Why “Buy America” is Not Going to Start a Global Trade War (And Why Our Tax Dollars Should Not be Spent on Sweatshops)

As I have stated, we do not believe protectionism helps workers either here or abroad. A trade war among developed nations, or between developed and developing nations, would be a devastating turn of events as nations struggle to deal with the impacts of the global economic crisis. However, given the vast disparity in policy responses among both OECD and G-20 nations, it is unlikely in the extreme that any nation would be the first to "go nuclear" in this sense. The UK and France are struggling to make peace with their own domestic labor movements' demonstrations over unpopular policies. China, which is facing its own very serious unemployment crisis, with literally millions of angry and laid off workers, announced as early as November 2008 its own comprehensive domestic stimulus package, with major new investments in housing, rural infrastructure, health and education and the Chinese government has recently offered $10 billion in subsidies to its domestic textile industry. In fact, just today the China Daily reported that the Chinese government would be providing tax rebates and other incentives to domestic manufacturers. We don't oppose China's efforts to deal with its own serious unemployment problem and growing unrest. We just find it interesting that the international business press is not up in arms suggesting that such protections will spark global retaliation.

Also, domestic procurement criteria have been around for a long time and haven't succeeded in sparking a trade war yet. The latest provisions, as our friends at Global Trade Watch have very helpfully pointed out, do little more than reflect what is already in US procurement guidelines. The House stimulus package requirement that US steel and iron be used for federal and state transportation infrastructure projects simply extends existing law (the 1982 Buy America Act). As these provisions already require most relevant federal agencies, including the Federal Transit Authority, Federal Highway Administration, and Federal Aviation Administration, and contain a waiver clause, there is little the stimulus package adds in reality. Other federal procurement guidelines, such as that requiring the US Department of Defense to use domestic suppliers for all apparel items, including body armor, already govern more than $4 billion in federal procurement and have not had any dramatic effect on global trade in this sector- nor have they been challenged at the WTO or other trade dispute bodies.

Thanks to research from Global Trade Watch, we can also note that the EU and Canada have excluded considerably broader swaths of their procurement activity from WTO rules than the Buy America provisions in question.

"'Sweatfree' Procurement"?

Mind you, if the Chamber and its members are really concerned that US procurement be available to bidders from other countries, they might at least agree with us that US tax dollars should not be used on contractors that exploit their workers. At the state and federal levels there has been growing awareness that the workers, particularly in developing countries, labor under poor and exploitive conditions. A new federal acquisition plan could be modeled after the current state movement toward sweatfree procurement . The idea behind the 'sweatfree' movement is simple: establish basic human rights standards that all contractors must apply to their workers, in order to be eligible for government contracts. The federal government could in this way move forward towards ensuring that public money is not used to support the violation of workers' rights.

Sweatfree provisions need not be at odds with 'Buy America,' as a number of federally procured goods are, and will continue to be, sourced overseas by virtue of the fact they cannot be produced in sufficient quantities in the US. Poor working conditions in developing nations not only strip laborers in those countries of their rights, but also create unfair competition in the global labor market. This global "race to the bottom" contributes to continued loss of US jobs to outsourcing. In addition, we note that 'sweatshop' jobs are alive and well here in the US, as well; we need better worker rights protections for US contractors as well as overseas ones. Sweatfree procurement not only gives foreign workers their rights, but also supports worker rights in the US by bringing up the bottom for everyone.

We will look forward to broad response and support for this modest proposal from US businesses concerned with the need for global trade and employment expansion.

Also, we welcome the corporate America to consider some ideas beyond support for sweatfree procurement. US corporations worried about global backlash should take a look at what they themselves can do to ensure that private investment contributes to sustainable development and decent employment worldwide. No country is going to retaliate against the US if our trade and investment policies are helping to grow that country's middle class. Here are a few other things concerned corporations can do in support of this goal:

  • Support terms of trade requiring that investors seeking the benefits of production in the developing world, including comparatively lower wages, agree to a floor of decent working conditions that ultimately enable workers to lift themselves out of poverty;
  • Direct investments to countries and regions where there is relatively better enforcement of labor laws;
  • Make long-term commitments to suppliers in developing countries;
  • Publicly support developing country initiatives to strengthen labor protections, protections for farmers (in areas such as land rights or stronger commodity policy), or overall social safety nets;
  • Be transparent about supply chains and revenue flows, to enable better consumer protections and other legal enforcement.

This is in global corporations' long term interests as it will raise purchasing power of consumers in developing countries, promote strengthened rule of law, and help to grow the emerging markets that have to be a part of a solution for both US workers and workers around the world. By all means we hope the Senate will pass the stimulus package, and that the creation of new jobs in the US helps restore our purchasing power. However the US can't keep being the consumer market of last resort. Let's help raise workers around the world into the middle class, as that will benefit our prosperity here at home, too.