Buy American: Bad for America | Marc Gunther.
Got this non-economic, good common sense analysis of anecdotes surrounding the “Buy American” provision in the US stimulus package from Knowledge Problem. It seems that pandering to protectionism, populism and assorted -isms is hurting American companies, more than helping them.
“The Buy American provision is centered very much on where you do manufacturing and assemble products,” Dulaney told me. Many state and local governments, he said, “view the Buy American act as meaning the products must be 100% made in the United States.”
That’s unrealistic. “We all have global supply chains,” he said.
It would seem the provisions of the Buy American rules are there specifically to protect (boost?) a very special kind of blue-collar, relatively low pay job – the kind of economic activity that gives little or no added value. After all, as the article points out,
Since more than 90% of the world’s consumers live outside of the United States, which remains one of the world’s three largest exporter — Germany and China are the others — we stand to be harmed more than anyone by a trade war.
I suppose US is the world’s third largest exported in value, not volume. Value is, at the end of the day, the important measure: export expensive stuff, after buying in the cheap components from other countries. Does America want to become the new China? Buy American certainly paves the way for that.
Punchline: bad economics is when you stand to lose the gains from trade because of populist protectionism.
