“Buy American” A Threat to Texas and Hispanics
An Obama Presidency was greeted with great enthusiasm by Europeans and other foreigners during his campaign but now many world leaders are wondering about his intents toward world trade. The Democratic initiative, the American Recovery and Reinvestment Act of 2009(H.R. 1), mandates the use of American steel and iron in infrastructure projects with few exceptions. The United States is currently ranked 3rd in world steel production behind China and Japan. China produces more than twice as much steel as the United States. India, China, and South Korea have the fastest growing sectors.
Throughout the world some protectionist measures have been started by countries whose governments are aiding private industry. Dairies, steel plants, and agricultural products are some of things being given preferential treatments in capitols from Beijing to London. However, world leaders are complaining that talk of American protectionist moves espoused by H.R. 1 and more being promoted by labor leaders in the United States will lead to a break down in international free trade.
The United States has had a law in the books since 1933 which mandates the preference for American made products by federal purchasers for which the American President may make exceptions. State and local governments often have similar provisions. Liberal activists and labor have over the past several years been linking “Buy American’ with patriotism. Much of the their support for the Obama Campaign was based upon his rhetoric of possibly canceling the North American Free Trade Agreement. When asked about “Buy American” provisions today, Robert Gibbs, White House Press Secretary, vaguely answered and indicated that proper balance of trade agreements which maintain the interests of both the domestic and world economies would be the goal.
Many experts in trade and business fear that if an international trade war starts as it did in 1930 when President Hoover began promoting protectionism that the result will be similar, a faltering economy made worse.
One of the few success stories in the United States economy has been Texas. For over seven years, Texas, has been the number one exporting state with revenues exceeding 168 billion dollars and growing at more than 10% per year. More than 80% of Texas’s export revenue comes from trade with Mexico. Computer products, chemicals, machinery, transportation, and fuel products flow increasingly to Mexico and South America.
South Texas has seen an explosion of Hispanic owned businesses blossoming in this free trade environment resulting in areas like McAllen having some of the fastest job growth in the country. “Buy American” initiatives adversely affecting the flow of goods across the border to Mexico and to other Latin American countries could devastate the local economy of McAllen and the surrounding Rio Grande Valley.
It is indeed ironic that liberal activists wish to repeat the actions of of President Herbert Hoover when we are facing an imminent risk of depression. The membership of the United States in the World Trade Organization specifically forbids protectionist activities like “Buy American”.
Another component of H.R. 1 that has not received a lot of attention is that it will mandate that all contractors use the E-Verify system. This will put additional burdens and risks of penalties on employers to carry out a government function, establishing the legality of their employees. As we have previously documented the experimental program in Arizona demonstrated fatal flaws in use of a troubled Social Security database. This will only add cost and bureaucracy.
Threats to free trade and the covert insertion of the E-Verify program poses a significant obstacle to the further development of Hispanic business. Not only along the border but also in cities like Chicago and in areas like Western Pennsylvania, increasing populations of Hispanics are starting small businesses. The resurrection of the Republican Party in its opposition to the Democratic fiat of a “stimulus” plan may well affect Hispanic Republicans. The Republican National Hispanic Assembly has adopted free trade (including a strong call for free trade with Columbia) and promotion of Hispanic business as key issues. Attacks on the Texas economy and free trade by Democratic measures will negatively impact Hispanics wallets and may push them once again toward the Republican tent.
Tony Magaña grew up in McAllen Texas, attended Texas A&M University, served as an officer in Army Reserve, and holds a doctorate from Harvard University. The co-founder of Contempo Magazine has participated in Valley business for over 20 years.He is a member of the National Association of Hispanic Journalists.
