Senate Infrastructure: The ‘Build America, Buy America Act’ Stresses “Commonsense” Preference for US Products, Companies and Workers

The Senate’s recently passed $550 billion bipartisan infrastructure bill was chock full of how to fund routine infrastructure projects like water treatment facilities, railroads, and preparing for building up a domestic electric vehicle supply chain. But the Build America, Buy America Act incorporated in that bill is a standout.

That section alone shows the Senate, and White House, remain heading in the same direction in terms of their thinking on local manufacturing and supply chain resilience. It’s been unmoved since Trump put tariffs on numerous China goods, and the International Trade Commission placed anti-dumping duties on China solar panel imports in 2018 and kitchen cabinets in 2020. In the wake of the global trade war, the U.S. Senate is becoming a little less globalist. Build America, Buy America, a bipartisan Act, is a plus for President Joe Biden who has been talking this up since January.

For decades, small to midsized manufacturers in the U.S. have been forced by the major global corporations – whether Walmart or GE – to compete against cheap labor and near-zero environmental rules in Mexico and China. It was a daunting task. Thousands folded. More firms laid off and automated, buying robotic equipment increasingly imported from Asia.

Build America, Buy America is a recognition that this is not sustainable on all counts: economically, socially, and politically.

What does the language in that Act tell us?

Keeping in mind that this is an infrastructure bill, the Build America, Buy America provision says that:

“United States must make significant investments to install, upgrade, or replace public works infrastructure…(and) with respect to investments in the infrastructure of the United  States, taxpayers expect that their public works infrastructure will be produced by American workers. Taxpayer dollars invested in public infrastructure should not be used to  reward companies that have moved their operations, investment dollars, and jobs to foreign countries or foreign factories, particularly those that do not share or openly flout the  commitments of the United States to environmental, worker, and  workplace safety  protections.”

This pretty much singles out China without mentioning it by name.

The Act also requires that any taxpayer-funded Federal program should give “commonsense procurement preference for the materials and products to be produced by companies and workers in the U.S.”

It is clear in the infrastructure bill that the Senate recognizes the important role that government contracts, albeit a small part of most manufacturers’ bottom line, can play in reshoring supply chains. They also highlighted the fact that in contracting domestic manufacturers, government agencies are assured to be getting the “highest labor and environmental labor standards in the world,” the bill stated.

More importantly, there is a recognition here that, “strong domestic content procurement preference policies act to prevent shifts in production to countries that rely on production practices that are significantly less energy-efficient and far more polluting than those in the United States.”

This almost certainly excludes China and – to some extent – Mexico. But it allows for working with the usual G-7 trading partners in Europe and Japan, of course.

The World Trade Organization’s Government Procurement Agreement (GPA) members, all 46 of them, and most of them in Europe (but including Hong Kong) was thrown a bone in the bill. (Section 70925.)

“Domestic  content  procurement  preference laws are fully consistent with the international obligations of the United States; and together with the government  procurements to which the laws apply, are important levers for ensuring that United States  manufacturers can access the government procurement markets of the trading partners of the  United States.”

CPA advocates for stronger Buy American Act rules; rules that can be weakened thanks in large part to the GPA agreement. However, we recognize that that agreement also allows U.S. companies of all sizes to compete for government contracts in those other countries as well. We do not know if the U.S. is an oversized winner or loser in those contracts abroad, or if foreign firms are taking up increasingly large chunks of our domestic procurement contracts. There is almost no data on this.

However, it does seem from this bill that asking for waivers to Buy American procurement contracts will be harder.

For instance, under Title IX Build America, Buy America, Part 1, domestic content procurement preference means that “no amounts made available through a program for Federal financial  assistance may be obligated for a project unless all iron and steel used in the project are produced in the United States; the manufactured products used in the project are produced in the United States; or the construction materials used in the project are produced in the United States.”

The content requirement for this remains at around 55% of the total cost of components of the final good.

This brings us to Section 70936, the establishment of the BuyAmerican.Gov website. This is more transparency. It makes it harder for companies to just get waivers because they couldn’t find the product in the U.S., especially in instances where the product does indeed exist.

Within the next 12 months, the Administrator of General Services will have BuyAmerican.gov up and running. It will include information on all waivers and exceptions to Buy American laws and will be designed to “enable manufacturers and other interested parties to easily identify waivers.”

The website will also include results of routine audits to determine Buy American law violations after winning a contract.

For companies that want to bid, and get a waiver, the requesting party would now have to jump through many more hoops and the Administrator of General Services will make the waiver request public, for public comment, over a 15-day period. In theory, this would give U.S. companies that manufacture, or can manufacture a particular item, a chance to contact the bidder and say they can make the product at home at a reasonable cost.

Under the Senate’s Build America, Buy America Act:

“No Buy American waiver for purposes of awarding a contract may be granted if…information about the waiver was not made available on the website and no opportunity for public comment concerning the request was granted.”

Then there is this:

Under Section 70934, still part of the Build America, Buy America Act in the infrastructure bill, the Senate is calling for the Secretary of Commerce, USTR, and the Director of the Office of Management and Budget to “assess the  impacts in a publicly available report of all United States free trade agreements, WTO GPA, and the Federal permitting processes on the operation of Buy American laws, including their impacts on the implementation of domestic procurement preferences.”

All of this is moving the ball in the right direction.

Buy America laws are the new gold standard in economic and national security. It started with the previous government. The Biden administration is not dialing it back. Neither is the Senate. This is a bipartisan issue.

The government signal on local supply chains makes it more interesting for private businesses to invest for the longer term. It also can lead to more demand for domestically sourced goods, especially for buyers concerned about delivery times, pollution levels, labor standards, and the general commonwealth of their home nation.

But Washington can only do so much. CPA recognizes the complexity of global supply chains, business needs, and motives. Large multinationals will play a vital role in where a lot of this goes.

For the Senate, they now have in writing, yet again, that Buy American provisions – in their own words, “help to sustain and grow domestic manufacturing and the millions of jobs domestic manufacturing supports throughout product supply chains.” Beyond just simple government procurement, it also makes domestic sourcing a part of government grants for the first time.

The Senate also recognizes what happens if they were to stand down on this issue and let Walmart and GE decide the country’s fate.

“As more manufacturing operations have moved offshore” – the Senate bill attests – “the  strength and readiness of the defense industrial base of the United States have been diminished.”