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Buy American Act Analysis

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Published: Mon, 20 Aug 2018

Buy American Requirements

Question 1

On his last day in office on 3rd March, 1933, U.S. president Hoover signed the Buy American Act which made it essential for the federal U.S government to choose products made by U.S manufacturers for procurement. Other parts of the rulings made similar compulsions on the procurements made through federal funds for transit and highway projects. Fundamentally, the Buy American Act is an endeavor to protect the welfare of local manufacturers and labors by giving direct partiality to U.S.-made products in the procurement made by government departments. The American goods defined in the act were placed is three broad categories; manufactured, mined and produced. Although the nativity of the manufacturer is not an issue according to the act however, American goods were defined as those products which are made from components manufactured in United States. Such components may be produced, manufactured or mined from within the country to qualify for being called American products. Moreover, the cost of foreign manufactured components used in the domestic product must not, in any case, go beyond fifty percent of the cost of all the components. However, there are a few exceptions to this act. Firstly, it becomes void if the procurement of American products is against public interest or entails irrational cost. Secondly, the act is not applicable on U.S projects outside the country or on the products which are not produced in sufficient quantities or acceptable quality inside U.S. Finally, the act is also not applicable for federal government procurements of less than $3,000. Moreover, the American Act provisions and restrictions can be over-ruled by the President of United States when it is envisaged that foreign products are likely to be given unfair treatment as compared to domestic products.

Question 2

VectorCal and Efficient Technologies are both engaged with the control and monitoring of drone navigation systems. In addition, the companies can develop systems that make it possible to have total management and control of drone navigation systems, as well as providing adequate security when required. As it is already known that United States is engaged in war in Afghanistan, Iraq and many other countries along with its NATO allies, the use of drone technology has gained vital importance. This technology is not only advantageous in gathering information about the activities of enemy but also prove vital in launching attacks against them. In doing so a lot of national exchequer and human lives of friendly forces are saved. And the enemies are demolished without much effort or fear of launching attack through fighter planes.

Keeping this background in mind, VectorCal and Efficient Technologies have much to gain from the Buy American Requirement. First and foremost is the possibility of providing the security agencies of the United States with state of the art defense navigation drone technology. This would not only assist the United States government in achieving its war related targets in an efficient manner but also in a cost effective manner as well.

Another point worth noting here is that with the enactment of Buy American Requirement, the reliance of United States on foreign suppliers for defense related procurement would decrease. This would in-turn help the country in relying on its own products rather than relying on the imports from other countries who may oppose the U.S. defense policy and at some time may also want to withhold the defense related procurements. This scenario is vital for national security of United State especially when it is engaged in wars around the world. Keeping these facts in mind, VectorCal and Efficient Technologies would definitively profit from the Buy American Requirement regulations as U.S would be compelled to procure drone related navigational aids from these companies.

This would obviously mean more business for the companies and more yield for the owners of the companies. This would also assist in expanding the business for the companies which would mean employment of more American workforce and added achievable targets.

Question 3

The United States takes pride in economic and political freedom that it project amongst the comity of nations. The American way of life still projects a form of capitalism, although much has changed over the years. To many today, Americanism still means appreciation that free market trade both in international and domestic markets signifies the only way to prosperity of the country. Trade in international markets is not a war to be won but a form of increasing production worldwide and cooperating with others in the business to seek prosperity. In is a common knowledge that common trade advantages are fruitful for both the countries across the borders even if one of them is much more adept in manufacturing quality products. As denoted by the Comparative Advantage Law, free trade does not create boundaries but helps in eradicating unemployment.

The free market trade does not depend on boundaries sketched on the map. International commerce provides the same kind of economic advantages as does the commerce between cities and towns across the country. Therefore, if intercity or across town trade is stopped for the reason that it is more patriotic to buy the product of only the local manufacturers, a huge trade deficit would be faced by the city or the town as was being faced by U.S. in almost every year in 19th century. Americanism is basically synonymous to individualism, if we take it to philosophical terms. This means that the rights of one person are his own and do not belong to a particular race or a nation. However, in case of collectivism, which is the prime notion of Buy American, Americans are supposed to look as suppliers and manufacturers of products as nations and not as individuals offering business. The country is required to accept goods of low quality at higher prices all in the name of nationalism. Mostly, the proponents of Buy American theory propagate motive behind the attitude is hostility towards the foreign products and foreigners themselves. This intolerant attitude is against the principles of capitalism and free market economy and can thus be termed as prejudiced.

Some experts even believe that preferring American made products over Japanese or Chinese products is same behavior as preferring products of white people over non-white. It is a form of economic racism which tends to judge the products by the manufacturer who made it rather than the quality of product itself. In principle, the standards of living o the people of a state are raised due to enrichment of another country. This standard analogy is clear from the fact that the standard of living of our people has greatly increased due to our trade with countries like Japan. If America decides today to stop trade relation with Japan, it would not only be detrimental for our economy but also undermine our living standards to a great extent. Let’s look at it from another point of view. Due to Buy American Requirement, if Americans have to pay more for commonly used items domestic products e.g. shirts or shoes, then the country would have less money to pay for other needs—it’s another way of sponsoring incompetent local manufacturers. These local American producers would not have any foreign competition to face and therefore would not have any reason to improve quality or cut prices. Secondly, if America refuses to buy Chinese products, same would be reciprocated by China which would include rejection of America’s top class iPods and computers. This would lead to a collapse in economic terms which was seen after enacting of Smoot-Hawley Tariff in 1930. This tariff added huge import duties on many items due to which retaliation was seen from European countries which ultimately deepened the Depression across the globe.

Question 4

Basically, there are three main exceptions to Buy American Requirement. Firstly, a product or an item can be procured from foreign manufacturer if the product or commodity is not available in local market. For example, iron and steel are not produced in America in sufficient quantities and acceptable quality. The act therefore waives the requirement of procurement of these commodities from within the country on account of their non-availability in sufficient quantity and acceptable quality. The second exception to the act refers to inconsistency to the public interest. This basically entails that any procurement which is against the interest of public may be made from the foreign manufacturer. However, such requests are to be scrutinized by DoE on case to case basis. The third exception to the act entails that a waiver would be given to the procurements for public projects when it is envisaged that by abiding to the ac would increase the domestic project construction cost by 25% or more. This is particularly true for the products which are neither manufactured nor produced in the U.S. in sufficient quantities e.g. Iron and Steel.

Free trade in world’s open markets is the hour of the need for the Americans. Otherwise the trade deficit would increase to substantially high value which would neither be controllable for the government nor acceptable to the public. The great Depression of 1930s is clear example of how U.S. imposed restrictions on the trade with other countries aggravated the financial situation globally. The Buy American Requirement binds the government to expend public funding on the procurement of only made in U.S.A. products. This restriction when waived by a few abovementioned exceptions gives some air to breath to the U.S. economy. For example, the Department of Energy waived off the restriction to buy energy efficient lighting products in 2010 for public roads and projects. This waiver was primarily granted due to the fact items e.g. traffic signals which used LEDs (light emitting diodes) technology are solely manufactured by Mexico and China. that products like compact fluorescent light bulbs and traffic signals made with light-emitting diodes, or LEDs, are manufactured almost exclusively in China and Mexico. A large number of suppliers petitioned that they were unable to find the suppliers for these items in the U.S. and those willing to supply were asking for too much money; in fact more than that allowed by Buy American Act. Moreover, the DoE had started $6.3 billion worth of energy efficient projects which were lingering due to lack of American manufacturers. The decision to waive off the restriction to buy only American products contributed a great deal towards saving the huge losses to U.S. economy in case of purchasing the items from local vendors. Moreover, this waiver was also directly related to the public interest exception as it expedited the completion of projects, resulting in the saving of trillions of dollars in energy consumption.

Another such exception was provided by the DoE for the procurement of two 13 MW and three 7.2 MW diesel generator radiators in 2011. The exception was a specific waiver for Utilities Corporation’s (CUC) which cost a total of $2,99,0075 on the import of five radiators against a cost of $3,22,5000 from domestic suppliers which meant a decrease in cost of about 35%. Therefore, the benefits of the exceptions given by the government are really beneficial for the U.S. economy and for the public interest.

Question 5

A number of advantages and disadvantages can be experienced by VectorCal and Efficient Technologies by abiding by the Buy American Requirement. Firstly, if defense and navigation equipment contracts are awarded to foreign investors, the benefit from local manufacturers is taken away. A focus on U.S. manufacturing companies e.g. VectorCal and Efficient Technologies by the Department of Defense would not only boost the profitability of the companies but would also assist the U.S. government in mobilizing the industry at the time of war. Should the government require to contracts to foreign manufacturers chips away at an already deteriorating manufacturing sector. If required by the defense agencies, both these navigation systems producing companies would be in a situation to react and provide sustained assistance throughout the period of conflict. This is already in practice in many European countries who maintain a subsidized defense industrial base. For example, France has patronized its Aerospace industry putting other countries at a disadvantage. An additional advantage that can be gained by the government through patronizing navigation systems industry is the matter of national security. The reliance of U.S. on other countries on navigation systems manufacturing would greatly decrease in case the other nations decide to restrict exports to the U.S. in case of policy disagreement. Although the argument pertaining to national security has some validity, it can also be abused for seeking protection of the industry.

On the other hand, sticking to Buy American Requirement can also bring demerits to the U.S; mainly on economic grounds. According to economic principles, free trade and open market competition brings economic progress amongst the trading partners. As restrictions among the trading partners are lifted, manufacturers from around the world begin to invest in specialized industry e.g. production of navigation systems thus bringing competition on the U.S. soil. This would although bring in vast opportunities of technological advances in the country but at the same time would render the local manufacturing industry inept to provide support to the country at the time of need.


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