Here’s a letter to the Wall Street Journal:
Commenting on the “Buy American” government procurement order to be signed by President Biden, an administration official boasts that “[w]e remain very committed to working with partners and allies to modernize international trade rules to make sure that we can use our taxpayer dollars to stir investments in our own countries and strengthen supply chains” (“Biden to Sign Buy American Order for Government Procurement, Jan. 25).”
Evincing ignorance of the economics of trade that’s downright Trumpian, the new administration seems unaware that “Buy American” orders might well – I believe likely will – reduce investment in America.
First, by preventing government from purchasing inputs at the lowest available prices, “Buy American” orders force taxpayers to pay more for government services. The practical result is a current increase in taxes or in government borrowing, either of which reduces the amount of money remaining in the private sector to be invested.
Second, by shielding favored American suppliers from foreign competition, “Buy American” orders dampen these suppliers’ incentives to innovate and remain cutting-edge. Even if these suppliers invest more to expand their production capacities, they will invest less to enhance their production efficiency and to fund R&D – consequences that will weaken, not strengthen, supply chains.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030