"Buy American" Provisions Mean the Opposite In Practice

Why the US government hurts US businesses when it requires domestic purchases.

By SHARE

There is a long list of political slogans that were originated to create a certain frame in the mind of the public, but ended up being associated with the exact opposite effect that was intended by the sloganeers. "No Child Left Behind" is probably the best recent example.

Maybe we can add "Buy American" to that list. You'll recall that when the stimulus package was passed earlier this year, Congress inserted a provision that required many of the materials used in stimulus-funded projects to be purchased from American companies only. Supporters cheered that the "Buy American" provision would stimulate domestic employment at a time when it was needed most.

But what actually happened?

The Journal has an article today that tells the stories of a few business owners who were meant to benefit from "Buy American." Here's what happened to Tom Pokorsky, who runs Aquarius Technologies Inc. of Port Washington, Wis.

Canadian communities angered by perceived American chauvinism have started a Buy Canadian campaign to exclude U.S. bidders from municipal contracts. "If that sticks, well, there goes 25% of my business," said Mr. Pokorsky. "To me, Ontario may as well be Indiana."

Only the U.S. government needs to "buy American." The problem is that the suppliers for the stimulus have suppliers of their own, and in this globalized economy, they can be from anywhere. As we're seeing with the brewing trade war with China over tire imports, when the U.S. government starts to discriminate against foreign products, other governments respond in kind.

So when the U.S. government requires that someone "buy American," it most likely is bringing about fewer purchases of American goods. It's a catchy slogan, but quite deceptive.