Behind the rousingly patriotic rhetoric is a seriously misguided economic philosophy that hurts Americans.
Joe Biden and Donald Trump were two very different presidential candidates, but they agreed on at least one key point. Too bad it’s one they’re both wrong about: The importance of “Buying American.”
The catchphrase sounds nice, but behind the rousingly patriotic rhetoric is a seriously misguided economic philosophy that hurts American individuals and businesses.
When politicians say they support “Buying American,” they’re broadly referring to policies that mandate domestic content requirements for government purchases. This necessarily excludes other countries even if they offer better or cheaper materials. (Aka a better deal for taxpayers).
Now that Biden is set to be the next president, it’s time to look seriously at these policies. And despite touting a more open and global viewpoint during the campaign that contrasted with Trump’s nationalist disposition, much of Biden’s approach to trade will likely resemble the current president’s protectionism by another name.
Earlier in the year, Biden announced his $700 billion plan to revive US industry, involving six “lines of effort” dedicated to remaking American manufacturing and investing. Most of the promises are vague, like his promise to “bring back critical supply chains to America” and “pursue a pro-American worker tax and trade strategy.” Others, however, are a little more direct, like Biden’s promise to spend $400 billion on procurement investment on American products, materials, and services.
These plans make for good politics, if not policy, because the idea of Buying American is popular. A recent poll by TradeVistas, where I work, showed overwhelming support for the sentiment among all political leanings. About 75 percent of Americans support a policy mandating that the federal government use domestic suppliers when possible.
And the idea isn’t new. Buy-American-type legislation was enacted throughout the 20th century, with Herbert Hoover introducing the first true piece of Buy American law in the midst of the Great Depression and with subsequent presidents adding to it in the 1980s, 1990s and 2000s.
However, it is Trump who fully embraced the idea, making extensive use of executive orders to establish and push a Buy American agenda. These have included his “Buy American Hire American” executive order of 2017, and most recently, his 2020 order on “Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States” in response to the COVID-19 pandemic.
“So what?” you might ask. “What’s wrong with buying American?”
Nothing, if it’s part of a free and competitive market system. But mandated Buy American policies impose burdensome costs on businesses, increase costs to taxpayers, and damage trade relationships with our foreign allies.
First, the imposition of Buy American greatly complicates the procurement process. As most supply chains are long and complex, relying on the highly specialized knowledge of thousands of individuals across the world, altering them to meet the domestic requirements is a burdensome, costly and inefficient task.
Secondly, mandating that everything governments purchase must be made domestically greatly reduces the pool of potential suppliers from which to purchase. This decreases competition—and increases prices. Since taxpayers are the ones footing the bill for these projects, it is Americans who end up paying more for these projects.
Finally, amid a fraught international political climate and following a Trump presidency that damaged the US’s global reputation, now is the time to embrace trade relationships and the benefit they can bring, not exclude them. Biden’s rhetoric already has even the US’s closest allies worried and planning for what this aspect of his presidency might mean for them. Canada, which has benefitted from agreements allowing them to participate in US procurement contracts in the past, has raised concerns over the president-elect’s Buy American policies and awaits further clarification on whether past free trade agreements will be honored.
For a president-elect hoping to bring the world together, this Buy American push will do little to mend shaky international relationships.
So, the president-elect should rethink his position and leave economic nationalism behind as a relic of Trump’s tenure. If he really wants to re-establish the US on the international stage and help Americans, Biden should buy from whoever makes it best.
By Alice Calder