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OUR PERSPECTIVES

Will Buying American Pay Off?



During his State of the Union address, President Biden announced new “Buy American” (also known as “Buy America” or “Made in America”) standards to require all construction materials used in Federal infrastructure projects to be made in America - specifically calling out lumber, glass, and fiber optic cable. While overwhelmingly supported by voters, Buy American has been the subject of a long-standing debate over the pros and cons of requiring the purchase of American-made goods in federally-funded projects.


Buy American laws are a series of statutes and regulations related to Federal financial assistance for procurement and infrastructure development. The original policy, the Buy American Act of 1933, applies to purchases by the Federal government (and contractors), and mandates the purchase of American-made products, which it defined as 100% manufactured in the U.S. with at least 50% domestic content. These requirements have been expanded multiple times in the last century, most recently by the Infrastructure Investment and Jobs Act (which included the Build America, Buy America Act).


These requirements are enforced by Federal agencies in cooperation with the Office of Management and Budget’s (OMB) Made in America Office. Agencies have the discretion to issue waivers to the policy in cases where 1) applying the domestic content preference would be “inconsistent with the public interest;” 2) types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality; or 3) inclusion of iron, steel, manufactured products, or construction materials produced in the U.S would increase the overall cost of a project by more than 25 percent. Both the Trump and Biden administrations took steps to increase Buy American usage by limiting agencies’ ability to issue waivers and increasing the domestic content requirement.


Proponents argue that Buy American mandates stimulate domestic production, create jobs, and ensure that taxpayer dollars are fed back into the national economy. In response to claims that Buy American is a protectionist policy that hurts international trade, supporters point out that the U.S. and many international trade partners are parties to the World Trade Organization’s Government Procurement Agreement, which extends national procurement coverage to manufacturers in Europe, Japan, Canada, and other countries.


At the same time, critics of the policy contend that while Buy American mandates look good in theory, in practice they can raise costs, weaken supply chains and depreciate global partnerships. The percentage of a company’s goods that are procured by the federal government may be so low that manufacturing goods in the U.S. ultimately isn’t worth the cost. Further, as economies become more dependent on technology, specialized equipment with multiple components, like broadband infrastructure, is increasingly produced through a global supply chain process. Requiring that components be entirely or predominantly American-made can be costly and significantly lengthen the time of production.


Although popular among the electorate, Buy American is a nuanced policy that doesn’t fit squarely within the bounds of one political ideology. Time will tell whether strict adherence to Buy American mandates will set the U.S. up for economic success in the coming years.

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