The government has used its authority to place circumstances on the procurements made by the federal government with federal dollars. One of the conditions is that it sets a requirement that government purchases must be produced in the United States. The most well-known components are known as the Buy American Act.
Buy American RequirementsThe Buy American is a segment of the American Recovery and Reinvestment Act (ARRA) that increases the funds that are distributed by the federal government to the local, and state governments over a period of years (Luckey, 2012). Essentially the acts aim to protect domestic labor by providing a required preference for American goods. Manufactured products are labeled as domestic as long as the cost of foreign components does not surpass 50% of all cost components (Luckey, 2012). The Buy American Act applies towards purchases by the federal government of more than $3,000, only if the acquisition is in line with public interest, they are going to be used in the United States, and they are reasonable in cost (Luckey, 2012).
A little history of the Buy American Act was that in 1875, Congress enacted one of the first statutory provisions, which involved the special treatment of American materials in contracts for the public (McDaniel, 2010). This act only counted towards materials that were purchased by the Department of War and was declared obsolete in 1933 by legislation popularly referred to as the “Buy American” Act took over. The Buy American Act was passed as a way of the government’s response to the unemployment crisis of the Great Depression (McDaniel, 2010).
In 1941, there was an amendment to the act which was called the Fifth Supplemental DOD Appropriations Act that included restrictions to protect the domestic industrial industry when at war (Cooper, 2017). The act surfaced again in 1982 with the Surface Transpiration Assistance Act, which applied to the purchases of rail and road transportation like highways and railways. Other government spending laws that require domestic investments are often modeled after the 1933 or the 1982 act, like the Obama Stimulus (Cooper, 2017).
The Obama stimulus also called the Reinvestment Act of 2009 included domestic preference provisions (Cooper, 2017). How the Buy American Requirements benefits both VectorCal and UAV GPS. The Buy American Act Requirement would benefit both VectorCal and UAV GPG for many reasons. First, the Buy American Requirements Act promotes the use of goods made in the United States. Since VectorCal and UAV GPS products are manufactured in the United States, it means, that the Buy American Act will encourage the government to make purchases with either company.
Secondly, the Buy American Act is advantageous to both VectorCal and UAV GPS because the act safeguards us from competition with foreign manufacturers. Lastly, the Act will benefit both companies due to the possibility of increased funding and financial assistance from the American Recovery and Reinvestment Act (ARRA) and the federal government. Since navigation systems will be used for government and the military drones, the federal government can decide to help financially to both companies to ensure the manufacture of the navigation systems fulfill security standards. Ways, the Buy American Requirements, are contradictory to a capitalistic ethosThe Buy American Act and capitalism are contradictory ideologies that the government promotes. On the one hand the government wants domestic products to be purchased, and on the other hand, they want to adopt a free market ideology. Following the capitalism ideologies, most of the Buy American act has a misdirected priority because the motive leads to the hostile attitudes towards products and goods made in foreign countries (Post, 2011). Some think that under capitalism, the government should not affect free trade and that the Buy American Act requirements are examples of the government forcing its authority to regulate the free flow of the market (Post, 2011).
For example, the Buy America Requirements put restrictions on the items that government agencies. They must buy American materials and products which in a way discriminates against produced that are manufactured in another country.The Buy American Act also interferes with the belief of free completion. The Act discourages foreign companies to supply and sell products to the United States government (Post, 2011). Basically, it averts international market items to compete fairly with domestic products and prevents privately made products to compete equally with government endorsed products.How the Buy American Requirements’ exceptions are advantageous to the US EconomyThe exceptions to the Buy American requirements are fair and advantageous.
It can be claimed that the exceptions to the Buy American requirements are aimed at strengthening the United States’ economy. The exceptions are put in place to decrease the expenses the government sustains when issuing bid (Linarelli, 2011). One of the limitations is the exempting of projects with unreasonable costs. This guarantees that the government only benefits from the advantage when it manufactures in countries that are comparatively cheaper. It also gives agencies the freedom to deny when the costs exceed the suitable amounts (Linarelli, 2011). The exceptions provide a little opportunity for free trade with foreign competitors. advantages of using the Buy American Requirements The Buy American Requirements are beneficial to the domestic businesses because it acts as a form of protection for American based companies such as VectorCal and UAV GPS from foreign competition.
The act also protects jobs for the American people by enforcing a want for American made products and raw materials. More jobs that kept in the United States reduces the unemployment rate and expands the tax base to pay for benefits like social security and Medicare for example (Simmermaker, 2011). Another advantage is that government agencies and public officials are held accountable with federal taxes on domestic projects under the Buy American Act when compared to overseas projects (Florence, 2015). When doing business overseas, taxes are hard to almost impossible to track in the United States, so it is good that business is being kept in the United States to make it fair for companies like UAV GPS and VectorCal. It seems that we are importing more goods then we are exporting which in return hurts any chance of economic growth. It was estimated that in 2009 our national trade deficit reduced America’s potential economic growth from 4% to 3% (Simmermaker, 2011).
To bring back any economic growth the Buy American Requirements and Act can help keep money in the country and create potential jobs, which would stimulate the economy. Disadvantages of using the Buy American Requirements Historically only purchasing American based materials and products have not always turned out the best. The Smoot-Hawley Tariff Act of 1930 raised United States tariffs to record levels, on about 20,000 imported goods. As a way to preserve American jobs and businesses, half of the imports between 1929 and 1933 were cut. At the same time exports declined and the unemployment rate grew (Markheim, 2009). Reducing the number of imports can potentially hurt companies like VectorCal and UAV GPS since a tiny percentage of technology comes from overseas companies.
Reduction of imports can spike up the prices of the needed technology and make the cost of the overall project increase. Another disadvantage of the American Buying Act or requirements is that if VectorCal or UAV GPS wanted to access foreign markets and expand their business they cannot. This limits the market and potential growth for both companies being that there will only be one leading purchaser. If the United States government decides to purchase from VectorCal, then UAV GPS would basically be out of business or vice versa. The Buy American Requirements also leads to an increased demand for quality from domestic firms such as VectorCal and UAV GPS. Government agencies and the military, which are the main customers, will demand more proficiency during federal procurements.
This can be an issue when the primary technology for navigation systems is overseas and may hinder companies like VectorCal and UAV GPS from getting the most up to date technology. This does not only make the domestic corporations look wrong, but it also will not provide the high-tech reequipment that the government and military need to perform their duties. In concision, the Buy American Act started as a way to improve the American economy. There are both negatives and positives that the act brings along with it.
Thankfully there are exceptions to the act that make it possible for trade and purchase to happen with foreign companies, guaranteeing that the best price will always win.