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Is ‘Buy American’ the right path forward for our economy? | Pro/Con

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One agenda President Joe Biden shares with his predecessor Donald Trump is to “buy American.” Biden’s approach includes a late July proposal for a rule to get the federal government to buy more domestic-made products and support “domestic production of products critical to our national and economic security.”

There’s debate about how much the rule would materially change how much the government delivers on the decades-old “buy American” slogan. Americans in industry also disagree on whether the idea behind mandates to encourage domestic purchases and production is good for our economy right now.

To tap this discussion, The Inquirer asked two company presidents who have done business in Pennsylvania: Does the push to “buy American” make sense for the U.S. right now?

By Stanley J. Kocon

The U.S. has made even more progress lately in committing our government to buy American — to ensuring those two words aren’t just a catchy slogan. In July, President Biden proposed a rule outlining how the federal government will put these principles into practice. From closing long-exploited loopholes, prioritizing domestic companies in the critical supply chain, and increasing transparency in reporting total domestic content in products, the rule represents one of the first good-faith efforts in years to truly emphasize and elaborate on buy American requirements.

These are heartening follow-ups to earlier Biden administration policies and executive orders that sought to strengthen provisions that encourage or require the federal government to procure goods in the United States, which I have supported, including in these pages.

The Infrastructure Investment and Jobs Act — the bipartisan infrastructure agreement that passed the Senate earlier this month — includes two bills that boost buy American through the legislative process. The bipartisan Build America, Buy America Act, introduced by Sens. Sherrod Brown (D., Ohio), Rob Portman (R., Ohio), Gary Peters (D., Mich.), and Mike Braun (R., Ind.), will require compliance with existing buy American rules for all taxpayer-funded infrastructure and public works projects. Similar legislation from Sens. Peters and Debbie Stabenow (D., Mich.) will make it much more difficult to waive buy American requirements at federal agencies.

These proposed reforms could reap huge benefits. According to an Economic Policy Institute study, money invested in the manufacturing of durable goods (products intended for long-term use), including hydropower equipment, has one of the highest job multipliers of any industry. That means when federal projects adhere to buy American policies and taxpayer dollars are invested in products manufactured domestically, good-paying and long-term jobs are created and sustained at home.

My company, Voith Hydro, supports trade and international commerce. Indeed, we are part of a global company that boasts a business presence and manufacturing capability around the world. However, given America’s focus on rebuilding our infrastructure and recovering from the economic impacts of a devastating pandemic, it makes economic sense to encourage investment in U.S. projects with U.S. companies, U.S. workers, and U.S. steel.

Wouldn’t it be a great story of American know-how if hydroelectric equipment manufactured in Pennsylvania, using steel from the East and Midwest, is installed in dams in the Southeast and Pacific Northwest?

Stanley J. Kocon

We also believe in U.S. competitiveness, in developing America’s workforce, and creating high-quality American jobs. Investing in a strong manufacturing base stimulates innovation, and innovation accelerates prosperity. We’ve shown this commitment through recent multimillion-dollar investments at our factory in York, Pa., and along with a robust apprenticeship program, we’re training the next generation of welders and machinists. Our hope is that federal agencies recognize the full life cycle benefits of heavy equipment that is truly “Made in America” and that companies choosing to send jobs overseas should not be rewarded with taxpayer-funded contracts or federal tax incentives.

Consider another “buy American” benefit: Hydropower is an essential part of our clean energy future, both as a zero-carbon source of electricity and as dispatchable generation (energy that can be delivered on demand) that strengthens intermittent renewables (energy that is not constantly available) like wind and solar. Wouldn’t it be a great story of American know-how, capability, and sense of common purpose if hydroelectric equipment manufactured in Pennsylvania, using steel from the East and Midwest, is installed in dams in the Southeast and Pacific Northwest?

Our and other U.S. companies are doing everything we can to make this a real success story that unites our entire nation around renewable energy, job creation, and infrastructure investment. Continued encouragement and application of Buy American requirements and incentives can help make that story a reality.

Stanley J. Kocon is president and CEO of Voith Hydro Inc., based in York, Pa., and has worked in the hydro power industry for over 30 years.

By Patrick J. Cunnane

A “buy American” initiative is an empty slogan — unless paired with policies that make it make sense to build here and buy here, creating American jobs and leveling the playing field for all American businesses.

I’m not an expert on every facet of global trade, but after 50 years in the bicycle business, I have seen my industry shift dramatically, from an environment in which most bicycles were made in the United States to today, when more than 95% of bicycles are imported.

That’s not because bicycle companies don’t want to make their bikes here — most would love the imprimatur that comes with those powerful words: Made in the USA. They don’t make bicycles here because it doesn’t currently make economic sense to manufacture them in America.

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So how do we change that? With better policies and a tariff structure that supports assembly and manufacturing, the United States could be a great place to manufacture bikes — and countless other products.

Let’s focus on the thing I know about: bikes. The market is large, between 15 and 20 million bicycles per year — plenty big enough to support USA assembly and manufacturing. But, the way the system works now, if a U.S. company purchases a complete electric bicycle in a box that was assembled anywhere in the world except China, the bicycle would not be subject to any import duty or tariff (Electric bicycles made in China are subject to a 25% tariff).

If a company were to assemble an e-bike in the United States, it would have to pay tariffs on the parts needed to build the bike here. So using an e-bike as an example, America’s tariff structure encourages importing a complete bike in a box over assembling the bike in the U.S.

On the other hand, in Europe, importing a complete bicycle in a box has a higher tariff than importing the parts that are used to assemble the bike. The European tariff structure incentivizes bicycle assembly operations in Europe and as a result the European Bicycle Industry is growing and robust. Most bicycles sold in Europe are assembled in Europe. That’s helped spur a growing European component manufacturing base to support bicycle assembly.

The most efficient way to create assembly jobs in the United States is to have a high tariff on imported products that are assembled and no tariffs on the parts needed to assemble the finished product.

Patrick J. Cunnane

There is a simple solution here: The most efficient way to create assembly jobs in the United States is to have a high tariff on imported products that are assembled and no tariffs on the parts needed to assemble the finished product. If we start assembling products here — which usually involves lower-skilled labor and modest capital investment — then manufacturing of component parts will follow, so long as there is confidence that the tariffs will be in place for a long period of time.

Of course, after assembly moves back to America, tariffs could be imposed on the component parts to encourage U.S. manufacturing. But that would need to happen gradually so that businesses can prepare.

The intention of Donald Trump’s “America First” tariffs was understandable, but they are a failure. They weren’t implemented strategically and so could last months, years, decades. And uncertainty prevents businesses to plan to evolve their supply chain. Moreover, importers can simply move production to another country to manufacture. There was no plan to advantage U.S. manufacturing — the objective was simply to punish China.

It was not so long ago (the 1990s) when most bicycles sold in America were Made in the USA. To return to that period, we need changes in tariff policy — not just a slogan.

Patrick J. Cunnane is president of Yuba Bicycles. He started fixing flats and sweeping floors at Glenside’s Keswick Cycle in 1970.

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