'Buy American' Provision Boom or Bust?

Feb. 18, 2010
Manufacturing association says rule creates manufacturing opportunities, while others call it a regulatory burden.

Despite criticism that the Buy American provisions in the federal government's stimulus plan have damaged relations with U.S. trading partners, a U.S. trade group credits the measure with bringing streetcar manufacturing to Oregon.

Transportation Secretary Ray LaHood awarded Tucson, Ariz., with $63 million in federal stimulus funds on Feb. 18 to build a four-mile, $150 million rail system that will utilize streetcars manufactured by United Streetcar LLC in Clackamas, Ore.

The Alliance for American Manufacturing noted that the Buy American rules along with federal transportation domestic content requirements and similar local provisions in the Tucson area helped secure United Streetcar as a manufacturer for the project.

The streetcars are the first to be manufactured in the United States in 60 years, according to AAM, a trade group comprising U.S. manufacturers and the United Steelworkers union.

"Buy America requirements have the potential to rejuvenate established industries, create new ones, and expand capacity throughout supply chains for small businesses," said Scott Paul, Executive Director of AAM). "A prime example is United Streetcar of Clackamas, Ore., which is building the first modern streetcars to be manufactured in America in nearly 60 years."

But not everyone is convinced the measure has paid off one year after being implemented. The Buy American provisions in the $787 billion stimulus plan received heavy criticism from Canada for shutting Canadian companies out of public projects. On Feb. 5, the United States and Canada reached a tentative agreement to allow companies in each nation access to each other's public works projects.

On Feb. 17, the U.S. Chamber of Commerce issued a report highlighting the consequences of the Buy American provisions.

"While the Chamber supported the Recovery Act, we had grave concerns that the Buy American mandates would only cause confusion and harm the efficiency of the plan," said Bruce Josten, the Chamber's executive vice president of Government Affairs. "Unfortunately, one year later our concerns with these provisions have been realized. We must ensure similar provisions are not included in future bills."

The Chamber notes that retaliation by foreign competitors could cause U.S. companies to lose 1% of potential foreign stimulus procurement opportunities and result in 176,800 job losses.

The report also profiles several U.S. companies, including Aqua-Aerobic Systems Inc., that say they've been harmed by the Buy American rules.

"As anticipated, the Buy American legislation, regulations and enforcement have become more complicated, and the provisions continue to put an increased hardship on small and medium-size manufacturers and suppliers," says Deb LaVelle, vice president of sales and marketing for Aqua-Aerobic Systems, a small wastewater treatment equipment manufacturer in Rockford, Ill. "Our company has invested in several internal and external resources over the past year at a considerable cost."

LaVelle says smaller companies don't have the resources larger corporations have to deal with the complicated Buy American requirements.

About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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