In an important step towards making America safer, the House passed its first authorization bill for the Department of Homeland Security (DHS). Unfortunately, Members of Congress added amendments to both that bill and the defense authorization bill that would strengthen the Buy America Act. Proponents of protectionism say that these provisions are just common sense. The problem is that protectionism undermines homeland security and national defense.

Common Sense?

Those who favor 'buy America' requirements intend for them to prevent the U.S. from becoming dependent on foreign suppliers. Rep. Donald Manzullo (R-IL), for example, has added an amendment to the Homeland Security Authorization Act for Fiscal Year 2006 (H.R. 1817) that strengthens the Buy American Act.[1] The amendment requires that at least half of the components in products that DHS purchases be mined, produced, or manufactured within the country. This requirement could only be waived with the permission of Congress.

Sen. Russ Feingold (D-WI), in a speech addressing amendments to the Buy American Act of 1933, argued that it just "makes sense" for the federal government to purchase U.S. goods.[2] Feingold went on to say that this "common sense approach" should not have to be mandated because it is so obvious, but that it was.

Common sense, however, shows that 'buy America' does not necessarily improve security or even benefit America's economy.

Many Problems

Allowing foreign investors and expatriated corporations to compete for U.S. defense and homeland security contracts and removing 'buy America' provisions from current legislation will benefit national security and the American economy.

U.S. security is more severely hampered by reduced innovation and higher prices from 'buy America' requirements than by any security risk that a foreign contract might possess in their absence. 'Buy America' provisions reduce the innovation, technology, and competitive pricing to which America has access. This, in turn, only serves to decrease America's ability to defend itself.

'Buy America' is not the most direct way to address the problems of contracting. Regardless of where contract work is done, the federal government must carefully structure its contracts to ensure sufficient security and data protection procedures. Well-written contracts with appropriate security requirements can reduce security concerns about foreign goods or services.[3]

Protectionism also damages America's relationships with its trading partners and may lead to reprisals and economic harm to the United States. For example, there is a "two-way street" between outsourcing jobs and insourcing jobs-the U.S. tends to export labor-intensive, low-skill work while insourcing final-assembly and other skill-intensive positions. While protectionism attempts to reduce outsourced jobs, it also puts at risk insourced jobs. Both outsourcing and insourcing are necessary for the further fostering of American trade relationships and future economic development.

The practice of outsourcing is a practical and sensible means to increase efficiency by increasing output while reducing input costs. This, in turn, leads to more jobs across the economy, higher living standards, and lower consumer prices. Insourced jobs, known as foreign direct investment, have been growing at a faster rate than outsourced jobs for the past 15 years. According to the Organization for International Investment, "Over the last 15 years, manufacturing 'insourced' jobs grew by 82 percent-at an annual rate of 5.5 percent; and manufacturing 'outsourced' jobs grew by 23 percent-at an annual rate of 1.5 percent."[4] The 4,300-worker BMW factory in Greer, South Carolina, is an example of insourced job creation.

Protectionism should not be allowed to put at risk the nation's ability to harness commerce and trade to get the most advanced technologies and rapid innovation at the most reasonable prices. Congress should avoid provisions that strongly encourage or require the sole use of American products and services. These restrictions detract from the primary goal of military and homeland security contracting: providing the most security and defense at the lowest cost. The free-market approach serves this interest primarily. The protectionism behind 'buy America' does not.

Alane Kochems is a Research Assistant in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation. Chris Molitoris contributed to this Webmemo.