Trump’s Buy American, Hire American: U-M experts respond

April 18, 2017
Greta Guest


ANN ARBOR—President Trump’s executive order to promote the Buy American, Hire American agenda affects how the government procures goods used in federally funded projects as well as how laws regarding immigration and visa programs are operated.

According to a White House statement, the H-1B visa program would reward them to the “most skilled or highest-paid applicants,” instead of by random lottery as the visas are now rewarded.

The University of Michigan has experts who can discuss.

Linda Lim, professor of strategy, focuses her research on the political economy of multinational and local business in Southeast Asia. That includes the changing international trade and investment environment, and the influence of domestic politics, economic policy and culture on business structure, strategy and operations.

“President Trump’s executive order to tighten Buy American rules on federal government purchases, particularly of steel for infrastructure and construction projects that are expected to increase, amounts to trade protectionism that will have far-reaching consequences,” she said. “Government agencies are large actors in international trade, and large buyers of U.S. exports, so giving them a reason/excuse to discriminate against U.S. exports by favoring their own domestic providers will definitely restrict trade, and thus hurt U.S. exports and export jobs (which are generally higher-skill and higher-paid than non-export jobs). Think Boeing airplanes and Microsoft software, both of which currently have large global market share.

“Buy American requirements will increase costs for American companies supplying the federal government, thus imposing a burden on taxpayers who must either pay more in taxes to cover the cost of more expensive public projects, or pay more in interest costs to finance their homes, cars, student debt, etc. Either that, or fewer projects will be undertaken. All this means fewer jobs throughout the economy—for example, there may be more jobs in steel, but this will be at the expense of fewer jobs in other sectors.

“Buy American also means more Big Government, since the bureaucracy may have to expand to monitor compliance, and the government becomes empowered to micromanage the buying and supplier decisions of government contractors, big and small.”

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Marina Whitman, professor of business administration and public policy, is an expert on international trade and a former chief economist and first female group vice president at General Motors Corp.

“There are two problems with Buy American,” she said. “First, it raises costs and, if the producer of a final product is thus forced to pay more for some of its inputs, that may render them uncompetitive with producers in other countries who are not so burdened. Second, the U.S. has worked for decades to stop other countries from favoring their own producers and, if we were to do so, other countries would surely retaliate.

“Hire American is more complicated. Presumably, the comment is aimed at H-1B visas, which are for the purposes of hiring highly skilled foreigners. Where there is a genuine shortage of native Americans to do the work, such hires add to overall efficiency in the U.S. But when they are used, as they sometimes are, to bring in foreign workers to replace American workers, who sometimes are forced to train their replacements who will receive lower wages, that is unfair.

“Whether lowering the cap on the number of such visas is helpful or hurtful on balance I can’t tell without very detailed information, but raising the wage floor at which H-1B visas are permitted, as Trump has proposed, is probably a good idea, if such visas are for truly ‘highly-skilled’ people.”

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Ann Lin, associate professor of public policy, has studied the most recent federal efforts to reform immigration policies.

“One of the problems with the H-1B visa is that it was understood to be for short-term immediate disruptions in the market where suddenly we need labor,” she said. “We’re going to bring people in, but the job is going to be temporary and so they’ll be able to leave again. But we’re not using it like that. We’re using it as a way to test people, to see if they really like the U.S. enough, to see if we like them enough to stay. That’s not a bad use of a visa but it is a really bad use of a temporary visa.

“On the one hand, each year the U.S. gives out 65,000 high-skilled worker visas or H-1B visas which are temporary, and within a day or a week they’re all given out. On the other hand, President Trump has talked about reducing H-1B visa quotas even further because he feels they are taking away American jobs. How do we fix this problem? The answer is more permanent worker visas and to restrict H-1B visas to growth areas.

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