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Buy American provision hurting business: USCC

June 03, 2009 15:28 IST

The 'Buy American' provision in the American Recovery and Reinvestment Act is badly hurting the country's businesses and resulting in job loss, the US Chamber of Commerce has said.

The world's largest not-for-profit business federation, representing over three million businesses and organisations, Tuesday asked Congressmen to make the necessary changes in the American Recovery and Reinvestment Act.

The act, more popular as the stimulus package, mandates American companies receiving federal aid money must purchase materials and equipments made in the US only. Under this act, signed into law by US President Barack Obama on February 17, the US government spends a whopping $787 billion to stimulate the economy and create jobs.

In a letter to US lawmakers, Chamber Executive Vice President (Government Affairs) R Bruce Josten said countries have already started taking retaliatory measures in response to the 'Buy American' provisions of the stimulus package. More so it is coming from its immediate neighbour Canada, he said.

'The 'Buy American' requirements are having a major impact on projects administered by state and local governments, resulting in declining trade and lost jobs for American workers,' the letter said.

This is particularly damaging to the United States' business relationship with Canada -- America's largest trading partner. In water and wastewater infrastructure, for example,

Canadian firms are now being excluded from US municipal contracts and retaliation by Canadian municipalities could result in $3 billion in lost business for US water and wastewater equipment manufacturers, the US Chamber said.

In addition, the 'Buy American' rules are being interpreted in a way that bars some US-based manufacturers from bidding on projects, Josten said.

Many US manufacturers rely on global production chains that integrate components from US and foreign sources. American manufacturers are finding it difficult to comply with these new rules because it is often impossible to avoid sourcing at least a portion of their content from other countries.

'The timing and cost for this disruption -- coming in the midst of the worst economic recession in decades -- could hardly be worse for US manufacturers,' he said.

'The law of unforeseen consequences is exacting a heavy toll. The Washington Post recently reported that 600 United Steel Workers in Pennsylvania, whose union lobbied for the 'Buy American' rules, may even lose their jobs as a result. We are sending exactly the wrong signal to our trading partners, and a retaliatory spiral may already be underway,' Josten said.

Urging the lawmakers to reject inclusion of 'Buy American' provisions in future legislation, the US Chamber said at least two new legislations has such provision. Two bills that have passed the House -- the Water Quality Investment Act of 2009 and the 21st Century Green High-Performing Public School Facilities Act -- have included 'Buy American' mandates.

'These bills authorise billions of dollars in spending over years and risk inciting further retaliation from our trading partners,' he said.

The Chamber also asked the administration to instruct state and local officials to emulate the federal government's approach to implementing the ARRA's 'Buy American' rules. This may require specific guidance, allowing state and local governments to treat non-US manufactured products and parts from designated countries the same as the federal government.

'The Chamber urges you to act now to ensure the US economy is not unnecessarily harmed by these and future 'Buy American' rules,' Josten said in his letter dated June 2.

Lalit K Jha in Washington
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