy American provisions could easily outweigh the positive effect of the measures on jobs in the U.S. iron and steel sector and other industries," Gary Hufbauer and Jeffrey Schott, senior fellows at the Peterson Institute for International Economics, said in the report.

From the full report "
Buy American: Bad for Jobs, Worse for Reputation":

If 1% of those exports were in fact lost by echo or retaliation behavior, the resulting employment loss in the United States would be around 6,500 jobs. In an extreme case that 10% of those exports are lost, as many as 65,000 jobs could vanish (see table above).

Based on our economic and legal analysis, the Buy American provisions would violate US trade obligations and damage the United States’ reputation, with very little impact on US jobs. In a country of 140 million workers, with millions of new jobs to be created by the stimulus package, the number of employees affected by the Buy American provision is a rounding error. In other words, there is little bang for the buck, and on balance the Buy American provisions could well cost jobs if other countries emulate US policies.

8 Comments:

At 2/04/2009 3:41 PM, Blogger Bruce Hall said...

Don't need any "buy American" anything. Simply need one overriding trade requirement:

Any product sold in the U.S. must have been manufactured or produced in compliance with U.S. health, safety, minimum wage, and all other regulations regarding employees and product performance... regardless of country of origin.

We'll do likewise.

I like to think of it as an extension of the Federal Bureaucratic Intrusion system.

 
At 2/04/2009 4:11 PM, Blogger NoWhining said...

I was pleasantly surprised to see President Obama criticizing the "Buy American"" clause even at the risk of alienating his own party. Would that he would develop some sound economic sense on a few other policies as well.

 
At 2/04/2009 5:40 PM, Anonymous Anonymous said...

I agree that Buy American is outragous. As a free trade absolutist--as everyone of wealth should be--I believe that American workers should be forced to compete against foreign workers, particularly those who work for pennies per day. Ultimately, and hopefully, Americans will be glad to get work which pays pennies per day. And when that glorious day comes I and my fellow country club friends will say, Hear!Hear!

 
At 2/04/2009 6:56 PM, Blogger QT said...

If you think it is bad in the U.S., consider that 20 million migrant workers in China have lost their jobs in a country with no social safety net.

Bruce:

"minimum wage"?

Are you suggesting that developing nations should adopt the current U.S. minimum wage?

Granted workers in foreign countries like Vietnam earn far less than U.S. workers. They also have far lower productivity and far lower skills than American workers. American manufacturers have largely eliminated labour intensive, low skilled, low paid grunt work which is why manufacturing jobs tend to be safer, higher skilled, and often in areas like production management.

Conditions in developing nations are more like the 19th century...labour intensive with primitive conditions (a reliable electrical grid is a luxury only dreamed of). I have watched building excavation work for highrise buildings in China being done by shovels with a human chain of people emptying baskets.

"We'll do likewise"

I doubt it. Chances are few wish to live in a historic re-enactment.

 
At 2/04/2009 8:19 PM, Anonymous Ralph Short said...

The "buy American" slogan is just more grandstanding from politicians (lawyers mostly) who never manufactured anything except a subpoena.

You go to a store and you buy Nestle and learn years later it is a swiss company. You buy a Honda and it is a Japanese co. except it has a factory in Ohio. You buy a GM car and you find out components are made in Mexico and/or Canada.

A voter should never elect a lawyer (even though there are great ones) because there are too dam many of them and they are completely screwing up the nation.

BTW, every President from the democratic party since Roosevelt has been a lawyer except Carter. Every nominee for President since Roosevelt has been a lawyer, except for Carter. Recently, every nominee's wife has been a lawyer. Talk about lack of diversity.

I won't add Peanut farmers or Navy guys to the list of people I won't vote for because of Carter. He is an anomaly. Hmmm, in more ways than one.

 
At 2/04/2009 8:31 PM, Anonymous Ralph Short said...

Bruce, I liked that federal bureaucratic intrusion system concept and it could be an acronym as well like FBIS which could mean a number of different things to different people.

Kind of like the more recent FBIS act aka "the neighborhood stabilization act" which is part of the "stimulus". I would venture to guess if you wrote to the right people and recommended a new federal agency, titled Federal Bureaucratic......., they would never detect the sarcasm and you could read about the "new agency" within a year. I know the NYT would buy it in a heartbeat.

 
At 2/04/2009 8:34 PM, Blogger Fred said...

but, but, but Lou dobbs was just on and he said "buy American" is a no brainer.

And Lou is always right :)

 
At 2/04/2009 10:15 PM, Blogger misterjosh said...

I think we should have reciprocal trade agreements. I'm tired of allowing Hyundai free access to our market, yet Korea severely limits our ability to export to that country.

 

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