THE PAST TWO WEEKS: "BUY AMERICAN" CONTROVERSY

The Administration, some congressional leaders, and a few states have begun pushing for more "Buy American" provisions in state and federal spending. However, our treaty obligations require that the US not apply any sort of preference for domestic firms in any federal contracts over $10.1 million (the amount varies, but most of our treaties use this number). They also prevent those other governments from preventing US firms from competing for their business, something American companies do quite frequently.

Were we to violate those treaty obligations (or withdraw from those treaties), we'd lose the ability to compete for business with foreign governments. We'd also end up paying higher prices (if the domestic firms' goods and services were cheaper, they'd have won the contracts in the first place). That extra spending has real cost; we have to raise taxes higher for the same public services, if we have these restrictions.

These treaties don't simply include NAFTA; we have open procurement obligations in many of our free trade treaties, including our membership in the World Trade Organization. If we left that treaty, we would be uniquely unable to compete with any developed country in markets across the world.

In the end, all estimates suggest very few jobs would be gained through this provision. Estimates are that employment would go up by just over half of a thousandth of a percent (0.0057%) if "Buy American" happens, and we may well lose high-value service exports (and thus high paying jobs that pay more taxes to boot) in exchange for lower-paying jobs producing less valuable goods, which consequently pay lower taxes. We'd all end up paying more, for less.

Few significant changes suggested in new NAFTA memo

While it is not clear precisely what will come out of the various negotiations the Administration is entering into with Canada and Mexico (and with Congress), when we look at what Robert Lighthizer (nominated to be the US Trade Representative) told the Senate two weeks ago, and this newly leaked memo that has been circulating within the White House, it seems the Administration realizes it can make few significant changes to the treaty.

It seems that the Administration will seek commitments that digital products won't be subject to country-of-origin tariffs, and better intellectual property enforcement.

Other requests the Administration is making seem to contradict the White House' anti-trade rhetoric. They want access to state/provincial/local government procurement—but as that would be bilateral, that would open up our own local and state expenditures, meaning state-level "Buy American" laws would be invalidated. That's not actually a bad thing, as it would mean states and local governments would pay lower prices for goods and services, and we could compete for those contracts in Canada and Mexico, but it seems to fly in the face of Trump's rhetoric about trade. Applying higher environmental and labor protection standards would constrain us as well as Canada and Mexico—perhaps helping us against Mexico, but doing little in terms of Canada, which has stronger protections than we do.

The Week Looking Forward

The Latin American Committee on Macroeconomic and Financial Issues, which is an influential non-governmental organization staffed by economists and former officials from a variety of Latin American countries, has recommended that their region focus their efforts on working with Europe and Asia (including China) and shift away from engaging with the US. Their concern is that Trump's rhetoric may actually indicate the policy direction of the US government, and that to rely on, sell to, or buy from the US would create a reliance on an unreliable ally.

The significance of this is that trade links shape future trade; if they buy and sell from other countries today, they will tomorrow (to an extent they would not have) no matter what our behavior towards these nations is. We could lose market share for years, long after the end of the Trump Administration, simply because of his rhetoric. In his words, that's "Sad."

Questions to Ask Your Member of Congress

• How much more will our community spend through taxes for the same government services, as a result of Buy American provisions?
• How much does our community earn from exporting to other governments? How much more will we earn from imports displaced by these provisions?
• Which of the changes in NAFTA suggested by the White House memo will help or harm this community?

- Trade & Commerce Policy Working Group, RISE Stronger

Have comments or something to add? Contact the RISE Trade & Commerce Policy Working Group at [email protected]