On the surface, “Buy America” sounds patriotic and seems like a no-brainer. It seems like the right thing to do because it supports American workers and companies.
That may have been true in the 1950s when I grew up, but today it is a very different world. In fact, it is rare to find a product that is made exclusively in one country, especially complicated machines and electronic devices.
The “Buy America” language in the $787 billion federal stimulus legislation passed earlier this year created a firestorm when President Obama flew to Ottawa last winter. Canada, our nation’s largest trading partner and longtime friend, took exception to the president’s protectionist initiative because the Canadian Parliament took precautions to ensure that a “Buy Canada” provision was excluded from its economy recovery plan.
The president’s chilly reception caused him to hurry back to Washington, consider the consequences and carve out exemptions to our recovery program. That didn’t totally work, because local governments were not exempt and “Buy America” provisions still applied.
The fact is the world’s economy is interconnected. The North American economy, especially, is highly integrated, and whatever actions government takes on one side of the Canadian border causes an equal if not greater reaction on the other side.
That happened recently when the Federation of Canadian Municipalities passed a resolution calling upon Canada to impose “Buy Canada” provisions to offset the U.S. directive.
The most visible impact of a new round of protectionism would be seen in the water treatment equipment and pipe sector which, in 2008, was worth $10.18 billion. The water treatment facilities installed around the world have integrated parts from many countries.
If Americans exclude Canadian products from U.S. water treatment facilities and the “Buy Canada” language sticks, U.S. companies and their workers stand to lose $6.18 billion a year. Canadian companies would lose $4 billion if they are excluded from providing pipe and water systems to American government projects.
You didn’t have to get an “A” in math to see who the real loser is in this equation.
Protectionism doesn’t make sense because manufacturers today are international. They build, process and assemble goods in many nations and sell products around the world.
According to Doug Conant, chief executive officer of Campbell Soup Company, 4,000 shipments of ingredients for its food products cross from our country into Canada each day and 3,500 come from Canada into the U.S. Some of the vegetables cross the border twice when ingredients from processing plants in both countries are mixed, packaged and distributed to retailers across the globe.
Unbundling that supply chain would have a catastrophic effect. Figuring out where to start would be overwhelming.
In Washington, 153,000 jobs depend on trade with Canada. Consider the aerospace and airline industry. Seattle-based Horizon Air, which flies Canadian-made Bombardier Q400 aircraft, has ordered 115 planes from the Canadian manufacturer, which by the way, uses parts from around the world (including the U.S.) in its aircraft. Horzon’s parent company, Alaska Air, flies Boeing 737s.
Air Canada, Canada’s largest airline, placed 37 orders for Boeing’s new 787 to add to its 18 777s. Air Canada’s fleet is dominated by Airbus and our “Buy America” provision could push Canada to retaliate, giving Airbus an advantage over Boeing. How is that good for Washington’s working families?
As much as we may want to return to the good old days when life was simpler and all our cars were made in Detroit, modern technology and markets are different. Despite our nation’s leadership in many areas, we have stiff competition from aboard. Political strategies from the 1950s don’t work in 2009, and the ones who really stand to lose from heart-tugging slogans like “Buy America” are Americans.
Don Brunell is the president of the Association of Washington Business.