Economic Stimulus Packages - “Buy American” provisions

US President Obama signed American Recovery and Reinvestment Act (ARRA) in February 2009. The ARRA contains a clause setting out that distribution of funds is to be subject to “Buy American” provisions.

“Buy American” provisions envisages products and services from the USA being given preference in public procurement as long as this complies with the USA’s international commitments.

What role does the debate on the special promotion of American companies play for German industry?

The BDI is very concerned about the “Buy American” provisions of the US economic stimulus package. They could have an adverse impact on the heavily export-oriented German industry. Favouring US products in public procurement in an economic crisis is sending the wrong signal. Although “Buy American” provisions are intended to comply with the USA’s international commitments there is still great uncertainty in the business sector as to how these conditions will affect practice. Not all US federal states have signed the international procurement agreement, the so-called Government Procurement Agreement (GPA) of the World Trade Organisation. Particularly that the terms “Produced in the US” and “Manufactured Goods” have not been defined is causing uncertainty. According to the current text, legal experts cannot with certainty say whether foreign steel processed in the USA can be labelled as “Produced in the US”, for example.

In tackling the current crisis cross-border investment is more important than ever

In economic terms this defensive approach is not a sensible response. For it buys short-term security with a long-term loss of welfare. In addition, there is the danger that US trading partners will now also introduce restrictions, resulting in a protectionism spiral. Some countries, mainly emerging markets and developing nations, have already raised tariffs.

If we isolate ourselves we will miss an opportunity to speedily overcome the current eco-nomic slump. The BDI is therefore sending an important signal against protectionism – also within the framework of the G8 and G20 process. Cross-border investment provides an important impetus to boost competitiveness, economic growth and employment. German com-panies have invested approx. EUR 785 billion abroad. Germany is not only the exports world champion but also a key country of origin for foreign investment. Conversely, foreign investors have invested EUR 390 billion in Germany.