‘Buy American’ Rules Stir Debate

Written by Tim Triplett

Are “Buy American” policies good for the U.S. economy and the U.S. steel industry?

President Trump issued an executive order in April instructing all federal agencies to conduct comprehensive assessments aimed at cracking down on weak enforcement of Buy American policies, and targeting the abusive use of waivers and exceptions that undermine Buy American laws. Fulfilling a campaign promise on infrastructure investment, he asserted, “We will have two simple rules when it comes to this massive rebuilding effort, buy American and hire American.” His executive order drew a number of responses from business and industry in a comment period that ended this week.

Speaking for domestic steel producers, the American Iron and Steel Institute said it strongly supports the application of existing Buy America requirements for iron and steel products used in transportation and water infrastructure projects funded by federal taxpayer dollars.

As AISI pointed out, these rules employ a strict “melted and poured” standard for the steel used in these projects, and may be waived only in limited circumstances, such as when they are contrary to the public interest, when the products are not sufficiently and reasonably available, or when the use of U.S.-produced steel would increase the overall cost of the project by 25 percent. All steel manufacturing processes must occur in the United States for a product to be Buy America compliant, from the actual steel production to the finishing processes.

“Strong Buy America laws are vital to the health of the U.S. steel industry, which is a backbone industry to all domestic manufacturing, as well as to the U.S. economy overall,” AISI stated, noting that the U.S. steel industry directly employs 140,000 people across 42 states, and directly or indirectly supports approximately one million U.S. jobs. 

Buy America requirements are not affected by trade agreements such as those implemented through the WTO, NAFTA or KORUS. “However, our trading partners regularly propose to add new obligations in future trade agreements that would impact these Buy America programs for iron and steel products,” AISI added. “We strongly urge the Department of Commerce and the Office of the U.S. Trade Representative to oppose all such proposals in ongoing and future trade negotiations.”

The Steel Manufacturers Association, which represents EAF steel producers, also supports the administration’s Buy America policies and the “melted and poured” standard. Both SMA and AISI have members who sometimes produce finished steel products from slabs that were not melted and poured in the U.S. Presumably, such steel would be diverted from government contracts.

Steel companies that produce coils from slabs and don’t have the ability to melt and pour on U.S. soil are naturally opposed to the Buy America rules. As they point out, their steel production facilities account for a significant percentage of U.S. steel output and U.S. steel jobs. They see little difference between importing slabs or importing foreign scrap that is then remelted and poured.

Some economists also cast doubt on the effectiveness of Buy American laws, arguing that they add burdensome regulations, force American taxpayers to pay more for government projects, and ultimately do not lead to the promised job creation.

A final report on strengthening Buy American laws is due to President Trump by Nov. 24.

Written by Tim Triplett,

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