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Buy American is an American economic procurement policy that was initiated and passed by the Congress in 1933 as a legislative marketing strategy of enhancing usage of American products within its own territory. This implies that the US population has to prefer its home made products as opposed to imports and other products that are made by non-American companies. However, this legislation was also meant to cover other third party purchases that utilize federal funds such as highway and transit programs.
Buy American Requirements
Since its inception, this policy has insisted that all American federal aid construction projects must permanently use steel or iron products (Zirkelbach, 2009). This includes new projects as well as emergency repairs. Furthermore, these steel and iron products must have been absolutely manufactured in America and by American companies. Besides these, even technical processes that involve rolling, extruding, bending, grinding, machining and drilling as well as basic finishing processes like coating are entirely limited to the requirements of the policy (Zirkelbach, 2009).
The Buy American policy also implies that if certain products must be permanently incorporated into federal aid projects, the respective municipalities are compelled to seek for authorization from the contractors as a proof that such products meet the set standards of the Buy American policy (Zirkelbach, 2009).
Although the policy does not completely prohibit utilization of foreign materials, such provisions are so dismal and are under stern checks with regard to the policy (Sirico, 2012). For instance, a foreign material can only be used in condition that it can not be produced by American domestic firms. In such a case, its cost must not exceed 0.1% of the total cost of the contract. In normal infrastructural constructions like bridges, such foreign materials may only end up being such minor gadgets as bolts and fasteners as posed to materials that are required in large scale (Sirico, 2012).
Furthermore, even simple and basic projects that can entirely be managed by the local public work staff are subjected to this policy. This is done by ensuring that the local public work staffs are restricted to only using such products that have been verified as complying with the Buy American standards.
Disadvantages of Buy American Policy
Although the Buy American Act of 1933 as passed by the Congress and signed by President was meant to benefit American society by promoting local trade and industry, its damages are likely to outweigh the expected benefits (Stiglitz, 2010). This is based on the fact that the policy is likely to result in unnecessary increase of prices of the materials since there is lack of fair competition in the market. Furthermore, the quality of materials sold to the consumers is likely to be lower. This is based on the monopoly of the market that limits consumers only to their domestic products rather than subjecting them to a variety of products from which better quality choices can be accessed (Stiglitz, 2010).
The Buy American Policy hinders human rights, especially rights to fair trade and rights to free choices. The policy limits American consumers to their own local products and does not give room for freedom to trade with other producers beyond their territorial boundaries and also to make choices based on the preference and taste (Rosati & Scott, 2011). In addition to these, when quality and fairness are compromised in favor of domestic products, developmental process is hindered and technological advancement is challenged. This is based on the fact that the policy may encourage negligence towards foreign products and foreign technologies simply because they are non-American, although they may be more development-oriented (Rosati & Scott, 2011).
Buy American Policy in relation to the Free Market Requirements
A free market economy can be defined as capitalistic economy that is purely based on supply and demand with little or no state control (Sirico, 2012). Buyers and sellers are therefore expected to freely transact business based on the mutual agreement on the prize without unnecessary state intervention (Sirico, 2012). Despite the fact that globalization demands that international society advocates for free market trade between various states of the world, the US policy of Buy American strongly contradicts this.
For a free market economy to be realized, there are four main indicators that must not be compromised. These include fair competition based on the supply and demand, economic equilibrium, low entry barriers as well as spontaneous order (Sirico, 2012). In the case of Buy American policy, these indicators are greatly hindered and compromised. Instead, government monopoly takes over and limits effective competition and fair distribution of goods and services. This, in turn, affects foreign policy as other states view it as an exploiter rather than an equal development and business partner (Rosati & Scott, 2011).
Exceptions of Buy American Requirements
Since American people are aware that no state can develop without involving other states in commerce, they have developed a few cases that have been considered as exceptions to the Buy American restrictions (Rosati & Scott, 2011). In such a case, a project will be exempted from this restriction if the specific materials required are totally unavailable in their territory. Secondly, such materials must be of reasonable cost that might not exceed 25% of the total cost of the materials. If the two criterions are met, the products can be obtained on a public interest (Rosati & Scott, 2011).
Buy American policy is a procurement economic policy that restricts America from consuming goods and services that are non-American by origin. Although this policy was passed in expectation that it would benefit the American society, it has been reported to have more economic damages than benefits. Even where there are a few exceptional cases that do not comply with this policy, such cases are very dismal and contradict the principals of free market capitalism.