Buy America: An Analysis of U.S. Domestic Preference Legislation for the North American Strategy for Competitiveness

62 Pages Posted: 17 May 2016

See all articles by James Dean

James Dean

Texas A&M University - George Bush School of Government and Public Service

Stephanie Gullo

Federal Reserve Banks - Federal Reserve Bank of Dallas

Rachel Marsh

Texas A&M University - George Bush School of Government and Public Service

Charles Edward Andrew Lincoln IV

University of Groningen, Faculty of Law

Michael Sankey

Texas A&M University (TAMU), School of Law, Students

Date Written: May 15, 2016

Abstract

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

Dean, James and Gullo, Stephanie and Marsh, Rachel and Lincoln IV, Charles Edward Andrew and Sankey, Michael, Buy America: An Analysis of U.S. Domestic Preference Legislation for the North American Strategy for Competitiveness (May 15, 2016). Available at SSRN: https://ssrn.com/abstract=2780156 or http://dx.doi.org/10.2139/ssrn.2780156

James Dean

Texas A&M University - George Bush School of Government and Public Service

TAMU 4220
1004 George Bush Dr West
College Station, TX 77843
United States

Stephanie Gullo

Federal Reserve Banks - Federal Reserve Bank of Dallas

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Rachel Marsh

Texas A&M University - George Bush School of Government and Public Service

TAMU 4220
1004 George Bush Dr West
College Station, TX 77843
United States

Charles Edward Andrew Lincoln IV (Contact Author)

University of Groningen, Faculty of Law ( email )

Groningen
Netherlands

Michael Sankey

Texas A&M University (TAMU), School of Law, Students

College Station, TX
United States

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