'Buy American' Rider Sparks Trade Debate

There are early signs that nations are putting up trade barriers to protect domestic companies as the global downturn worsens. Despite promises offered during a major economic summit in November to refrain from taking such measures, countries from France to Indonesia have done so.

That, some argue, may be reason enough for the United States to follow suit. But in recent decades, the United States has stood out as the global champion of free trade; some analysts fear a move by Congress to restrict foreign companies from stimulus spending would mark an important shift away from that philosophy.

Supporters say expanded Buy American provisions could help ensure that the treasure trove of government contracts for new highways, schools, bridges and energy grids creates jobs at home instead of abroad. They note that much of the tax rebate checks that went out last year to stimulate the economy went to Chinese-made televisions and Korean-made refrigerators.

Until the global economy turned critical in the second half of last year, the domestic steel industry, for instance, was operating at near capacity and steel prices were climbing sky-high. Now, U.S. unemployment is soaring.

Factories in some top steel-producing states -- including Indiana, Ohio, Pennsylvania and Alabama -- are running at 45 percent capacity, with 40 percent of their workforce on furlough, or about 25,000 people, according to United Steelworkers union. Ensuring that U.S. steel and iron do not have to compete with, say, Chinese steel, for stimulus projects, industry officials say, could help get those workers back on the assembly line.

"What we're already seeing is that demand is going down, but imports of Chinese finished steel is going up because they are subsidizing it," said Thomas Gibson, president of the industry-funded American Iron and Steel Institute. "What we're saying is that this is a stimulus package to promote American jobs. We ought to maximize every dollar in that bill toward that end. If you were building a bridge in West Virginia, you wouldn't bring in German workers to do it. Materials should be no different."

Congress enacted the Buy American Act in 1933, establishing preferences for U.S.-made products in government contracts. In 1982, those preferences were made more strict for transportation and highway projects, although waivers have been granted.

The plans being considered by Congress, however, would greatly amplify and expand existing preferences for U.S. companies. The provision passed last night was introduced by Rep. Peter J. Visclosky (D-Ind.) and had won unanimous bipartisan support in committee. Among the few exceptions, use of U.S. steel or iron would need to drive up the cost of a project by 25 percent in order to allow a foreign substitute -- far more rigorous than current regulations. The House bill also contained a stipulation that the uniforms and other textiles used by the Transportation Security Administration be 100 percent American-made.

In the Senate, Byron L. Dorgan (D-N.D.), is proposing a far broader measure that would exclude most foreign-made manufactured goods, again, with a few exceptions. In an interview Visclosky said he would be inclined to accept the broader Senate proposal as the two houses seek to compromise on the final language of the bill.

It's not protectionism, Dorgan said. Citing the massive U.S. trade deficit, he added, "and it's pretty hard for anyone to look at our trade situation and suggest that we are being unfair."