Eakinomics: Buy
American – Coronavirus Edition
The idea of “Buy American” is hardly new; it has the same perpetual,
misguided appeal as minimum wage laws and price controls on drugs. But research has
shown that Buy American laws increase the cost of goods
purchased by the government, and these costs are often passed down to
consumers via higher prices. Despite this problem, there is a long
track record of appealing to some non-economic imperative – e.g., national
security – to justify Buy American mandates.
So, here we go again.
As nicely summarized by
AAF’s Jacqueline Varas, the president’s protectionist wingman and economic
flat-earther Peter Navarro announced that
he was preparing an executive order to reduce U.S. reliance on foreign-made
medical supplies. The executive order will have three components: Buy
American requirements, regulatory reform, and government investment in
advanced manufacturing facilities in the United States.
According to
reports, the order will include:
- A mandate that all
purchases of medicines or medical equipment by federal agencies –
the Department of Defense, the Department of Health and
Human Services, and the Department of Veterans Affairs – be
American-made;
- A requirement that federal
contractors equipped to manufacture medical supplies do so, along with
a withdrawal of the United States from World Trade
Organization (WTO) commitments not to discriminate in government
procurement; and
- Regulatory reforms to speed
products to market and lower the cost of locating plants in the United
States.
The plain objective of the executive order is to force domestic production
of medical supplies and pharmaceutical products.
Nobody will object to rolling back overly burdensome regulations. But
violating WTO commitments will invite retaliation. Anybody here remember
that successful trade war with China? Finally, if the economics were best
for exclusive production and sale in the United States, this would already
be true. But it is not, and this policy will
be both costly and counterproductive.
There are doubtless some isolated supplies and products that would best
be produced in the United States. But using a pandemic crisis to
foist costly, medical protectionism on a panicked electorate is
disappointing at best.
|
No comments:
Post a Comment