Pressure to ‘Buy America’ surging
07/03/2013 11:59 AM
07/03/2013 5:08 PM
To John Garamendi, the new San Francisco-Oakland Bay Bridge set to open in September is a symbol of failed U.S. trade policy: a $6.3 billion project that used 43,000 tons of Chinese steel and produced thousands of jobs overseas.
With 70,000 U.S. bridges needing repairs, the Democratic representative from California wants Congress to pass more “Buy America” requirements, insisting that public works projects use American-made materials to create more manufacturing jobs – even if foreign firms offer lower bids.
“The American workers have been totally screwed year in and year out by the free-trade negotiations and the compacts that have been reached – and it’s got to end,” he said.
Opponents say that’s a surefire way to increase costs for U.S. taxpayers.
“You’re going to simply be less efficient – you’re going to buy more expensive products than you would if you could buy foreign products,” said Dan O’Flaherty, vice president of the National Foreign Trade Council in Washington, a business lobby that promotes global trade.
Despite the criticism, the idea is growing in popularity: 20 Buy America bills popped up in statehouses this year, a fourfold increase from last year.
Most of the bills died in committees, but critics fear that such a big spike could complicate the work of U.S. negotiators as they prepare to formally open the first round of new trade talks with the European Union on Monday.
The issue irked the European Union in 2009, when Congress included Buy America requirements in a bill to stimulate the economy. With the issue back on the table, some fear that U.S. negotiators may find themselves on the defensive, making it harder for them to press for increased access to the vast European markets.
“You should not be handing the people we’re negotiating with an ace in the bargaining,” said O’Flaherty.
In the last two years alone, three states – Colorado, Maryland and Ohio – have passed Buy America laws requiring the use of U.S. manufactured goods in public works projects, O’Flaherty said. He expects another flurry of bill introductions in 2014.
In Nebraska, state lawmakers this year even debated a “Buy Nebraska” law, aimed at giving an edge to state businesses over out-of-state competition for any state contracts.
“You have to wonder what they were thinking, because that means wheat, basically,” said O’Flaherty.
With so much public anger over trade deals, Garamendi is confident that the campaign to pass Buy America legislation is a winner for Democrats and Republicans alike.
“I’m telling you: This is a big, big political issue,” Garamendi said. “You want to go out and get the tea party to cheer for you as a Democrat? Just go say, ‘We’re going to make it in America. We’re going to spend your taxpayer money on American-made equipment and supplies.’”
Eric Shimp, a former U.S. trade negotiator who’s now a policy adviser on global trade with Alston & Bird, a Washington law firm, said the increase in Buy America bills reflects the growing pressure on officials to make sure that local tax money is used to support local jobs.
But he said “it’s a bit overwrought” to suggest that the trend could undermine upcoming trade talks.
“It’s just one among many rather difficult issues between the U.S. and the European Union,” Shimp said.
Caught in the middle is Michael Froman, President Barack Obama’s new U.S. trade representative.
In an interview, Froman said a new trade deal with Europe could mean additional U.S. exports valued anywhere from tens of billions to hundreds of billions of dollars, depending on the ultimate size of the pact and what’s covered.
He said he has not reviewed any specific Buy America bills but that any new laws must be “consistent with our international obligations.”
For Froman, the bigger concern is getting the U.S. and the European Union to adopt similar standards for products as a way to sell more American goods in Europe. U.S. negotiators, for example, face a huge hurdle in trying to overcome European suspicions about American food, including genetically modified products.
And Froman’s hoping a new deal will end up sending more big-ticket items from the U.S. to Europe, such as automobiles.
“When one of our European counterparts lands here at Dulles Airport and gets in a car that was built to American safety standards, I rarely hear them worrying that they’re unsafe – they don’t get out and walk from the airport to downtown Washington,” Froman said. “Yet we can’t export that car to Europe because it’s a slightly different set of safety standards.”
Garamendi, who served as California’s lieutenant governor before being elected to Congress in 2009, said that trade talks in recent years have mainly served to put a spotlight on “the normal American position of giving away American jobs.”
Garamendi said California hoped to save money by using Chinese steel on the Bay Bridge, one of the largest public works projects in U.S. history, but the strategy backfired.
“The steel had flaws, the welds had flaws and the end result was no money was saved,” he said. “And China used that contract to build a highly specialized steel mill, the only one in the world. . . . That could have been an American steel mill, but it’s not.”
O’Flaherty said many of the states considering Buy America laws could be setting themselves up for trouble: He noted that 37 states already have agreed to abide by World Trade Organization procedures for procurement.
“If you signed on to an international agreement that says you’re supposed to not discriminate against foreign companies in procurement, you can’t do it,” he said.
O’Flaherty said the Obama administration should do more to push back against states considering Buy America plans to avoid legal liability: If a complaint is filed with the World Trade Organization alleging that a state law caused a company to suffer a financial loss after losing a bid, the federal government – not the individual state – would have to defend the case.
“The U.S. government is on the hook for that, not the state of Ohio,” he said.
Shimp said it’s unrealistic to expect Obama’s team to get tough with the states on trade issues.
“This administration went to such lengths to do all these road shows and talks about how trade could benefit the economy,” he said. “But for a lot of their core constituents in the Democratic Party, that’s not their game: Trade still doesn’t work for them.”
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