Don Davis

Is 'Made in USA' a Jobs Program?

Filed By Don Davis | August 22, 2011 10:00 AM | comments

Filed in: Politics
Tags: Buy American, Congress, economic policy, election campaigns, Jobs, Labor, Made in USA, Unions, White House

When last we met, it was to discuss a Big Idea that the Obama Administration might apply to get some job creation going, despite a difficult Congress; the Big Idea was to look at the "Buy American" provisions that exist in our laws, regulations, made-in-USA.jpgand executive orders and see if we could practice a bit of "jobs arbitrage" by not just meeting the "Made in USA" requirements when governments across this country make purchases, but exceeding them.

(As it stands today, pretty much any "good or service" with more than 50% Made in USA content qualifies as a Made in USA purchase, even if 49% of the "good or service" comes from somewhere else).

At the time, I told you that if all went well we could look forward to comments from both labor and the administration as to the practicality of the Big Idea, and as it turns out I have comments for you that hit close to that mark - and a bit more besides:

On Saturday I just happened to bump into Congressman Adam Smith (WA-09); in the course of that conversation I told him what we're doing here, and he wanted to offer a few thoughts of his own. When you put all that together, I think we're going to have a lot to talk about.

"Tis surprising to see how rapidly a panic will sometimes run through a country. All nations and ages have been subject to them; Britain has trembled like an auge at the report of a French fleet of flat bottomed boats; and in the fourteenth century the whole English army, after ravaging the kingdom of France, was driven back like men petrified with fear; and this brave exploit was preformed by a few broken forces collected and headed by a woman, Joan of Arc.

--From "The Crisis", by Thomas Paine; essay of December 23, 1776

So the two-second recap of the Big Idea is that if government, at all levels, were buying more American we could create more American jobs, and as we mentioned above, the way the rules stand today, 51% Made in USA is good enough - and that seems to leave a lot of room to do better.

Of course, nothing is as simple as it seems, and despite what Tom Lehrer might say, it's not all skittles and beer for this proposal either.

I have a source in the Administration who would not go on the record for this story; nonetheless I was sent a detailed email response "on background", which I'll paraphrase for our use today:

We are looking to expand US trade abroad, and we have made deals for access. We agree not to restrict, for the most part, where purchases can be made, and we expect reciprocity from the rest of the world when their governments do their purchasing - or at least from those governments with whom we have a WTO Government Procurement Agreement (GPA) or a Free Trade Agreement (FTA). (Want even more details? Check out either the Trade Agreements Act of 1979 or this Congressional Research Service report).

The Administration would tell you that 95% of the world's consumers live outside the USA, making trade reciprocity particularly valuable for the US.

They would also tell you that if we decide on our own to "change the deal", then we should expect retaliation from other governments.

Beyond that, they would suggest that there are US companies that source many of their products or product components globally, and those companies would actually be hurt by stricter Made in USA requirements.

Finally, the Administration points out that there is a dollar cost for more Made in USA, as opposed to using what can often be cheaper foreign sourcing.

In the introduction I suggested that I had a comment from labor, and that's somewhat correct. I contacted the Washington State Labor Council (WSLC) for a comment, and they sent me material that came from the Alliance for American Manufacturing (AAM), at the same time telling me that the AAM's position on "Buy American" is the same as their own.

It is inaccurate to refer to the AAM as a labor organization, however, as they are a partnership of unions, manufacturers, and other interested parties. Among those partners are the AFL-CIO and the United Steelworkers (USW); the USW was one of the founders of the group.

They take issue with a great deal of what the administration has to say, and I'll start with a quote from an email sent to me Friday by the AAM's Steven Capozzola:

The threat of retaliation for buy America is ridiculous. The law [the Buy American Act, 41 USC 10a-d] is specifically written so as to be applied when permissible under our existing trade obligations.

Here's a quote from AAM material that was referred to me by the WSLC:

...the U.S. is, by far, the world's largest importer, soaking up a net $819 billion in goods in 2007...The U.S. imports far more than it exports, a balance of sales that our trading partners are anxious to preserve. This is not about restricting imports. It is about using taxpayer dollars, when allowed by our international obligations, to purchase U.S.-produced goods. As the global downturn has progressed, many industrialized countries such as France and China have already taken similar action to support their domestic manufacturing base.

...These trade agreements do however allow for domestic preference under a number of circumstances...These preferences were negotiated for a reason. It would be irresponsible not to utilize them to the fullest extent possible.

...By contrast, other countries have held themselves out of the reform movement and have instead opted to promote their own manufacturing base through closed self-procurement programs. A good example is China, which, in addition to a recent $586 billion stimulus program, continues to subsidize its own producers via deliberate (and illegal) currency undervaluation. Until countries like China make the same commitments, and sign-on to internationally accepted procurement agreements, the U.S. will accomplish nothing by making yet more unilateral concessions.

In addition, as noted above, these contentions rely on the baseless assumption that the U.S. currently has any significant access to foreign procurement markets that would be at risk if other countries "retaliated." The majority of the foreign stimulus in PPI's tally is made up of $614 billion being spent by countries that have no procurement obligations towards the United States and that already apply domestic procurement preferences (principally China, but also India and Brazil).

-- Alliance for American Manufacturing, "The Facts on 'Buy America' and Domestic Sourcing", February 2009

The AAM would also want you to know that in addition to China numerous other countries, specifically Canada, certain European nations, Japan, and Brazil all use other forms of "discrimination" to "preference" their goods over ours when it comes to government procurement: impossible-to-meet technical standards, "murky" purchase procedures, and bid rigging are all tools used around the world to make sure local suppliers are just a bit more, shall we say...reciprocal...than a US supplier might be.

Look, I hate to do this to everyone, but we're once again running longer than we should, and we still have a lot more to talk about, so at this point I'm going to call "cliffhanger!" and set us up for a part three.

Here's the "agenda":

We'll be talking about how the devil's in the details: specifically, we'll be looking at what "Buy American" is already excluded from these various trade agreements - and there's a lot more than you might think, even as some of it is targeted in amazingly specific ways (to do that we'll be paying particular attention to the annexes to the WTO agreement); we'll also get Congressman Smith's reaction to all of this and, once again, we'll see if we can't get it all done in 1500 words or less.

And on a lovely summer's day, what could possibly be better beach reading - what with the redolence of the lazy sea breezes and the surf washing gently up on the shore and all - than 1500 more words on the annexes to the WTO agreement and how it all relates to sneaking a jobs program past recalcitrant Republicans?

I can't think of anything else either, and I can't wait to see you there.

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Bill Perdue Bill Perdue | August 22, 2011 1:16 PM

The only meaningful jobs program is one that aims at zeroing out unemployment permanently.

Funding for that can be easily amassed by draconian and confiscatory taxes on the rich, instituting socialized medicine and ending the role of vampiric privately owned insurance companies and HMO that drain the system and ending US aggressive wars.

That funding can be applied to a massive multi-trillion dollar 'Manhattan Project' effort to green the infrastructure, manufacturing and agriculture using union hiring halls and paying union wages and benefits . Additional measures like a constitutional amendment guaranteeing trade union wages and benefits for all workers, native and imported, and for retirees, single heads of household and adult students and a sliding scale of work time (30 hours work for 40 hours pay and benefits) to maintain full employment can make it permanent.

Unemployment, poverty and homelessness are crimes and the looter class and the politicians who enable them are criminals.

i definitely have problems with a few of these ideas; here's why:

--take a look right here for just one more example of how unions are setting the wage bar lower, which is a process that's been going on in the auto industry since the 1980s.

how would a constitutional amendment help change that situation, if the unions are willing to concede to the givebacks - and how would such an amendment prevent companies from simply moving production offshore in response?

and which "prevailing union wage" do you use if the union has a two-tier wage structure that pays half the union workforce 50% of what the other half makes, as the new uaw/gm contract does at the orion and shreveport assembly plants?

i have to tell you that, in my lifetime, the one thing that has created some upward push for wages has been a growing economy combined with a worker shortage in some particular skill set, and that's where i find your "manhattan project" concept to be entirely logical - but if that's going to work as a way to grow worker incomes over time we have to find a way to establish a wage floor that isn't so easily manipulated downward, either by union consent or by other means.

--you rightly note the problem of vamparitic insurance companies, and they do take a big bite out of today's medical expenses (maybe 1/3 of today's us healthcare costs are insurance administrative costs)...but over time the real action is in preventing demand for care, and i promise you that diabetes and the need to provide for long-term care for the least able amongst us will take an even bigger bite out of those dollars than the insurers will.

--full employment, as in zero unemployment, seems to be virtually unattainable for a variety of reasons that relate to people being "between jobs" or transitioning their skills to new jobs.

because of this, it used to be economic dogma that an unemployment rate of 5% or so was considered "full employment"; it turns out that the actual unemployment rate fell below 5% during the '90s, and now there's some considerable academic "kerfuffling" as to what the tern should actually mean.

Bill Perdue Bill Perdue | August 23, 2011 11:16 AM

The leadership of the UAW and other major unions are led by sellout bureaucrats who identify with Democrats and management as opposed to union members on the factory floor. Many are personally corrupt, taking kickbacks and raiding union treasuries. That's old news and it requires the rebuilding of the union left wing, a process well underway because of Obama's union busting and copycat efforts by several Republican and Democrat state governors, notably Brown (CA) and Cuomo (NY) and their cousins Walker (WI) and Scott (FL). http://labornotes.org/ or http://kclabor.org/

The call for constitutional amendments to guarantee good wages and benefits and end wars of aggression are fighting demands, entirely reasonable and in a decent society doable programs that the looters and their lap dogs in the WH and Congress will never grant. We use them as a focus for organizing and educating. That's always been the real role of the left as opposed to liberals.

You use the highest wage and benefits scale of the best paid union workers - not the lowest - I'd have thought that would be obvious.

Zero unemployment is only possible in a democratically run - socialist- economy. It's another fighting demand.

Diabetes and many other medical problems can be reduced over time by forbidding the production and distribution of fast foods and cigarettes and by forbidding forced overtime and on the job stress factors like speed ups and by pushing the formula 30 hours work for 40 hours pay.