BREAK IN TRANSCRIPT
Mr. McCAIN. Madam President, I am pleased to join with my good friend Senator Feingold in offering this fiscally responsible amendment, along with Senators McCaskill, Burr, Lieberman, Graham, Coburn, and others. May I say that I find there are very few pleasant aspects of losing an election, but one of them that I most value is going back to work with my friend from Wisconsin, Senator Feingold, whom, for now many years, I have had the great honor and privilege of working with as we attempt to bring about the reforms which will help restore the confidence and trust of the American people in the way we do business in Washington but also in our stewardship of their tax dollars. I am pleased to join with my good friend Senator Feingold.
Senator Feingold outlined the provisions of the amendment so I don't want to repeat them. But I also want to point out that some people are saying: Why should we have this on this legislation, when this stimulus package does not directly apply? We know there is an omnibus appropriations bill coming down the pike. The House of Representatives intends to take it up soon. There is apparently, unfortunately, another TARP that may be coming, not to mention the other appropriations bills that will be coming. So the sooner we address this issue, the better off we will be. I also think one of the reasons why support for the stimulus package is rapidly eroding is because you don't have to call it an earmark and it doesn't have to be technically an earmark, but when you see many of the provisions in this stimulus bill, they have nothing to do with stimulus and everything to do with spending. They are fundamentally earmarks as well, certainly in their effect.
It is not only appropriate but necessary to adopt this amendment so that the American people will know in the future, when we make tough decisions, this kind of practice of adding absolutely unnecessary, unwarranted spending of their tax dollars on appropriations bills without a proper process of scrutiny and ability to reject them will not occur. It will not restore their confidence. The stimulus package before us is important, but right now the American people see it not as a stimulus but a spending package. That is why this provision will restore some confidence in the future way we address their tax dollars.
Every time Senator Feingold and I have tried to kill off a specific unwanted and unnecessary and, many times, outrageous appropriation, if we had succeeded, it would have taken down the whole bill. So one of the important aspects of this legislation is to allow us to rifleshot and remove unnecessary and wasteful spending.
I don't have to go through the list, but it is always kind of fun to do it. Even though we passed in January 2007, by a vote of 96 to 2, an ethics and lobbying reform package that had meaningful reforms, by August of 2007, we were presented with a bill containing very watered-down earmark provisions and doing far too little to rein in wasteful earmarks. Since we adopted the much heralded reforms of January 2007, we have spent $188,000 for the Lobster Institute, which includes a lobster cam at the bottom of the ocean, which so far we have been unable to make work; $98,000 to develop a walking tour of Boydton, VA, population 454; $212,000 for olive fruit fly research in Paris, France; $1.95 million for the Charles B. Rangel Center for Public Service; $150,000 for the Montana Sheep
Institute--almost every one of these earmarks location specific required--$345,000 for tree planting in Chicago; $196,000 for the renovation of an historic post office in Las Vegas; $150,000 for the STEEED program, Soaring Towards Educational Enrichment via Equine Discovery, a youth program in Washington, DC; $100,000 for Cooters Pond Park in Prattville, AL; $50,000 for construction of a National Mule and Packers Museum in Bishop, CA; $244,000 for bee research in Weslaco, TX.
The point is, some of these projects I am talking about may have virtue. It may be of the utmost national importance in this time of record deficits that we have a lobster cam at the bottom of the ocean and that we should spend $188,000 for it. But it should be subject to debate and discussion and amendment and acceptance or rejection.
What Senator Feingold and I are seeking is a process where these earmarks can be judged on their value, their contribution to the overall economy, and whether they are necessary. Under the present system, they are still inserted without the Congress having the ability to carefully examine them.
It also would require recipients of Federal dollars to disclose any amounts that the recipient has expended on registered lobbyists. There is a new game in town--not so new, it has been going on for some years, but it grows--and that is that special interests, universities, others will go to a specific lobbying group, and they will then seek the earmarks this interest desires and believes is required. There are certain, obviously, amounts of money given to those lobbyists for their work. We are not saying they should not do that. We are saying that the amounts of money given to the lobbyists as a result of the recipients of Federal dollars obtaining those funds should be revealed.
Again, $446,500 for horseshoe crab research at Virginia Tech in Virginia; $500,000 for a maritime museum in Mobile, AL; $360,000 for Hawaii rain gauges; $401,850 for the Shedd Aquarium in Chicago, IL.
This process has got to end. The American people do not trust the Congress to dispose of their tax dollars without these billions of earmarks, or at least a process where they are scrutinized and Members of Congress have the ability not to just vote on an appropriations bill that appears on the Member's desk shortly before the vote takes place. The appropriators will tell us these are all worthwhile projects.
They are not, and they have resulted in corruption. There are former Members of Congress residing in Federal prison today because this process--this process--has corrupted people. It has to be fixed.
So I could go in citing examples of unauthorized earmarks and policy riders in appropriations bills and conference reports. But I think you have the picture. By the way, an egregious example that is being investigated today is that for one of the appropriations bills, appropriations were inserted after the bill was passed and signed by the President of the United States--a remarkable occurrence--a remarkable occurrence. It shows how far we have gone in our obligations to the American people.
I would like to say a word to my own side of the aisle. We just lost an election, and I will take the responsibility for that. But I can assure my colleagues on this side of the aisle that one of the reasons why Republicans lost the last election is because our base, who are concerned about our stewardship of their tax dollars, believes we got on a spending spree which has mortgaged our children's futures.
If there is a future on this side of the aisle, then we have to clean up our act on spending. Time after time, when some of us said: You have to veto these spending bills, the answer was: Well, we have to please Members. What we did was we alienated those American citizens--frankly, of all parties--who feel strongly we have lost our sense of obligation to them as far as careful stewardship of their tax dollars is concerned.
I wish to mention one other thing. I had a very good conversation with the President of the United States. We all want to work together to pass this stimulus, a stimulus package that will get our economy going again. I look forward, as do other Members on this side of the aisle, as well as the other side, to sit down, and let's have some serious negotiations so we can eliminate wasteful and unnecessary spending that is part of the stimulus package that is before the Senate today.
We should make sure we adopt an amendment that as soon as the GDP improves for two quarters by 2 percent, we will then enact spending cuts to put us on the road to a balanced budget. We need to do that. We used to talk about millions of dollars and then we started talking about billions of dollars and now we are talking about trillions of dollars of deficits that will be run up that we will lay on future generations of Americans.
With this stimulus package, there must be a commitment to stop this spending and to reduce spending once our economy recovers, so we can have some sense of ability to put this Nation on a path to a balanced budget to eliminate the debt and deficit we are laying on future generations of Americans.
Americans are beginning to turn against the stimulus package as it is presently designed. They are doing that because they do not believe it is a stimulus package. They believe, correctly, it is a spending package. I urge my colleagues to help restore confidence in whatever the outcome is, that we adopt this amendment, so in the future the American people can be sure we will have done our very best to eliminate unnecessary, wasteful, and corrupting spending that has characterized the expenditures we have made in the past on appropriations bills that contained those unwanted, unnecessary spending practices.
I thank the Senator from Wisconsin, again, and my friend, Senator Lieberman, and Members on both sides of the aisle who will support this amendment.
Madam President, I yield the floor.
BREAK IN TRANSCRIPT
Mr. McCAIN. Madam President, I rise to offer an amendment that would strike the protectionist ``Buy American'' provision from the pending economic recovery package. While the supporters of this provision state that they intend it to save American jobs, it would have exactly the opposite effect, causing great harm to the American worker and global economy.
In 1930, as the United States and the world was entering what would be
known to history as the Great Depression, this body considered issues similar to those we are discussing on the Senate floor today. Two men--Mr. Smoot and Mr. Hawley--led the effort to enact protectionist legislation in the face of economic crisis. Their bill, the Smoot-Hawley Tariff Act, raised duties on thousands of imported goods in a futile attempt to keep jobs at home. In the face of this legislation, 1,028 economists issued a statement to President Herbert Hoover. This statement, subsequently printed in the New York Times, is as relevant today as it was nearly 80 years ago. ``America is now facing the problem of unemployment,'' these economists wrote. ``The proponents of higher tariffs would claim that an increase in rates will give work to the idle. This is not true. We cannot increase employment by restricting trade.'' Mr. Smoot, Mr. Hawley, and their colleagues paid no heed to this wise admonishment, and the Congress went ahead with protectionist legislation. In doing so, they sparked an international trade war as countries around the world retaliated, raising their own duties and restricting trade, and they helped turn a severe recession into the greatest depression in modern history.
We know the lessons of history, and we cannot fall prey to the failed policies of the past. We should not sit idly by while some seek to pursue a path of economic isolation, a course that could lead to disaster. It didn't work in the 1930s, and it certainly won't work today. That is why I so strongly oppose the protectionist ``Buy American'' provision in the pending bill and believe we must strike it.
The Senate version of the stimulus bill goes beyond the stark protectionism of its House counterpart in a way that risks serious damage to America's economic well-being. The bill currently on the Senate floor prohibits the use of funds in this bill for projects unless all of the iron, steel, and manufactured goods used in the project are produced in the United States. These antitrade measures may sound welcome to Americans who are hurting in the midst of our economic troubles and faced with the specter .of layoffs. Yet shortsighted protectionist measures like ``Buy American'' risk greatly exacerbating our current economic woes. Already, one economist at the Peterson Institute for International Economics has calculated that the ``Buy American'' provisions in this bill will actually cost the United States more jobs than it will generate. Some of our largest trading partners, including Canada and the European Union, have warned that such a move could invite protectionist retaliation, further harming our ability to generate jobs and economic growth. And it seems clear that this provision violates our obligations under more than one international agreement.
The purpose of this stimulus legislation is to create jobs and generate economic growth. I am very concerned about the potential impact these ``Buy American'' policies will have on trade relations with our partners, an impact that will directly affect the number of jobs we are able to create at home. For example, in a few days, President Obama will embark on his first trip abroad to Canada. I applaud his decision to visit our neighbors to the north, as they are one of our closest allies and strongest trading partners. Our two nations share an increasingly integrated trade relationship, resulting in nearly $1 million of trade and commerce crossing our border every minute, a level of trade that sustains approximately 7 million jobs here in the United States.
Should we adopt protectionist legislation, however, President Obama is likely to visit our ally with a dubious gift indeed: legislation that attempts to choke off Canada's access to the U.S. market. Prime Minister Stephen Harper said yesterday that the provisions ``are measures that are of concern to all trading partners of the United States.'' In a recent letter, Canada's ambassador to the U.S. Michael Wilson wrote, ``If Buy American becomes part of the stimulus legislation, the United States will lose the moral authority to pressure others not to introduce protectionist policies. A rush of protectionist actions could create a downward spiral like the world experienced in the 1930's.'' He writes further that this provision would ``decrease North American competitiveness, thereby killing jobs rather than creating them.'' It is beyond my comprehension why we would seek to hamper such an important relationship by passing legislation with provisions that have been proven counterproductive time and time again.
The reaction of our Canadian friends is just the beginning of what we can expect to occur should this provision become law. American trade with the European Union currently stands at over $200 billion per year. John Bruton, the European Commission's ambassador to Washington, has raised serious objections to the
``Buy American'' provisions in a letter to Congress and the administration, saying that the provision ``risks entering into a spiral of protectionist measures around the globe that can only hurt our economies further.'' A European Commission spokesman noted, ``We are particularly concerned about the signal that these measures could send to the world at a time when all countries are facing difficulties. Where America leads, many others tend to follow.''
Should we enact such a provision, it will only be a matter of time before we face an array of similar protectionism from other countries--from ``Buy European'' to ``Buy Japanese'' and more. In fact, in the 1980s we saw Japanese provisions that attempted to take the kinds of steps we are contemplating now, and barred American goods in Japanese government procurement. The U.S. Congress responded just as we can expect others to do now--by threatening retaliation and considering legislation that would restrict Japanese imports.
We took these steps in order to persuade our Japanese friends to abandon these protectionist moves, and in the end we succeeded. The United States has spent decades pushing toward a globalized world of open trade and investment, governed by rules applicable to all. The ``Buy American'' provision contained in this legislation would undermine this longstanding tenet of American trade policy and would violate our international obligations and commitments. Just last November in Washington, the U.S. signed a joint declaration with members of the G-20 pledging that ``within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services.'' Yet here we are, barely 2 months later, contemplating whether or not to go back on a commitment to some of our closest allies and trading partners, potentially damaging our credibility to uphold future agreements. Canadian Prime Minister Harper pointed out the irony here when he noted that ``we all agreed that we had to have a global response to recession, which would include stimulus packages in all major countries and the avoidance of protectionism, and certainly not protectionism in a stimulus package.''
In addition, it appears that the ``Buy American'' provision would violate our obligations under the WTO Agreement on Government Procurement and, in fact, reports indicate that the European Union is already considering a legal WTO complaint--and the procurement chapter of the North American Free Trade Agreement. Such action is not only potentially disastrous for our economic interests, it is also a terrible way to conduct foreign policy. Pascal Lamy, head of the World Trade Organization, said recently, ``I hope the senators will be wise enough ..... to make sure the U.S. complies with its international obligations.'' Will we?
In addition to the growing chorus of international opposition, there is also. opposition from the very American companies that would generate badly needed jobs at home. In a recent Washington Post article, Bill Lane, government affairs director for Caterpillar, is quoted as saying that ``by embracing Buy American, you are undermining our ability to export U.S.-produced products overseas.'' Karan Bhatia, GE's senior counsel for international law, said that adoption of the ``Buy American'' provision would ``be creating an ample basis for countries to close their markets to U.S. products.'' Why then should this body approve a bill that would potentially devastate the ability of American companies to tap into foreign markets and, in turn, continue to employ thousands of hardworking Americans? The short answer is that we should not. President Obama himself spoke out against the Buy American provision. ``I think that would be a mistake right now,'' he said yesterday. ``That is a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe.''
I hope all senators will support this amendment, which would strike the existing ``Buy American'' provision and replace it with a limitation on ``Buy American'' clauses in this bill. To adopt anticompetitive, protectionist policies is to risk economic disaster, and it is the last thing we should consider at a time of economic difficulty.
I urge my colleagues to support this amendment.
Madam President, I ask unanimous consent that the Record be held open for my second statement concerning the other amendment.
BREAK IN TRANSCRIPT
Mr. McCAIN. Mr. President, I would like to keep the floor, if I can, for a couple of minutes.
Basically, tomorrow morning we will be considering this amendment. I would like to say a few words because this is a proposal that I think should be considered, along with the legislation that is pending. It is a compilation of what we believe is the most effective way to address the stimulus and job creation. It has tax provisions, such as elimination of the 3.1-percent payroll tax for all employees for 1 year. It lowers the 10-percent tax bracket to 5 percent; lowers the 15-percent tax bracket to 10 percent; lowers the corporate tax bracket from 35 to 25 percent and has accelerated depreciation for capital investments for small business; the extension of unemployment insurance benefits; extension of food stamps, unemployment insurance benefits, tax-free training and employment services, as well as keeping families in their homes through a loan modification program. It has tax incentives for home purchases and GSE-FHA conforming loan limits; national infrastructure and defense, which is very badly needed; transportation infrastructure; and also contains the trigger that is also the subject of a separate amendment I have proposed, with a total of about $420 billion.
Now, I know my friend from Wisconsin is waiting patiently, but I would like to point out where I think we are at this moment; that is, we basically have legislation which is too big, which is not stimulative, and which does not create jobs. The American people are beginning to figure it out. In fact, polling numbers in the last couple of days have shown a significant shift in American public opinion because they are beginning to examine this proposal.
I argue that it is time we sit down, Republicans and Democrats, and begin good-faith negotiations to create a real job creation and stimulus package. I think it would be unfortunate if this body passed, on a party-line basis or largely party-line basis, this package in similar fashion as it did in the other body.
I think we have a proposal here that deserves consideration, but I also think it is time that we had serious negotiations to try to reach some kind of consensus on a package and legislation that truly stimulates and truly creates jobs.
My colleague from Arizona will be pointing out, as many others have, that there are many programs here, moneys in the hundreds of millions and billions, that simply do not meet any criteria for job creation: $75 million for smoking cessation; $150 million for honeybee insurance. The list goes on and on. We also have an obligation to future generations to understand that $1.2 trillion, followed by another TARP, followed by an omnibus appropriations bill, requires us to put this country, once the economy recovers, back on the path to a balanced budget and reduce spending across the board once our economy has recovered.
I thank the Senator from Montana, the distinguished manager of the bill, for his consideration on my amendment. I thank my colleague from Wisconsin, as always.
I yield the floor.
BREAK IN TRANSCRIPT
Mr. McCAIN. Madam President, every dollar of the $1.2 trillion we are contemplating spending with this legislation would add to the national debt. The national debt has already climbed to more than $10.2 trillion. This amount does not include any of the funding provided in the legislation we are considering. After achieving economic growth for two quarters, then, according to this legislation, the President shall submit in his first budget, after the restoration of economic growth, fixed deficit targets that would achieve a balanced budget not later than 5 years from that date.
The discretionary spending caps are restored in the first fiscal year after the restoration of economic growth for 5 fiscal years at a level equal to the budget baseline, excluding any and all portions of the Economic Recovery and Reinvestment Act.
Basically, this legislation calls for, as soon as there are two quarters of GDP growth after inflation, that we embark on an effort to balance the budget. We are mortgaging our children's future.
BREAK IN TRANSCRIPT
Mr. McCAIN. Mr. President, what this amendment does is basically stand in direct contradiction to the amendment itself. It is impossible to say the section would be applied in a manner consistent with the U.S. obligations under international agreements and then say that anything that is manufactured in the United States, whether iron, steel, or manufactured goods will have to be subject to ``Buy American.''
The reaction to this amendment has been strong and widespread, including the President of the United States, who said, ``I think this would be a mistake right now.'' The President said, ``It is a potential source of trade wars that we cannot afford at a time when trade is sinking all over the globe.''
I yield the remainder of my time.
BREAK IN TRANSCRIPT
Mr. McCAIN. Mr. President, nearly 80 years ago, two men--Mr. Smoot and Mr. Hawley--led an effort to enact protectionist legislation in hopes of curing the woes of the American worker. Despite the strong objection of over a thousand leading economists of the time, the Smoot-Hawley legislation was enacted. This bill helped spark an international trade war that turned a severe recession into the greatest economic depression in modern history.
The Buy American provision in the current bill has echoes of the disastrous Smoot-Hawley tariff act. It prohibits the use of funds in this bill for projects unless all of the iron, steel, and manufactured goods used in the project are produced in the United States. These anti-trade measures may sound welcome to Americans who are hurting in the midst of our economic troubles and faced with the specter of layoffs. Yet shortsighted protectionist measures like Buy American risk greatly exacerbating our current economic woes. Already, one economist at the Peterson Institute for International Economics has calculated that the Buy American provisions in this bill will actually cost the United States more jobs than it will generate.
Some of our largest trading partners, including Canada and the European Union--who account for hundreds of billions of dollars in annual trade--have warned that such a move could invite protectionist retaliation, further harming our ability to generate jobs and economic growth. And it seems
clear that this provision violates our obligations under more than one international agreement, including the WTO Agreement on Government Procurement and the procurement chapter of the North American Free Trade Agreement.
Just last November in Washington, the U.S. signed a joint declaration with members of the G-20 pledging that ``within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services.'' Yet barely 2 months later, we are contemplating whether or not to go back on a commitment to some of our closest allies and trading partners, potentially damaging our credibility to uphold future agreements.
Even President Obama himself spoke out against the Buy American provision. ``I think that would be a mistake right now,'' he said yesterday. ``That is a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe.''
We know the lessons of history, and we cannot fall prey to the failed policies of the past. We should not sit idly by while some seek to pursue a path of economic isolation, a course that could lead to disaster. It didn't work in the 1930s, and it certainly won't work today. I hope all senators will support this amendment, which would strike the existing Buy American provision and replace it with a limitation on Buy American clauses in this bill.
As I said, the President of the United States said it would be a mistake right now. It sends a message to the world that the United States is going back to protectionism.
I ask unanimous consent the comments of literally every leader in the world, including the Canadian leader, the European leader, and over 100 major industries in the United States of America in opposition to this amendment and an op-ed article by Douglas Irwin be printed in the Record at this time.
There being no objection, the material was ordered to be printed in the Record, as follows:
Letters From World Leaders
Ambassador Michael Wilson: ``We are concerned about contagion, that is, other countries also following protectionist policies. If Buy America becomes part of the stimulus legislation, the United States will lose the moral authority to pressure others not to introduce protectionist policies. A rush of protectionist actions could create a downward spiral like the world experienced in the 1930s.''
Ambassador John Bruton: ``The United States and the European Union should take the lead in keeping the commitments not to introduce protectionist measures taken by the G20 in November 2008. Failing this risks entering into a spiral of protectionist measures around the globe that can only hurt our economies further.''
Over 100 signatories: ``Enacting expansive new Buy American restrictions would invite our international partners to exclude American goods and services from hundreds of billions of dollars of opportunities in their stimulus packages and perhaps to adopt Buy-Local rules or raise other barriers to American goods more broadly across their economies. The resulting damage to our export markets and the millions of high-paying American jobs they support would be enormous.''
Quotes From World Leaders
Prime Minister Gordon Brown: ``The biggest danger the world faces is a retreat into protectionism''.
President Barack Obama: It would be a mistake when worldwide trade is declining for the United States ``to start sending a message that somehow we're just looking after ourselves and not concerned with world trade.''
Quotes From Reports and News Sources
PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS
Report on `Buy American': EU spokesman Peter Power stated that ``if a bill is passed which prohibits the sale or purchase of European goods on American territory, [the European Union] will not stand idly by and ignore.'' Buy American provisions would particularly damage US reputation abroad since they would come just a few months after the United States pledged to reject protectionism at the G-20 summit on November 15, 2008.
In a country of 140 million workers, with millions of new jobs to be created by the stimulus package, the number of employees affected by the Buy American provision is a rounding error.
General Electric (GE) Senior Counsel Karan Bhatia: ``You would be creating an ample basis for countries to close their markets to U.S. products.''
Bill Lane--Caterpillar, Inc. Director of Governmental Affairs: ..... ``The so-called Buy America amendment is really an anti-export provision,'' ..... ``At Caterpillar we are doing everything we can to export American-made products to the numerous infrastructure projects being proposed around the world, particularly those in China. Embracing new Buy American restrictions would totally undermine those efforts to increase U.S. exports.''
Fred Smith--Chairman of FedEx: ..... ``If the Congress passes this buy-American provision, I can assure you--and we operate in 220-some-odd countries around the world and are a huge part of the import-export infrastructure of the United States--we will get retaliation, and it will be American jobs at risk.''
List of Companies and Organizations in Opposition to Buy American
(Signatories of attached industry letter)
ABB; The ACE Group of Insurance and Reinsurance Companies; AT&T; Alticor, Inc.; AgustaWestland North America Inc.; Avaya Inc.; BAE Systems, Inc.; BASF Corporation; Boston Scientific Corp.; Case New Holland Inc.; Caterpillar Inc.; Cisco Systems, Inc.; Citibank N.A.; Cummins Inc.; Dassault Falcon Jet; The Dow Chemical Company; Eastman Kodak Company; Forsberg International Logistics, LLC; Fujitsu.
General Electric Company; IBM Corporation; Intel Corporation; International Bancshares Corporation; International Bank of Commerce; ITT Corporation; John Deere; Lockheed Martin Corporation; Manitowoc Company Inc.; The McGraw-Hill Companies, Inc.; McKesson Corporation; Michelin North America, Inc.; Microsoft Corporation; NEC Corporation of America; Oracle Corporation; Panasonic Corporation of North America; PCS VacDry USA LLC; Philips Electronics North America; The Procter & Gamble Company; SAP America.
Siemens Corporation; TEREX; Texas Instruments Incorporated; Transact Technologies; Trimble Navigation Limited; Unilever United States; United Technologies Corporation; US Trading & Investment Company; Volvo Group North America; XOCECO USA; Xerox Corporation; The Advanced Medical Technology Association; Aerospace Industries Association; American Business Conference; American Chemistry Council; American Council of Engineering Companies; Associated Builders & Contractors; Associated Equipment Distributors.
Association of International Automobile Manufacturers, Inc.; Business Roundtable; The Associated General Contractors of America; The Association of Equipment Manufacturers; Brazil-U.S. Business Council; Business Software Alliance; California Chamber of Commerce; Canadian American Business Council; Consuming Industries Trade Action Coalition; The Coalition for Government Procurement; Coalition of Service Industries; Computer & Communications Industry Association; Computing Technology Industry Association; Consumer Electronics Association; Emergency Committee for American Trade.
European-American Business Council; Grocery Manufacturers Association; Hong Kong-U.S. Business Council; Information Technology Industry Council; International Wood Product Association; National Association of Foreign-Trade Zones; National Association of Manufacturers; National Defense Industrial Association; National Electronic Distributors Association; National Foreign Trade Council; Ohio Alliance for International Trade; Organization for International Investment; Retail Industry Leaders Association; Securities Industry and Financial Markets Association; Semiconductor Industry Association; Software & Information Industry Association.
Technology Association of America (formerly AeA and ITAA); Technology CEO Council; Telecommunications Industry Association; United States Council for International Business; US-ASEAN Business Council; U.S.-Bahrain Business Council; U.S. Chamber of Commerce; U.S.-India Business Council; U.S.-Korea Business Council; U.S.-Pakistan Business Council; U.S.-UAE Business Council; Washington Council on International Trade.
[From the New York Times, Jan. 31, 2009]
If We Buy American, No One Else Will
(By Douglas A. Irwin)
HANOVER, NH.--World trade is collapsing. The United States trade deficit dropped sharply in November as imports from the rest of the world plummeted in response to the financial crisis and global recession. United States imports from China, Japan and elsewhere declined at double digit rates. The last thing the world economy needs is for governments to give a further downward shove to trade. Unfortunately, we may be doing just that.
Steel industry lobbyists seem to have persuaded the House to insert a ``Buy American'' provision in the stimulus bill it passed last week. This provision requires that preference be given to domestic steel producers in building contracts and other spending. The House bill also requires that the uniforms and other textiles used by the Transportation Security Administration be produced in the United States, and the Senate may broaden such provisions to include many other products.
That might sound reasonable, but history has shown that Buy American provisions can raise the cost and diminish the effect of a spending package. In rebuilding the San Francisco-Oakland Bay Bridge in the 1990s, the California transit authority complied with state rules mandating the use of domestic steel unless it was at least 25 percent more expensive than imported steel. A domestic bid came in at 23 percent above the foreign bid, and so the more expensive American steel had to be used. Because of the large amount of steel used in the project, California taxpayers had to pay a whopping $400 million more for the bridge. While this is a windfall for a lucky steel company, steel production is capital intensive, and the rule makes less money available for other construction projects that can employ many more workers.
American manufacturers have ample capacity to fill the new orders that will come as a result of the fiscal stimulus. In addition, other countries are watching closely to see if the crisis becomes a general excuse for the United States to block imports and favor domestic firms. General Electric and Caterpillar have opposed the Buy American provision because they fear it will hurt their ability to win contracts abroad.
They're right to be concerned. Once we get through the current economic mess, China, India and other countries are likely to continue their large investments in building projects. If such countries also adopt our preferences for domestic producers, then America will be at a competitive disadvantage in bidding for those contracts.
Remember the golden rule, or the consequences could be severe. When the United States imposed the Smoot-Hawley Tariff in 1930, it helped set off a worldwide movement toward higher tariffs. When everyone tried to restrict imports, the combined effect was a deeper global economic slump. It took decades to undo the accumulated trade restrictions of that period. Let's not make the same mistake again.
Mr. McCAIN. Mr. President, this amendment may lose. We are making a very dangerous move tonight.
BREAK IN TRANSCRIPT