The National Defense Authorization Act (NDAA) passes Congress every year, and is rarely covered by the political press. This year it seemed important to cover because we thought it would provide a picture of where members of Congress stood after dealing with pandemic-induced supply chain woes for over 18 months. Would Congress understand the need to make things here? Or would they choose to “work with allies”, often appeasing the globalist interests of K Street. We looked at two issues debated in the NDAA and divided them up into a two-part series. The first should give our members a view into where some political leaders stand on Buy America policies: are they cold, lukewarm or hot? We need them hot. The second looks at who within Congress is up for criticizing China and the multinationals that benefit greatly from their relationship with our biggest, most potent rival.
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For a (slight) majority of the members of Congress deciding on FY2022 NDAA, domestic sourcing for U.S. Navy Ships is too complicated and needs more studies. It’s a maneuver often used to kill the effort to source domestically. More studies mean “lukewarm”, and maybe a bit cold.
Last week, the 59 member House Armed Services Committee shot down NDAA Amendment Log No. 1211 offered up by California Rep. John Garamendi in a roll call vote, voting in favor of a substituting amendment proposed by Virginia Rep. Rob Wittman. He initiated the substitute on the spot to replace Garamendi’s 1211. Wittman wanted the Department of Defense to study the impact Garamendi’s strict Buy American Act requirements would have on delivery time and cost for ongoing defense contracts.
“Every time we come up against this issue, whether it has to do with naval ships or steel for bridges, we always come to this ‘a-ha’ moment that says: ‘maybe we ought to study it.’ Which is a rather well-known way of killing an idea,” Garamendi said. (time frame: 3:51.10-3:51.35)
“Either you want to make it in America, taking into account all the waivers under existing rules that deal with cost and availability, or you don’t. If you want to put America in the proper position of sustaining our industrial base…then we ought to put in law requirements such as my amendment. If you want to study it, we will study it to death and then sometime off into the future we will wonder why we are not doing this or that or why we can’t make it in America or why we can’t complete the ship because somehow the supply chain from South Korea broke down. If you want real national security you’re going to have to build things here. If you want a real economy, you’re going to have to make things in America.” – Rep. John Garamendi (D-CA-3), September 1, 2021 (time frame: 3:51:39-3:52:42)
The NDAA provides authorization of appropriations for the Department of Defense (DOD), nuclear weapons programs of the Department of Energy, DOD elements of the Intelligence Community, and defense-related activities at other federal agencies.
The Buy American Act began in 1978. It requires government procurement contracts to be directed towards domestic suppliers. It is full of exemptions. Cost is one of them. As is supply. Sometimes the product line or raw material is not made or found here, and never was. More often than not, the Act also permits members of the World Trade Organization’s Government Procurement Agreement to bid on those contracts, as well.
Garamendi’s amendment would have made the Buy American requirement stricter, with exemptions only for cost and the availability of supply. His amendment was for “critical pieces” only. Specifically, he named things like ship shafts, generators, motors, power distribution equipment, load centers among other things that would “be required to be made in America.”
If most of those items were made here, “it would add up to tens of thousands of jobs,” Garamendi said.
Beyond the job market, however, Garamendi seemed mostly motivated by the last year’s supply chain shortfalls in important items such as personal protection equipment for hospitals in the middle of a pandemic, and – more recently – semiconductors used in automotive manufacturing.
“We’ve all heard about supply chain disruptions in PPE, in cars. Here, we’re talking about a national security issue,” Garamendi said. “Are we capable in the United States to produce the key elements of a Naval ship? Presently the answer is ‘not really’. But if we adopt this amendment, these key elements will be Made in America.”
We believe President Biden would support Garamendi’s take. He ran his presidential campaign on the slogan Build Back Better and Make in All of America. But some members of his own party seem wishy-washy on this, as last week’s NDAA mark-up suggests.
Wittman, a Republican, said that his substituting amendment was not to “torpedo” Garamendi’s amendment. “What will be the impact of Buy American provisions for these ships?” Wittman asked. “I believe it will have a big impact.”
Wittman’s Virginia colleague, Democratic Rep. Elaine Luria agreed. She said restricting access to Navy contracts for non-U.S. companies was “an additional hurdle”, and added that we should instead “work collaboratively with our closest allies and with our NATO allies.”
“We need an in-depth study before we go forward with any provision such as those offered by Garamendi.” – Rep. Elaine Luria (D-VA-2), Vice-Chair, House Armed Services Committee, September 1, 2021
Garamendi pushed back, saying “after the end of that study, I suspect it will say, ‘yes, it is likely to cost more.’ However, we have the ability right now to waive the Buy American requirement for all those pieces and parts of a ship on cost. If you want to make things in America, you vote no on this (Wittman substitute) amendment.”
When asked if this amendment would impact existing contracts, Garamendi said if there was no supply here, then no it would not, and if it was too expensive, he said he didn’t know.
Committee Chairman Adam Smith (D-WA-9) said that it would.
Rep. Donald Norcross (D-NJ-1) backed Garamendi and said it would not because it made no sense to go in and redo old contracts. Norcross voiced his opposition to more studies and was against making waivers any easier.
“Not available here? You get a waiver. Cost? You get a waiver. Twenty-seven countries currently get a waiver,” said Norcross. (CPA note: It’s actually more than that when you count individual EU nations and all WTO GPA parties.) “That means every ally you are mentioning already has a waiver,” he said. “This is part of the problem.” (time frame: 3:57:05-3:57:28)
Luria, whose constituents include those working in the shipyards of Norfolk and Virginia Beach, lambasted any critique that suggested flexible Buy American rules for DoD contracts was an open invitation for China.
“I urge the support of this amendment,” Luria said. “I believe it requires further study. None of us are insinuating that we purchase any components in China,” she said. “We support bolstering our own industrial base and that of our closest allies,” she said. (time frame: 3:55:01-3:55:26)
Her argument won by a slim three-point margin.
It seems clear that many voted along party lines, with cost override and the specter of delays being an easy sell.
Chairman Smith did not call for a vote on Garamendi’s amendment 1211 mainly because the Wittman one substituted it and the vote would be the same. Smith voted with Garamendi and not Wittman.
However, voting for the substitute – on the record – looks a lot nicer on paper than voting against Garamendi’s amendment. It gives politicians the chance to say they did not vote against Garamendi’s amendment. There is no record of it. What they voted for was more studies, and not weaker Buy American rules. This is a classic strategy of Committee chairs, sometimes used to shield members of the same party prior to elections. Now no one is officially on the record having voted in favor of key parts to a Navy submarine, destroyer, or aircraft carrier being made in Germany and Hong Kong instead of here.
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Wittman and Garamendi locked horns on two amendments, including a Wittman amendment (No. 723) on sourcing anchor chains for use on Navy ship anchors from “non-NATO allies” (think South Korea, for example). Garamendi offered up a so-called perfecting amendment (No. 1496), which cut out the non-NATO allies line.
Garamendi sought to require that anchor chains be purchased from U.S. manufacturers, of which there is now only one: Lister Chain & Forge in Blaine, Washington, population 5,959. Under last year’s NDAA, anchor chains could also be bought from “major non-NATO partners and allies.” Garamendi said he was fine sourcing anchor chains from Australia, the UK, and Canada, however, but it doesn’t seem like this is a product line those countries are making any better, or cheaper than we do here.
“The point of the amendment is to maintain our ability to manufacture a key part of a Navy ship – that is the anchor and its chain. This amendment…puts in the coffin an American manufacturer. It would be very hard for them to compete with heavily subsidized foreign companies that will be allowed to produce chain for the American Navy under this amendment. My amendment negates his amendment,” Garamendi said in another toe-to-toe with Wittman last week.
Wittman argued that the anchor chain “is not a complex manufacturing item, therefore it doesn’t have national security implications.” He noted that if Lister Chain is the only game in town, requiring Naval ship anchor chains to be made here was akin to an earmark, attempting to raise a point of order, to which Chairman Smith said it was not an earmark after conferring with the Committee’s counsel. Still, Wittman insisted on an open market. “If it is not something unique to the United States as a national security issue, it should be open to allies,” he said.
Rep. Rick Larsen (D-CT-1) thought otherwise. “I don’t think we should make it hard on the last American chain manufacturer who managed to make it this far. An action like Mr. Wittman’s amendment will put them at a supreme disadvantage,” he said, adding that if Congress was going to continue adding more holes to an already fairly Swiss-cheesed Buy American Act for government procurement orders, what is the point of having it?
Wittman emphasized that Buy America restrictions should be for sophisticated pieces of equipment only. “With all due respect to Lister Chain…we should be able to look elsewhere to use our dollars sufficiently.”
Larsen thought it made more sense to keep Lister Chain in business. “This is a small company, U.S. -based, U.S. workers. Voting yes on the Wittman amendment puts them at extreme disadvantage…doing work for the Navy,” said Larsen (time frame: 3:39.28-3:40:58). “Our allies are going to be fine. This company will not be if we pass this.”
Garamendi’s perfecting amendment won that round against Wittman; a small victory for local manufacturing and another example of how hard it is for domestic manufacturers who are pressed on pricing by the big multinationals they manufacture for, and also pressed on pricing and sourcing from their own government. It should be much easier than this to give preference to American businesses building for the U.S. military.
Later this week, we will look at another battle in the NDAA debate: China, the Olympics, and protecting Coca-Cola’s sponsorship of the February 2022 Winter Games.