The Pound-Foolish Case Against Buying American
Thursday, August 15, 2013
Supporters of stronger Buy American requirements for all U.S. government purchases just got a big favor from Thomas Prendergast. The head of the New York City-area Metropolitan Transit Authority evidently thought his recent defense of his agency’s decision to refurbish a bridge with Chinese steel epitomized excellent stewardship of taxpayer dollars. Instead Prendergast made clear what a triumph of shortsightedness the China import option usually is.
No, we at GLOBALIZATION FOLLIES didn’t miss Prendergast’s troubles in keeping his story straight in the letter he wrote to the New York Times. The MTA chief insisted both that he couldn’t “identify an American fabricator ready, willing and able to supply the steel deck panels in the quantities needed” and that buying Chinese saved the taxpayers “up to $100 million” But if American producers simply couldn’t come up with enough steel to repair the Verrazano-Narrows Bridge, then choosing imports wasn’t a virtue. It was a necessity.
More important, if American-made product was indeed available, then the use of imports entailed much more cost than benefit. The $100 million in savings Prendergast claims would have generated more than that sum in new orders for domestic companies – the savings plus the premium the U.S.-based supplier allegedly would have charged. That’s also $100 million-plus dollars in economic growth that wouldn’t have required financing through bigger public sector deficits and national debts that inevitably would have been created by either lower taxes or more government spending.
But state and local governments would have benefited from Buying American, too, because both the earnings of the supplier company (and its own suppliers) and the wages of its workers could be taxed by these authorities. In other words, the proceeds would have made available more financially responsible funding for schools, police, roads, and other public services.
Local economies – and the broader U.S. economy – also would have been strengthened as well to the extent that these corporate earnings and wages were spent in America, spurring even more demand for domestic goods, services and workers.
And let’s not forget the big externalities arising from using Chinese products in particular. Many were ably described in the Times op-ed that prompted Prendergast’s letter in the first place, but are worth reviewing.
There’s the extra global pollution and greenhouse gases emitted, because China-based manufacturing is so much dirtier than U.S.-based manufacturing. There’s the enabling of government subsidies
and other forms of economic predation – which have powered China’s export drive, and which hardly help spread free market practices around the world. There’s the financing of China’s military buildup – made so much easier by all of Beijing’s licit and illicit trade profits. And there’s the overall strengthening of a regime deeply to real economic and other forms of freedom.
Not that it’s reasonable to expect Prendergast and state and local officials generally to think of all this. Their jobs are hard enough as is. But the popularity of Buying Foreign reveals the urgent need for legislation that requires these considerations to be taken into account. If America ever could afford to be penny-wise and pound foolish with public funds, those days are clearly over.
(Sources: “Letter: Buying Steel From China: The M.T.A. Explains,” The New York Times, August 12, 2013, http://www.nytimes.com/2013/08/13/opinion/buying-steel-from-china-the-mta-explains.html?_r=0 and “The Price of ‘Made in China,’” by Peter Navarro, The New York Times, August 4, 2013, http://www.nytimes.com/2013/08/05/opinion/the-price-of-made-in-china.html?_r=0)
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).