Tempering 'Buy American' in the Recovery Act - Steering Clear of a Trade War

Abstract

The controversial 'Buy American requirements in Section 1605 of the American Recovery and Reinvestment Act of 2009 threaten to stir protectionism leading to an outright trade war. This could be catastrophic in the current economic crisis, particularly since the Obama administration does not appear to beleive that additional domestic preferences are needed for U.S. procurement. The pending challenge for federal regulators, therefore, will be to craft a rule that contains the Recovery Act's international impact, while implementing Congress' intent. The authors suggest that the optimal approach seems to be the most simple: to fold new procurement under the Recovery Act into the existing FAR regulatory structure, which accommodates the U.S.' many trade agreements. This would ensure that federal agencies' procurements adhere to those trade agreements (and also increases the likelihood that an already over-taxed acquisition workforce can consistently apply the new rules.) This simple, quick and elegant approach would be the least likely to generate new, potentially disastrous waves of protectionism in the critical, but treacherous, waters of global commerce.

Keywords: Buy American, World Trade Organization, Government Procurement Agreement, Recovery Act, Federal Acquisition Regulations, Protectionism

JEL Classification: H57, K12, K23, K33