CPA is working hard to ensure government procurement dollars go to domestic producers. We’re up against powerful import lobby groups who want us to voluntarily do-away with buy local policies.
The following is CPA’s strategy:
- Terminate trade deals preventing governments from buying local. Currently, we are required to treat goods from 60 other countries as domestic even when “Buy American” applies. The WTO Government Procurement agreement is the most significant of these deals.
- Expand domestic preference to more areas of government spending. For example, while the 1933 Buy American law covers procurement the Federal government does for itself, the law does not apply when federal agencies distribute funding or lending to state and local governments or private companies. This has been largely rectified by Congress for the Department of Transportation, but it needs to become the norm for disbursements throughout the government.
- Draw a hard line on adversaries: federal procurement money should never be used to buy goods from our nation’s adversaries. There’s nothing in any of our trade deals which requires us to treat Made-in-China as Made-in-USA for purposes of procurement. Federal procurement grants should always have origin criteria to prevent this.
- Ensure senior accountability for procurement decisions. Too often, contracts are engineered to sidestep domestic content expectations. Agency decision makers should be eager to Buy American, and document their journey in navigating the marketplace.
Developments under the Biden Administration
President Biden campaigned on six “Made in USA” promises:
- Tighter domestic content rules
- On January 25, 2021, President Biden issued E.O. 14005, “Ensuring the Future is Made in All of America by All American Workers”. This E.O. did not itself make significant changes to actual legal requirements facing procurement bidders. It does direct the FAR Council to replace U.S.-content thresholds with a “job supported activity” test.
- CPA expressed its concern, particularly that the new “job supported” test would de-emphasize American manufacturing jobs.
- Fortunately, the FAR Council heard the concern, and in their final rule in 2022 did not adopt the “job supported” test contemplated by E.O. 14005. However, the long-standing component test with a “content” test, and ongoing vigilance will be required.
- A public website to track Buy American waivers, and using Manufacturing Extension Partnerships to identify small business to fill procurement needs.
- The promise to track waivers mirrors that of the gov Act of 2018, introduced by Senators Sherrod Brown (D-Ohio), Lindsay Graham (R-SC), Chris Murphy (D-Conn.) and Rob Portman (R-Ohio). It was reintroduced in the 117th Congress on March 12, 2021. CPA is supportive of this legislation.
- Stronger FTC enforcement of false “Made-in-USA” claims.
- Rohit Chopra was a commissioner at the FTC and the leading proponent of strong enforcement against companies that knowingly deceive consumers with false Made-in-USA claims. President Biden appointed Chopra to run the CFBP. CPA believes his replacement, Lina Kahn, will continue this leadership.
- Extending Buy America to other forms of government spending and assistance.
- (Note: see below for difference between ‘Buy America’ and the 1933 Buy American Act).
- Major progress was made with passage of the Infrastructure Investment and Jobs Act in November 2021, and President Biden’s E.O. 14052 to implement the law. (See OMB memo here). This law took ‘Buy America’ style domestic content preferences that traditionally only applied to DOT spending, and extended them to certain infrastructure spending by other agencies. Note, however, that this spending will be “consistent with international obligations”, meaning that ‘Buy America’ will include a list of 60 other countries.
- Strengthen Department of Transportation localization requirements.
- These “Buy America” flow-down statutes ensure that DOT funds given to states and counties are used on American-made steel, iron, and manufactured goods. Fortunately, DOT’s infrastructure spending has always been exempted from international procurement commitments, meaning ‘Buy America’ was an appropriate description of the rule.
- Updating trade rules “to make sure that the U.S. and allies can use their own taxpayer dollars to spur investment in their own countries.”
- President Biden has yet to fulfill this campaign pledge, and has taken steps to undercut our ability to use taxpayer dollars to invest domestically.
- On January 22, 2021, nine Democratic Committee Chairs from the House of Representatives wrote the President to “encourage [the President] to give early notice to World Trade Organization (WTO) Agreement on Government Procurement (GPA) and U.S. Free Trade Agreement (FTA) partners that the United States will renegotiate procurement terms in trade pacts” and “to eliminate the trade-pact terms that prohibit the use of procurement preference for domestic firm and domestic goods.”
- CPA expressed its concern in our response to EO 14005 that there was no direction for USTR to renegotiate these trade pacts.
- On March 15, 2021, 13 Senators co-signed a Baldwin-Brown letter to the President urging him to cancel trade agreement waivers to ensure spending stayed in the USA.
- On April 16, 2021, President Biden’s Administration cancelled a process begun by President Trump at the WTO to ensure the federal government could use its procurement budget to buy American-made essential medicines. CPA issued a press release criticizing the Biden Administration for undercutting his campaign promise.
CPA will continue to work to see that the Biden Administration keeps these promises, and to recommend further actions the Administration can take to strengthen domestic production.
Backgrounder on “Buy American” policy
Government procurement gets an exemption from the WTO’s core National Treatment obligation, which requires that our laws, taxes, and regulations treat imports no less favorably than ‘like’ domestic products. Until we get more freedom over tariff policy, government procurement will continue as one of the more important levers we have for growing domestic production. In addition to government procurement, CPA is focused on the promotion and marketing of consumer-orientated Made-in-USA programs.
“Buy American” vs. “Buy America”
- “Buy American” generally refers to the 1933 Buy American Act, which controls when the federal government is buying things for itself. If a federal agency is distributing taxpayer dollars to other entities (whether states and cities, or private companies), then the Buy American Act does not automatically apply unless a special provision is inserted. This did happen with the 2009 Recovery Act.
- “Buy America” = refers to five separate laws that apply to five U.S. Dept. of Transportation agencies which distribute federal money to sub-federal purchasers. Think of them as “flow-down” version of Buy American. These Buy America statutes are limited to iron and steel and goods that are mostly iron and steel.
“Buy American” most often means “Buy from a list of 60 countries”
To understand the current patchwork of procurement rules for domestic content, visualize three levels of “Buy American” restriction:
- Buy from anywhere: Federal procurement with no origin rules. Government purchasers are free to buy without much concern for goods’ country of origin. Outside of DOT spending, a shocking amount of taxpayer dollars flow to equipment without any origin rules.
- Buy from 60 countries: Origin-rules “consistent with international trade obligations”. Government purchasers must consider goods’ country of origin, but pursuant to trade agreements we have, goods from 60 other countries are eligible for purchase, even though you’ll hear “Buy American” applies. Some of these countries are included due to FTAs, but most are included due to the WTO Government Procurement Agreement.
- Actual Buy American: The government is required to purchase American-made goods, and there is no obligation to treat other nations’ goods as American. This happens in the DOT context, where the Department’s “Buy America” laws have been exempt from the WTO GPA. It also happens in other contexts where we have not waived Buy American under a trade agreement. However, in practice, this is limited to certain types of manufactured product, and always subject to waivers. These waivers are available to the government purchasers if there would be substantial cost increases (e.g., over 25%), the product is unavailable in sufficient quantities, or it’s otherwise in the public interest.