How ‘Buy American’ Can Hurt U.S. Firms
Halton Hills, a town of 50,000 people about 25 miles west of Toronto, is one of about a dozen Canadian communities forging ahead with plans to amend their procurement policies to freeze out American companies. “We won’t be taking any products from any country that is discriminating against us,” said Mayor Rick Bonnette.
Aquarius gets a lot of its parts from abroad, particularly from Canada. Such integration became even tighter after the North American Free Trade Agreement in 1994 joined the U.S., Canada and Mexico in a free flow of goods and services.
Trojan Technologies Inc. of Ontario, North America’s dominant maker of ultraviolet disinfection equipment for treating sewage, is a key supplier to Aquarius and other companies. Because of the Buy American provisions, Trojan has had to shift production to a plant in Valencia, Calif., a move that has resulted in delays and additional costs being passed on to customers, said Trojan executive Christian Williamson.
The challenges of trying to legislate market choices such as what products to buy are difficult. It is understandable to want to direct stimulus funds to improving the economy today in the USA. Creating legislation that can cope with interactions and unintended consequences inherent in such attempts is not easy.
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Politicians (I won’t call them “leaders”) are about the WORST in terms of thinking long-term or thinking two steps ahead.
Simplistic thinking of “Buy American will lead to more jobs” is just wrong. Slapping a 35% tariff on Chinese tires sounds great if you don’t think a few steps ahead.
We need more chess players who can think at least a few steps ahead or take a system dynamics perspective.
All one has to do is look at the 1930s to see why a blind purchasing choice like this is a bad idea – and legislating it is even worse.