“Buy American” is Bad for America

Issue Brief

If you’ve never read The Federalist and were curious why the Founding Fathers thought Congress should have two chambers rather than one, there’s a clinical case-study of what concerned them unfolding right now in the U.S. House of Representatives. The fiscal 2004 defense authorization act passed by the lower chamber contains a series of preferences for U.S. industry so thoughtless that they could derail military modernization and severely impair the nation’s security. The provisions seem to have been included in legislation with virtually no consideration of cost or consequences. Here are some examples:

1. All Pentagon weapons programs would need to be reviewed (and in some cases redesigned) to minimize foreign content, increasing costs and delaying operational availability.

2. Weapons being developed in cooperation with allies, such as the F-35 Joint Strike Fighter — on which Britain and seven other overseas partners have already invested $4 billion — would have to be restructured or cancelled.

3. Use of off-the-shelf commercial products in military systems to cut costs and speed modernization would be precluded by the presence of foreign content in virtually all such products.

4. Defense contractors would be required to eliminate foreign machine tools from their production lines, costing the government billions of dollars for investment in new equipment and accelerated depreciation of old tools.

5. The Pentagon and its suppliers would have to comply with ridiculously burdensome reporting requirements concerning the use of domestic sources, which would undoubtedly deter many commercial companies from doing business with the military at all.

And that’s just the big stuff. The House legislation contains numerous other “buy American” restrictions, such as mandating that all the items in military uniforms be made in America, and that Canada be excised from the official definition of the national industrial base — even though U.S. vehicle producers have integrated cross-border operations. Nobody seems to have assessed whether domestic sources for key parts and tooling are even available, or how other nations might react to the closing of the U.S. defense market (aerospace produces the biggest surplus in America’s otherwise dismal trade balance).

If these foolish provisions manage to survive conference with the Senate, the Bush Administration can forget about transforming the military into anything other than a technological backwater. The genius of American democracy and markets resides largely in their openness to new ideas, and their freedom to make choices on the basis of merit. When Congress distorts this culture of excellence with the moral equivalent of welfare programs for mediocre suppliers, it erodes the foundations of national security. The Soviet Union had a “buy Russian” policy that closed its economy to most of the world, and everybody knows how that worked out.