Buy American Act and campaigns

The Buy American Act (1933) and traditions favor the pur­chase of goods and services from domestic suppliers. Almost every time the U.S. economy begins to decline, local and national politicians, supported by business lead­ers, develop campaigns promoting the purchase of Ameri­can-made products. The Buy American Act requires the federal government to purchase American products unless

(a) the purchase is for use outside the United States (such as U.S. military bases abroad),

(b) there are insufficient quantities of acceptable quality products available domes­tically, or

(c) it results in unreasonable costs.

As currently applied, the act requires federal agencies to purchase domestic goods unless the domestic bids are more than 6 percent higher than bids from foreign pro­ducers. Bids from U.S. companies must contain 50-percent or more American materials to be considered domestic. These rules apply to civil purchases made by the U.S. gov­ernment but are suspended for purchasing subject to WORLD TRADE ORGANIZATION rules.

The U.S. Department of Defense has its own Buy Amer­ican rules giving preference to domestic suppliers. In addi­tion, under the Small Business Act of 1953, federal agencies set aside 30 percent of their procurement for socially and economically disadvantaged businesses.

Many state and local purchasing requirements also sup­port preferences for American producers. For example, California once had a regulation mandating purchase of American products, and cities in Massachusetts banned purchases from Myanmar (formerly Burma). These laws were declared unconstitutional on the grounds that they encroached on the federal power to conduct foreign affairs. State laws that copy the federal Buy American Act incor­porating public interest and unreasonable cost exceptions have generally withstood legal challenges. Many countries around the world have preferential buy­ing laws similar to those of the United States. American laws can be used to deny procurement contracts to suppli­ers from countries that “maintain . . . a significant and per­sistent pattern of practice or discrimination against U.S. products or services which results in identifiable harm to

U.S. businesses.”

“Buy American” campaigns—business/political initia­tives to encourage the purchase of American-made prod-ucts—typically arise during downturns in the domestic economy. In the mid-1980s, Wal-Mart, the largest retail chain in the United States, initiated its “Keeping America Working and Strong” campaign. Led by founder Sam Wal­ton, Wal-Mart directed buyers to seek out U.S.-made prod­ucts and encouraged vendors to do business with U.S. manufacturers.

“Buy American” campaigns generate favorable publicity and are good PUBLIC RELATIONS strategies. The federal govern­ment estimates that each additional $1 million spent on U.S. products results in 23 additional jobs in the country. “Buy American” campaigns are frequently associated with trade deficits and efforts to increase protectionism in the country. Economists have conducted numerous studies showing the huge cost to consumers for each job saved through TARIFFs and other competition-reducing trade legislation.

Studies also show that, while Americans prefer U.S.­made products, they tend to purchase the best price/value products available regardless of where they are made. A frequent problem is determining what is American-made. For example, approximately half of the Japanese-brand cars sold in the United States are produced in this country. Similarly, many American-brand cars are produced else­where. Often consumers have to look on the inside pas­senger door to determine where their car was manufactured. In a controversial Harvard Business Review article entitled “Who Are US?,” former Secretary of Com­merce Robert Reich argued that if the goal is to create and maintain jobs in the United States, Americans should also support the many foreign companies producing products and employing workers in the country regardless of where the company is headquartered.