In his first weeks as president, Joe Biden has been busily undoing much of his predecessor’s legacy. On issues ranging from climate to abortion to immigration, Biden has signed executive orders and proposed new regulations aimed at reversing Donald Trump’s policies. But when it comes to one of Trump’s most damaging economic obsessions — his “Buy American” agenda — Biden is following in Trump’s footsteps.
Trump was the most protectionist president of modern times. Hostility to free trade was a key theme of his 2016 presidential campaign and of his inaugural address. “We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” he declared. “Protection will lead to great prosperity and strength. . . . We will follow two simple rules: Buy American, and hire American.”
He was wrong. His protectionist policies failed. Yet now comes Biden, and he vows to go even further.
On Jan. 25, the president issued directives toughening Trump’s policy of requiring the federal government to buy US-made products. Biden’s orders, as summarized by the White House, impose higher hurdles for imported components used in US manufacturing and direct government agencies to “crack down on unnecessary waivers” — i.e., to allow fewer federal agencies to procure foreign-made goods when they determine that a preference for American products would not be in the public interest.
But “buy American” mandates, though popular with the public, are never in the public interest.
The idea that the federal government should be compelled to buy its products and supplies from US producers and suppliers dates back to the Great Depression. On his last full day as president, in 1933, Herbert Hoover signed the protectionist Buy American Act, which required government agencies to give preference to domestic goods for all contracts above a $10,000 threshold. Supporters of the law argued that it would strengthen American industry, fuel job creation, and boost the fortunes of American workers.
The same argument is still being made by advocates of “buy American” policies. Biden’s new orders, said the White House, “will ensure that the federal government is investing taxpayer dollars in American businesses — both small and large. These investments will help create well-paid, union jobs, and build our economy back better so that everybody has a fair shot at the middle class.”
That may sound patriotic and reasonable. But the effect of Hoover’s law, and myriad subsequent domestic-preference statutes and regulations, has been to drive up the cost of goods and services bought with public funds and prevent jobs from being created. According to one scholarly estimate, scrapping “buy American” restrictions would add $22 billion to the US economy and generate an estimated 363,000 new jobs. Another analysis, by the Peterson Institute for International Economics, calculates that “the annual taxpayer cost for each US job arguably ‘saved’ by made-in-America [rules] probably exceeds $250,000.”
There is a superficial appeal to the notion that US procurement dollars should be reserved whenever possible for US producers. But like a lot of superficially appealing notions, it doesn’t hold up to scrutiny. No one would ever insist that officials in Cambridge or Worcester be compelled to buy equipment and materials only from vendors and producers located within their municipal borders. After all, there are so many more options — often less expensive options, higher-quality options, or more reliable options — to be found in other towns. It would be equally absurd to insist that Massachusetts agencies be barred from contracting with firms in Ohio or California. Economic well-being doesn’t come from locking up trade behind local or state boundaries, but from expanding it beyond those boundaries. What is true of neighborhoods, cities, and states is equally true of nations.
Protectionist mandates deprive American taxpayers of the benefits that come from access to worldwide supply chains and the broadest possible competition. By sheltering domestic producers from competitors abroad, “buy American” rules reduce the pressure on those producers to innovate, improve quality, and become more efficient. Rare is the business that is capable of achieving sustained excellence, or of remaining at the cutting edge of its industry, if it never has to face challengers.
Those entrusted with taxpayer dollars should be required not to “buy American,” but to buy wisely — to get the highest quality at the most reasonable cost. When American-made products meet that standard, by all means buy them. When imports are available at higher quality and lower cost, that is where taxpayer dollars should go. Surely Biden would agree that Herbert Hoover’s policies have done enough harm. This is no time to double down on them.