September 21, 2011

THE AMERICAN Recovery and Reinvestment Act of 2009, a.k.a. “the stimulus,” had its pluses and minuses. But few would dispute that some of the worst bureaucratic hassles and international disputes associated with that $825 billion measure stemmed from its protectionist “Buy America” provision, which prohibited the use of imported steel on tens of billions of dollars’ worth of infrastructure and building modernization projects.

Yet President Obama proposes to do it all over again. Or so it would seem from the text of his American Jobs Act , which would require the use of U.S.-made “iron, steel, and manufactured goods” on roughly $80 billion of proposed road, transit and school construction.

This is a word-for-word repetition of the Recovery Act’s language, which was, in turn, a dramatic extension of previous “Buy America” rules for steel, which had applied only to highway construction. Superficially patriotic, the provision harmed American workers and businesses by artificially raising the dollar cost and administrative complexity of projects. It was not until March of this year that the Energy Department finally issued a 53-page book to explain how “Buy America” and its myriad implementing regulations affected energy-efficiency grants. Sample topic: “What is a ‘manufactured good’?”

The Buy America rule also angered U.S. trading partners, as protectionist legislation tends to do. Some of the conflict was ameliorated by a proviso ensuring that the rule would be enforced consistent with international trade agreements. But more was required to settle the issue with Canada, whose companies are part of a cross-border supply chain serving infrastructure projects that has grown up under the North American Free Trade Agreement. Canadian provinces threatened to retaliate. It took months to settle this completely unnecessary battle, through an agreement exempting Canada that went into effect in February 2010.

Yes, the president’s new bill includes another pledge that international treaties will be respected. But, as was the case with the Recovery Act, most of the funds will be channeled through state governments, and most U.S. international trade obligations do not apply when states and municipalities are the procuring entities. And, yes, contractors can get a waiver if using all-American products would increase the cost of the project by more than 25 percent or if necessary goods aren’t manufactured or available in the United States. But that’s a cumbersome and time-consuming process — economic stimulus for lawyers, not construction workers.

Not surprisingly, Canadian officials are up in arms about this news; their exemption from the Recovery Act’s Buy America provision expires at the end of this month, and they are wondering whether they’ll have to do the whole thing over. It’s not the best time for another tiff with our northern neighbors, since the Obama administration is in the middle of separate talks with Canada on integrating the two countries’ border security operations and facilitating the safe flow of goods.

Mr. Obama, having learned from the Recovery Act that “shovel-ready” public works projects often aren’t, should have hesitated before adding this extra layer of regulation to his jobs bill. And that’s not to mention the negative signal this sends about the U.S. commitment to free trade. There’s still time for Congress to take it out.

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