Buy America: An Analysis of U.S. Domestic Preference Legislation for the North American Strategy for Competitiveness
62 Pages Posted: 17 May 2016
Date Written: May 15, 2016
Every Congress since 1933 has enacted domestic preference legislation mandating that the federal government favor U.S. Products in contracting. The Buy American Act of 1933 is the first and most comprehensive piece of domestic preference legislation. It was initially enacted with the purpose of protecting U.S. Industries and jobs during the Great Depression. The Buy American Act, as well as the other forms of domestic preference legislation, gives preference to domestic goods in federal procurement.
This analysis recommends implementing a policy that is politically feasible, improves economic efficiency, and does not skew the distribution of wealth among the stakeholders.
It finds that expanding trade agreements so that exempt countries have increased access to U.S. Federal procurement would reduce the Buy American Act’s scope and economic inefficiencies, while avoiding a direct confrontation with the Act's supporters. This is accomplished by increasing countries’ exemptions to the legislation to include lower value contracts.
The benefit of the recommended policy, lowering the thresholds for the exemptions so that the producers operating in the 129 exempt countries are able to pursue more United States federal contracts, is that it avoids strong political opposition from beneficiaries of the legislation. It also sidesteps the argument that domestic procurement is necessary for national security by leaving the Berry Amendment of 1941, which applies stringent requirements to the Department of Defense, in place. However, our analysis indicates that domestic producers, low-wage workers, and labor unions are likely to openly oppose this policy. Ways to compensate those harmed by the recommended policy changes should be researched. In order to make an alternative policy politically feasible and equitable, policy makers should incorporate these crucial stakeholders into the process of developing alternatives.
Keywords: Government, Public Policy, Economic Analysis
Suggested Citation: Suggested Citation