Written by Editorial Board
ASK ANY economist about “Buy American” laws, and he or she will tell you: All else being equal, they are counterproductive. Such laws, which require federal and state governments to purchase goods and services from U.S. companies, are touted as a way to boost production within the United States. In fact, they raise the average cost and lower the average quality of everything government buys. That is the inevitable consequence of limiting choices available to government purchasing managers, just as it is for ordinary consumers. Jobs created may be offset by those lost when other countries retaliate.
Ask a political consultant, though, and you’ll get a different answer: Many voters support the practice. In a 2020 survey for the nonprofit Hinrich Foundation, 75 percent of Americans backed Buy American policies, including 48 percent who “strongly” favor them. Organized labor, a key Democratic constituency, is especially supportive.
So it’s unsurprising, but unfortunate, that President Biden, in one of the few instances where he did not differ from President Donald Trump, campaigned on tougher Buy American rules. And he has delivered: His “Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers,” issued Monday, would tighten what critics regard as unjustified loopholes in current Buy American laws, which allow the government to buy foreign products or services when U.S. equivalents are either unduly expensive or unavailable.
Henceforth, agency heads will have to pre-clear such waivers with a new special office within the White House. They will also have to lay bare more of their internal decision-making on the Internet, so the public can more easily hold them accountable — or interested companies and unions can more easily badger them. The Biden order’s emphasis on the Jones Act, a domestic-vessel shipping requirement for Puerto Rico, portends tougher enforcement of a blatantly protectionist law that raises the cost of living and doing business on the already struggling island.
There are real issues related to the supply chain for strategic goods, as U.S. dependence on China for medical equipment during the pandemic has shown. Public health and national security can justify departing from pure free trade. Mr. Biden is not wrong to want to “onshore” jobs that might be created by major new infrastructure spending, for which this executive order lays a basis. His order stipulates that it be implemented “consistent with applicable law,” including, presumably anti-protectionism rules of the World Trade Organization. Apart from any future infrastructure bill, the actual amounts at stake may be relatively small: U.S. agencies bought $586 billion worth of goods and services in fiscal 2019, but data from the Government Accountability Office suggest foreign suppliers account for less than 5 percent.
Still, the Biden administration is letting itself in for new layers of bureaucracy and friction with U.S. trading partners, whose own government procurement is already more protectionist than this country’s. The ultimate goal should be talks whereby the United States and other countries reciprocally open their markets, so all governments, at home and abroad, can buy American. We hope Mr. Biden’s order will spur mutually beneficial opening; our fear, all too realistic, is that it will prompt a response in kind.