Buy American: Bad for Jobs, Worse for Reputation

WASHINGTON (Reuters) - "Buy American" provisions under consideration in Congress as part of a huge economic stimulus bill could create only 1,000 new steel industry jobs and might cost as many as 65,000 across a number of sectors, a new study said on Tuesday.

"The negative job impact of foreign retaliation against Buy American provisions could easily outweigh the positive effect of the measures on jobs in the U.S. iron and steel sector and other industries," Gary Hufbauer and Jeffrey Schott, senior fellows at the Peterson Institute for International Economics, said in the report.

From the full report "Buy American: Bad for Jobs, Worse for Reputation":

If 1% of those exports were in fact lost by echo or retaliation behavior, the resulting employment loss in the United States would be around 6,500 jobs. In an extreme case that 10% of those exports are lost, as many as 65,000 jobs could vanish (see table above).

Based on our economic and legal analysis, the Buy American provisions would violate US trade obligations and damage the United States’ reputation, with very little impact on US jobs. In a country of 140 million workers, with millions of new jobs to be created by the stimulus package, the number of employees affected by the Buy American provision is a rounding error. In other words, there is little bang for the buck, and on balance the Buy American provisions could well cost jobs if other countries emulate US policies.