Bad Policy Or Finally Good Business Sense?

In the April 2009 issue of WaterWorld magazine, an opinion article was published in the WWEMA CORNER regarding the “Buy American” provision that was recently enacted in the American Recovery and Reinvestment Act of 2009.

By James L. Keffer

In the April 2009 issue of WaterWorld magazine, an opinion article was published in the WWEMA CORNER regarding the “Buy American” provision that was recently enacted in the American Recovery and Reinvestment Act of 2009. As stated in the article, WWEMA is of the opinion that “…this is a bad policy…” and went on to state the various reasons as to why this would be detrimental for the water works industry. One of their primary reasons was that this “…could lead to protectionism and come back to haunt U.S. manufacturers hoping to compete in the global marketplace.”

Frankly, this statement demonstrates the author’s naive understanding of the “…complex world of global sourcing.” As a 2nd generation, family-owned and American founded company since 1964 we are extremely cognizant of the impact globally sourced products have made on many U.S. manufacturers and their abilities to compete not only in a global marketplace but even in their own backyards. To claim this provision is bad policy because it will lead to protectionism ignores the fact that many globally sourced products have been underwritten for years by foreign governments in order to support their state-owned manufacturing facilities.

Furthermore, numerous foreign governments are attempting to stimulate their own economies during this current globally affected economic downturn. For example, in January ’09 the China government began investing $586B towards various government sponsored programs in order to stimulate their own suffering economy – much of which is to be dedicated towards their manufacturing industry.

Whereas the ARRA “Buy American” provision requires that American made products merely be given a preference in hopes of stimulating and creating American manufacturing jobs; by comparison, per the terms of the China government stimulus package, much of their stimulus funds go directly to state-owned manufacturers in order to assist in underwriting their capital expenditures and overhead costs. Even more specifically, foreign national owned manufacturing facilities are not entitled to receive any such stimulus funding. Thus, who is demonstrating more protectionism in this case?

While there is strong language and an obvious preference for American made products in the “Buy American” provision, there are certain allowed exceptions to this provision. The intent of these noted exceptions are to protect against the very conditions cited in the WWEMA opinion article as their reasons for this provision being “bad policy.” Regrettably WWEMA failed to disclose to the readers that various exceptions were included in the language of the provision from the onset.

Furthermore, since the April ’09 WWEMA opinion article, specific guidelines for the implementation of the “Buy American” provision have been issued by the Executive Office of the President – OMB (dated 4/3/09) and even most recently by the EPA Office of Water (dated 4/28/09) regarding the waiver process for allowing non-American manufactured goods. Nowhere in these guidelines does it preclude the ability of a foreign national owned firm from obtaining equal preference for its products to be supplied on a water works infrastructure project provided they meet the simple requirements of being manufactured in the America. As a producer of American made products, this is not a bad policy, but rather a fair policy.

As stipulated in the opening sentence of its preface, the purpose of the ARRA is for “…making supplemental appropriations for job preservation and creation, infrastructure investment…” It is a long-held belief amongst water industry experts that much of America’s aging infrastructure system is in dire need of repair and replacement. ARRA funds (through the SRF loan fund programs) are an appropriate mechanism to stimulate reinvestment into the infrastructure of America’s water works systems – and towards the long-suffering American manufacturing industry as well.

The implication that these available funds have too many strings attached and would inhibit projects from obtaining financing through the SRF programs is an obvious one-sided opinion when all the facts are not fully represented. Speaking from an American manufacturer’s perspective, by stimulating everything but American manufacturing in this process, we risk accelerating the very imbalance between production and consumption that is one key reason for the nation’s current economic woes.

Our country needs a strong manufacturing base to ensure a viable and prosperous American economy. The long-held belief that fiscally responsible companies must have some offshore sourcing of their production in order to ensure competitiveness has eroded America’s industrial manufacturing base. If this anti-American manufacturing trend continues, more of America will become even more sharply divided between a growing class of low-wage workers and the relatively few wealthy – in essence the hollowing out of America and the demise of the middle-class. This would clearly be a bad policy for all Americans. WW

About the Author:
James L. Keffer is President of EBAA Iron Sales, Inc., a 45-year-old American manufacturer based in Eastland, TX specializing in the manufacture of piping restraint products used in municipal and industrial water supply and wastewater treatment applications.

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