To: Mayor and Board of Aldermen
From: C. Paul Smith
Date: March 19, 2009
Re: Agenda Item X10 – the “Buy American” Proposal
Unless the wording is drastically changed, I cannot support this resolution as worded because I believe it is a policy that will hurt American businesses and the American economy. I would support and do propose that we support products and services “that strengthen the American economy.” (See the end for the specific wording that I propose.)
The most important consideration in making city purchases is to make those purchase decisions that are best for the City. Secondly, where possible, I believe the City should also make purchase decisions that are best for the city economy, such as making purchases from city businesses when possible. Thirdly, where possible the City should make purchase decisions that are best for the U. S. economy. All of that I agree with, and I support including these three-level factors as legitimate considerations in the city’s contracting and purchasing policies.
But this is different from a policy of spending city funds “wherever possible and practical on products and services that are made or performed in the United States.” The “where possible and practical” gives some latitude to the city, but those words really fail to address the problem with the policy it modifies. The “buy American” standard is often best, but it is sometimes counter-productive to promoting what is best for the American economy. I will explain.
We live in a global economy, and to me, the American economy is the most important national economy. I support policies that strengthen our national economy whenever “possible and practical.” But that is a different policy from buying American products “wherever possible and practical.” It is important to understand this distinction.
In recent years this nation has supported a policy of free trade whenever possible. This policy would allow our goods to compete for markets with the goods of other nations (without tariffs) based upon their quality and their prices. Those in America who export goods benefit from free trade. But the flip side of this policy is that we allow into America the goods of other nations without imposing tariffs. If the U.S. were to boycott the goods produced in other nations, this would have the same effect as if we were to impose a tariff on those incoming goods. The other nations would have to impose some offsetting policy (either tariffs or its own boycott on U.S.-made goods) in order to compete and survive. Such actions would hurt the American businesses that export to those nations.
The “Buy American” proposal is basically a policy to boycott anything that is not made in the USA. It is a “protectionalist” policy that is an oversimplified and short-sighted solution to a legitimate national interest. Yes, we should seek to make the American economy the best in the world. But the “Buy American” limitation has too many adverse consequences which actually harm American business.
The “Buy American” standard is much too broad to be a good policy. A few years ago, Japan placed tariffs on electronic goods that were made in America, while America was not imposing tariffs on the goods “made in Japan” that were sold here. Because of this inequity, it would have been proper at that time to boycott Japanese-made electronic goods. But we should not boycott the goods of those nations which are our partners in free trade. Let all of our goods and services compete based upon quality and price. This is the foundation of the free enterprise system and of free trade. But the “Buy American” standard is a repudiation of free trade, and is nothing more than a boycott against the goods of all other nations. The “Buy American” approach is a short-sighted, “feel good” policy that would protect some American businesses and would hurt others. The “Buy American” approach is an isolationist policy that hinders both international trade and good international relations. The “Buy American” policy is a self-righteous and arrogant approach to foreign relations and to international trade. It is not in the interests of either America or the City of Frederick to adopt this narrow-minded approach to trade.
As I mentioned earlier, the better approach is a policy that encourages the City of Frederick to “wherever possible and practical” make those purchase decisions that will strengthen the American economy. I would support this measure.
One appropriate limitation on whether or not to purchase foreign products is the conduct of the other nation. For example, because of its history of serious human rights violations, it may be appropriate to boycott goods from China until appropriate improvements are made by that government. On the other hand, I am inclined to support the purchase of goods and services from Taiwan, which has been a supporter of freedom. There are many political reasons that would call for boycotting the products of some nations and encouraging the purchase of products from other nations. I think it is fine if the City of Frederick takes these factors into consideration in its purchasing decisions. But the boycott of purchasing all non American-made goods is not a good policy. I want to promote our favorable international relations with our friends in Canada, England, Italy and Australia and other nations. The boycott approach is the wrong approach.
The “Buy American” approach is the Boycott approach. It is too broad, and it would be more harmful than helpful. If such a policy were embraced by the entire community, it would be especially harmful on the less affluent people—the ones who frequent K-Mart and Wal-Mart, whose stores are stocked with foreign-made goods. The “Buy American” approach would put K-Mart and Wal-Mart out of business, and thereby it would help those businesses that compete with the Marts. Is that what we want to do?