Business groups call for ôBuy Americanö fix
The U.S. Chamber of Commerce warned Thursday that the American Recovery and Reinvestment Act, intended to create jobs through government spending on public works and other programs, is actually costing American jobs.
The chamber said 'Buy American' provisions of the act prevent U.S. companies with foreign suppliers from winning contracts and could lead to more retaliation by foreign trading partners against U.S. exporters.
The world's largest business federation is asking the Office of Management and Budget to clarify guidance to states about how funds from the law can be spent, and President Barack Obama to unequivocally denounce protectionism by fighting mandates for domestic purchasing in other pending legislation, said Myron Brilliant, senior vice president for international affairs, in a briefing with reporters on Thursday.
'We could have declining trade and we could lose a lot of jobs in the United States. It's particularly damaging to the U.S. relationship with Canada,' he said.
President Obama insisted in February that Congress amend the stimulus bill to require that it be consistent with international obligations that limit domestic preferences and purchasing policies.
Most of the funds dispersed at the federal level follow the free trade commitments, but the 'Buy American' requirements are having a major impact on projects administered by state and local governments that are not bound by North American Free Trade Agreement and World Trade Organization rules, according to the chamber.
The Government Accountability Office estimates that state and local governments will have $280 billion of stimulus money at their disposal. Jurisdictions across the country are interpreting the 'Buy American' provisions on their own in the broadest terms possible to avoid losing out on funds.
The chamber said it wants OMB to instruct state and local officials to emulate federal guidelines to reduce confusion in the marketplace about the actual requirements. To date, states and municipalities have been reluctant to use the public interest waiver included in the Recovery Act.
National Pipes of Vestal, N.Y., Milwaukee-based gearbox maker REXNORD Industries LLC and Athens, Ga.-based Baldor Electric, which makes submersible motors, are examples of U.S. companies that have been barred from government business because some of their components or materials come from Canadian and other overseas suppliers, Brilliant said.
'We need some guidance on what the de minimus standard is. Companies source globally. That doesn't mean they aren't creating real manufacturing in this country,' he said, pointing to steel and construction as industries that use foreign inputs.
The stimulus plan 'was intended to create American jobs, not just protect jobs,' said Brilliant, who attributed the small amount (6 percent) of funds that have been disbursed through actual contracts so far, in part, to confusion about the domestic content requirements.
'We don't see the money flowing out quickly, and one has to ask why is that? And one reason is that states and locals don't know what they should be doing, and thus companies don't know how to bid,' said Brilliant, who urged Congress to encourage the administration to update the spending guidelines.
'American manufacturers are finding it difficult to comply with these new 'Buy American' rules because it is often impossible to avoid sourcing at least a portion of their content from other countries. The timing and cost for this disruption — coming in the midst of the worst economic recession in decades — could hardly be worse for U.S. manufacturers,' Chamber President Thomas Donahue said in a May 22 letter to Obama.
Among the Canadian industries being hurt by the 'Buy American' provision are alternative energy, structural steel and medical devices, said Jay Myers, president of the Canadian Manufacturers and Exporters Association.
'We're losing jobs on both sides of the border because of these restrictions,' he said. Some companies are giving up trying to win contracts because the process is too expensive and complicated, he added.
There has been a significant backlash in Canada over the U.S. effort to protect American jobs at the expense of free trade. Canadian firms are being excluded from U.S. municipal contracts for water and waste water infrastructure, and several Canadian municipalities have retaliated by closing off business with U.S. suppliers. Such action could result in $3 billion in lost businesses to U.S. wastewater equipment and construction companies, according to the Chamber.
The Federation of Canadian Municipalities issued a resolution last week saying its members are willing to keep their purchasing market open to those that are willing to do the same to Canadian exporters.
At stake is more than $15 billion for American companies in the Canadian municipal procurement sector, Myers said.
Two bills that have passed the House — the Water Quality Investment Act of 2009 and a bill to fund energy efficient improvements for schools — also include domestic content mandates, and Canadians are also closely watching upcoming energy and highway bills for similar provisions, he said.
'We're worried about how other countries are adopting similar kinds of practices' after the G-20 leaders in April committed not to take protectionist actions as they worked to stimulate their economies, Brilliant said.
'We don't want to provide excuses for subsidy and other practices that prevent U.S. companies from competing in those markets,' he said, noting that other countries don't notice the distinction between federal and local contracting and perceive it as American protectionism. ' Eric Kulisch