When last we met, it was to discuss a Big Idea that the Obama Administration might apply to get some job creation going, despite a difficult Congress; the Big Idea was to look at the â€œBuy Americanâ€ provisions that exist in our laws, regulations, and Executive Orders and see if we could practice a bit of â€œjobs arbitrageâ€ by not just meeting the â€œMade in USAâ€ requirements when governments across this country make purchases, but exceeding them.
(As it stands today, pretty much any â€œgood or serviceâ€ with more than 50% Made in USA content qualifies as a Made in USA purchase, even if 49% of the â€œgood or serviceâ€ comes from somewhere else).
At the time, I told you that if all went well we could look forward to comments from both Labor and the Administration as to the practicality of the Big Idea, and as it turns out I have comments for you that hit close to that mark â€“ and a bit more besides:
On Saturday I just happened to bump into Congressman Adam Smith (WA-09); in the course of that conversation I told him what weâ€™re doing here, and he wanted to offer a few thoughts of his ownâ€¦and when you put all that together, I think weâ€™re going to have a lot to talk about.
â€œTis surprising to see how rapidly a panic will sometimes run through a country. All nations and ages have been subject to them; Britain has trembled like an auge at the report of a French fleet of flat bottomed boats; and in the fourteenth century the whole English army, after ravaging the kingdom of France, was driven back like men petrified with fear; and this brave exploit was preformed by a few broken forces collected and headed by a woman, Joan of Arc.
–From â€œThe Crisisâ€, by Thomas Paine; essay of December 23, 1776
So the two-second recap of the Big Idea is that if government, at all levels, were Buying More American we could create More American Jobs, and as we mentioned above, the way the rules stand today, 51% Made in USA is good enough â€“ and that seems to leave a lot of room to do better.
Of course, nothing is as simple as it seems, and despite what Tom Lehrer might say, itâ€™s not all skittles and beer for this proposal either.
I have a source in the Administration who would not go on the record for this story; nonetheless I was sent a detailed email response â€œon backgroundâ€, which Iâ€™ll paraphrase for our use today:
We are looking to expand US trade abroad, and we have made deals for access. We agree not to restrict, for the most part, where purchases can be made, and we expect reciprocity from the rest of the world when their governments do their purchasing – or at least from those governments with whom we have a WTO Government Procurement Agreement (GPA) or a Free Trade Agreement (FTA). (Want even more details? Check out either the Trade Agreements Act of 1979 or this Congressional Research Service report).
The Administration would tell you that 95% of the worldâ€™s consumers live outside the USA, making trade reciprocity particularly valuable for the US.
They would also tell you that if we decide on our own to â€œchange the dealâ€, then we should expect retaliation from other governments.
Beyond that, they would suggest that there are US companies that source many of their products or product components globally, and those companies would actually be hurt by stricter Made in USA requirements.
Finally, the Administration points out that there is a dollar cost for more Made in USA, as opposed to using what can often be cheaper foreign sourcing.
In the introduction I suggested that I had a comment from Labor, and thatâ€™s somewhat correct. I contacted the Washington Sate Labor Council (WSLC) for a comment, and they sent me material that came from the Alliance for American Manufacturing (AAM), at the same time telling me that the AAMâ€™s position on Buy American is the same as their own.
It is inaccurate to refer to the AAM as a Labor organization, however, as they are a partnership of Unions, manufacturers, and other interested parties. Among those partners are the AFL-CIO and the United Steelworkers (USW); the USW was one of the founders of the group.
They take issue with a great deal of what the Administration has to say, and Iâ€™ll start with a quote from an email sent to me Friday by the AAMâ€™s Steven Capozzola:
The threat of retaliation for buy America is ridiculous. The law [the Buy American Act, 41 USC 10a-d] is specifically written so as to be applied when permissible under our existing trade obligations.
Hereâ€™s a quote from AAM material that was referred to me by the WSLC:
â€¦the U.S. is, by far, the worldâ€™s largest importer, soaking up a net $819 billion in goods in 2007â€¦The U.S. imports far more than it exports, a balance of sales that our trading partners are anxious to preserve. This is not about restricting imports. It is about using taxpayer dollars, when allowed by our international obligations, to purchase U.S.-produced goods. As the global downturn has progressed, many industrialized countries such as France and China have already taken similar action to support their domestic manufacturing base.
â€¦These trade agreements do however allow for domestic preference under a number of circumstancesâ€¦These preferences were negotiated for a reason. It would be irresponsible not to utilize them to the fullest extent possible.
â€¦By contrast, other countries have held themselves out of the reform movement and have instead opted to promote their own manufacturing base through closed self-procurement programs. A good example is China, which, in addition to a recent $586 billion stimulus program, continues to subsidize its own producers via deliberate (and illegal) currency undervaluation. Until countries like China make the same commitments, and sign-on to internationally accepted procurement agreements, the U.S. will accomplish nothing by making yet more unilateral concessions.
In addition, as noted above, these contentions rely on the baseless assumption that the U.S. currently has any significant access to foreign procurement markets that would be at risk if other countries â€œretaliated.â€ The majority of the foreign stimulus in PPIâ€™s tally is made up of $614 billion being spent by countries that have no procurement obligations towards the United States and that already apply domestic procurement preferences (principally China, but also India and Brazil).
— Alliance for American Manufacturing, â€œThe Facts on â€˜Buy Americaâ€™ and Domestic Sourcingâ€, February 2009
The AAM would also want you to know that in addition to China numerous other countries, specifically Canada, certain European nations, Japan, and Brazil all use other forms of â€œdiscriminationâ€ to â€œpreferenceâ€ their goods over ours when it comes to government procurement: impossible-to-meet technical standards, â€œmurkyâ€ purchase procedures, and bid rigging are all tools used around the world to make sure local suppliers are just a bit more, shall we sayâ€¦reciprocalâ€¦than a US supplier might be.
Look, I hate to do this to everyone, but weâ€™re once again running longer than we should, and we still have a lot more to talk about, so at this point Iâ€™m going to call â€œcliffhanger!â€ and set us up for a Part Three.
Hereâ€™s the â€œagendaâ€:
Weâ€™ll be talking about how the devilâ€™s in the details: specifically, weâ€™ll be looking at what â€œBuy Americanâ€ is already excluded from these various trade agreementsâ€“ and thereâ€™s a lot more than you might think, even as some of it is targeted in amazingly specific ways (to do that weâ€™ll be paying particular attention to the annexes to the WTO agreement); weâ€™ll also get Congressman Smithâ€™s reaction to all of thisâ€¦and once again, weâ€™ll see if we canâ€™t get it all done in 1500 words or less.
And on a lovely summerâ€™s day, what could possibly be better beach readingâ€¦what with the redolence of the lazy sea breezes and the surf washing gently up on the shore and allâ€¦than 1500 more words on the annexes to the WTO agreement and how it all relates to sneaking a jobs program past recalcitrant Republicans?
I canâ€™t think of anything else either, and I canâ€™t wait to see you there.