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Cisco, Alcatel-Lucent say 'buy American' not feasible for stimulus requirements
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In discussions and comments filed with the National Telecommunications and Information Administration (NTIA), Cisco Systems and Alcatel-Lucent said they want the "buy American" provisions eliminated as a condition to receive part of the $7.2 billion in broadband stimulus money the NTIA and the Department of Agriculture's Rural Utilities Service (RUS) are charged with doling out.
Cisco says requiring U.S.-made equipment would be "grossly inefficient" and a "radical departure" from normal practices. The two industry heavyweights also say such rules would slow down projects because telecom networks typically are made up of equipment from companies worldwide. Congress said funds provided under the law passed in February generally can't be used for iron, steel and factory goods not produced in the U.S.
"We're talking about technologies that are no longer made in the United States," John Marinho, vice president of public affairs with Alcatel-Lucent, said in an interview with Bloomberg.
Moreover, other telecom vendors and the Telecommunications Industry Association (TIA) have sent a letter to the Commerce Department saying that thousands of parts are constructed around the world and that a requirement for documentation of where they are made "will severely complicate" the application for funds.
The NTIA and RUS are expected to draft stimulus fund rules in early summer.
For more:
- see Bloomberg
Related articles:
Broadband stimulus brings all sorts of bedfellows
Sorting through the broadband stimulus package
Zhone: 'Buy American' for broadband stimulus
More stories about stimulus package Ntia Department Of Agriculture Cisco Systems broadband stimulus alcatel lucent
Comments
Posted by Anonymous | June 11, 2009 - 10:52am
While it may be impractical to truly "Buy American" (however that's defined), it points out what's wrong with the whole idea of this stimulus package. It'll end up being a big give-away to a few who will still send much of it off-shore, and the stimulus effect (because there's a great unfilled demand for faster internet that folks struggling to pay bills are going to pay more for?) will occur long after the recession is over, and the money those consumers would pay will go into higher taxes to pay for it!
Posted by Anonymous | June 11, 2009 - 11:44am
Cisco and Alcatel-Luscent put their fellow citizens at a disadvantage by moving jobs outside the US. In effect they said these jobs are not for you Americans. Now the Americans are saying this stimulus money is not for you.
The “stimulus” in the phrase stimulus package refers to the economic theory of the “Spending Multiplier” developed by John Maynard Keynes. Under this theory government can stimulate a sick economy by modest outlay if people who get the money spent most of it on consumption. This extra spending allows employers to hire more people. When those people spend further increases allow further spending. This is the so called multiplier effect. If any of the spending goes outside the economy you are trying to fix it is lost to the multiplier effect. It is also lost as pure spending. No advantage to the economy results.
The Cisco/Alcatel-Lucent “grossly inefficient” complaint is not relevant. Efficiently is not the point here. Fixing the economy is what this is all about. In fact Keynes is alleged to have used the example of hiring people to dig holes and the filling them up again. Totally inefficient, useless in fact, but it still stimulates the economy.
To make the theory work the “buy American” is necessary. Any money spent that goes outside the US is wasted in that the multiplier does not apply. Fixing the economy is more important than the problems faced complying with the rules.
Posted by Anonymous | June 11, 2009 - 1:30pm
The "Buy American" provision of the stimulus outlays, while a nice ideal, is impractical in reality as the CISCO/Alcatel-Lucent situation illustrates. The government we have today is simply in pursuit of greater and greater control over the economy and the daily lives of the American people - by definition, socialism. Would you pay someone to dig a hole and fill it in again? No! It makes no sense and produces nothing. You might as well just give the money away. Only the government would pay someone to do that...one, because it's not their money being spent and two, because they can control the person digging the hole! On the other hand, money given to CISCO with no strings attached might be spent to manufacture say, a less expensive router. That router is then bought by a company (perhaps American) at a cost-savings to them, and when put to use increases the company's productivity. The company is then able to grow and hire more workers. THAT is how the market works and the stimulus can help. No socialism involved. If more people in our country had more than just a superficial "sound-bite" education, they would better understand the thievery of our freedoms going on in Washington these days. Wake up America!
Posted by Anony | June 11, 2009 - 6:45pm
If you hire someone to dig a hole and them fill it in the multiplier is 1.
If you hire someone who buys his hole digging equipment from outside your economy the multiplier is less than 1 (eg you are wasting the money).
If you borrowed the money to have the hole dug and will have to raise taxes to pay it back, then the multiplier is less than 1.
Greg Manwik had a series of posts on this multiplier idea. Unless the project was wrothwhile on it own merits in the first place, the a multiplier of less than 1.5 will have a net depressive effect.
Posted by Anonymous | June 11, 2009 - 11:55am
The problem with "Buy America" is it violates numerous trade agreements. If other countries commit to spend a proportionate amount of stimulus then each country will receive stimulus dollars from the others. The real problem is unfair trade where one country's stimulus (China, for example) stays inside that country while another's (America, for example) is spent both internally and externally. Unfortunately "Buy America" is just a band-aid on the symptom.
Posted by Anonymous | June 29, 2009 - 12:51pm
The fact that Cisco and Alcatel do not want to compy wit hthe Buy America provisions is BECASUE they are usign excessive foreign investments and shipping job overseas.
Alcatel-lucent is a French foreign company and is supported by very socialist gvt and very strong labor laws. Cisco outsources like mad o nthe manufacturing side and is steadily shipping hi-tech software jobs into China and India
The companies that are hit the most are the small american business that are stiving to become industry leaders. They do not command the buying power of the large corporations but have a worlforce that is 99-100% American tax payers.
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