Buying American: The US Policy of Protectionism - Essay Sample

Introduction

Almost all national governments strive to protect their industrial sectors and labor workforces from the competition by foreign countries in varying degrees. The United States is no exception. 'Buying American' is a policy that promotes the buying of goods produced in the United States of America and has been widely talked about by contemporary president Donald Trump. It is associated with an act called The Buying American act which was passed in Congress in 1933 and then signed by President Hoover in March 1933. The bill limits the purchase of non-domestic goods and favors goods that are manufactured or domestically sourced in the United States. The current Leader of USA President Trump issued an executive order that advocated for the 'Buy American policy' with the fundamental assumption that through this policy, many employment opportunities will be created, and the country's economy will be enhanced. While this policy may sound logical, many disadvantages had not been considered (Choi, 2017)

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Firstly, there is an interrelation of regulatory mandates. United States law constitutes of highly complex content conditions. The circumstance is complicated further by varying understandings of the law. The mandatory guidelines that American companies must follow to fulfill the 'Buy American' policy increases their costs, lowers profits, reduces the number of employment opportunities for American Citizens, and lowers the value received by taxpayers. The money received by taxpayers is invested in infrastructure and other projects by the government. Also, due to the many differences in various laws, while defining the slogan 'produced or manufactured in America', it makes it hard for corporations to bid on contracts provided by foreign governments while staying competitive in the world economy (Yukins, 2019).

Secondly, there is a decrease in making choices. The National Defence Authorization Act is a policy that requires the Department of Defence to purchase athletic footwear for all new service members from domestic sources. The United States manufactures less than 1% of the approximately 24.3 billion shoes, produced in the whole world. In the past. The Department of Defence gave the servicemen money to buy any athletic shoes that best suited their needs. The service members had the freedom to choose from any brand worldwide because athletic shoes vary. Also, due to the availability of different products, which is considered suitable for one person, might be unsuitable for another. Thus, 'The Buy American' policy hinders the United States service members the ability to make the best decision concerning athletic shoes that meets their needs.

Thirdly, isolation of the American economy from the world. Companies have become more strategic in recent years. Often, these corporations always look for places to find high-quality raw materials at cheaper costs so that they can stay competitive and maximize their profits. 'The Buy American' Policy hinders them from doing so because it isolates American manufacturers, restricting consumers and companies from the increased fortune that is a result of a globalized economy. Hence, the rest of the world continues to trade unsupervised, while America remains isolated.

Loss of jobs due to layoffs and plant closings resulted from the 'Buy American' policy. The 'Buy American' guidelines have negatively impacted many businesses, especially the ones that depended on Chinese imported products. A South Carolina Plant specializing in assembling of television parts using Chinese products shut down because of the imposed regulations as a result of The Buy American policy. When a big company like that shuts down, hundreds of Americans lose their jobs. 'The Buy American' policy is doing more harm than good to the citizens of the United States. Also, due to the tariffs imposed, The Beer Institute that employs 2.2 million Americans laid off twenty thousand employees due to the increased cost of Aluminium by 6%, which is essential in the making of beer cans. The laying off of employees was a necessity for the company to remain in competition with other companies worldwide.

Increased costs for taxpayers. The Buy American policy forces American taxpayers to pay more on domestic content compared to what they would pay for the federal, state, or local projects. The policy costs taxpayers an increment of about 6 to 50 %, which varies on the type of corporation bidding on a contract. A contract of about fifty million dollars could cost the taxpayers approximately fifty-three to seventy-five million dollars. Thus, the high cost hinders the taxpayers from bidding on foreign contracts.

It is challenging to find a product that is manufactured exclusively from local content. In most cases, goods are the end products of Global Value Chains. Global Value Chains consists of a combination of stages in production that are from different countries. Global Value Chain involves putting together intermediate goods and services into products used at a particular stage of production. There are several steps when dealing with Global Value Chains. It includes several steps from conception, assembling, branding, and marketing. In this manner, organizing production captures efficiencies worldwide.

The 'Buy American' Policy creates trade wars between countries. Trade wars are economic conflicts that arise when a state creates or raises a tariff in retaliation to trade barriers put in place by another country. Business corporations such as Morris Kessler that specializes in manufacturing amplifiers and auditory equipment are affected negatively because of the tariffs. Kessler's competitors from other countries can undercut his prices because they are in a position to buy cheaper products from the Chinese markets without the added duties. Also, his Chinese suppliers increased the rates on their goods as a way of retaliating to the trade wars. Replacing a supplier is very expensive, and establishing new supply chains takes a very long time; hence this policy is negatively impacting different manufacturing industries (Platzer & Mallet, 2019).

Increase in prices on domestically made products in the American economy. The prices of locally made goods have risen due to increased costs for quality products. Manufacturers in the United States are selling their goods at premium prices due to the severe labor protections and higher wages that American workers enjoy. These manufacturers fear that one of the consequences of the trade wars can be increased prices on products past what the consumers can afford or willing to pay.

Conclusion

In summary, The Buy American policy has negatively impacted the United States economy. It has cost taxpayers more than they would otherwise pay for projects provided by the government, increased prices on domestically made goods, started trade wars, and resulted in massive layoffs. Thus, removing the 'Buy American' policy would result in considerable benefits to the producers, consumers, taxpayers, and contribute to the significant growth in the United States economy. The removal of the policy would increase the United States GDP by approximately twenty-two million dollars and raise thousands of employment opportunities in the country. Also, removing the Buy American Policy would enable corporations to spend less money on supplies, thus increasing employment in the private sector. It would lead to increased efficiency, cost reduction, and allow the United States federal government to complete many projects without the problem of increased funding. Lastly, the taxpayers would be able to get more money from their investments (Dixon, Rimmer &Waschik, 2018)

In conclusion, the 'Buy American policy' is destroying the American economy, and the Congress and Administration should remove the law to create a conducive economic environment in which private corporations can flourish.

References

Choi, S. (2017). " BUY AMERICAN AND HIRE AMERICAN": PRESIDENT TRUMP'S OPTIONS FOR STRENGTHENING THE BUY AMERICAN ACT. Public Contract Law Journal, 47(1), 79-100.

S Choi - Public Contract Law Journal, 2017 - search.proquest.com

Dixon, P. B., Rimmer, M. T., & Waschik, R. G. (2018). Evaluating the effects of local content measures in a CGE model: Eliminating the US Buy America (n) programs. Economic Modelling, 68, 155-166

PB Dixon, MT Rimmer, RG Waschik - Economic Modelling, 2018 - Elsevier

Platzer, M. D., & Mallett, W. J. (2019). Effects of Buy America on Transportation Infrastructure and US Manufacturing. Washington: Congressional Research Service.

MD Platzer, WJ Mallett - Washington: Congressional Research ..., 2019 - everycrsreport.com

Yukins, C. R. (2019). Trump Executive Order Calls for More Aggressive Use of The Buy American Act-An Order Likely to Have More Political Than Practical Effect.

CR Yukins - 2019 - papers.ssrn.com