Trade Compliance

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Trump Signs “Buy American” Executive Order That Could End Waivers

Posted April 19, 2017

Acting on one of his key campaign promises, President Donald Trump yesterday signed an executive order aiming to promote “Buy American, Hire American” policies.

In part, the order directs U.S. Commerce Secretary Wilbur Ross to lead a “systematic review” into government procurement practices at federal agencies, with a focus on re-examining the waivers and exemptions process granted to foreign bidders that “have been abused greatly, resulting in many lost job opportunities for American workers.”

The executive order also calls on the Commerce Department and the Office of the U.S. Trade Representative to “comprehensively assess” the procurement provisions of all free-trade agreements as well as the World Trade Organization’s Government Procurement Agreement. The goal, a senior administration official said in a background briefing on Monday, is to “determine which deals may actually be working for America and which may not.”

“If it turns out America is a net loser because of those free trade agreement waivers,” the official said, “these waivers may be promptly renegotiated or revoked.”  Buy American waivers – and the possibility of revoking or renegotiating them – are likely to be among the most contentious issues addressed in upcoming talks with Canada and Mexico to “modernize” the North American Free Trade Agreement.

“It is simply unfair for government contracts to be awarded to low bidders that use dumped or injuriously subsidized, foreign-source content to push out domestic producers,” the official continued. “This portion of the executive order is an innovative step to stop the foreign cheaters from using taxpayer funds to steal our jobs, to shutter our steel mills and offshore our factories.”

The official faulted U.S. free trade agreements as well as the WTO’s Government Procurement Agreement as avenues through which the United States has “surrendered its Buy American rights,” citing a February Government Accountability Office report that found the U.S. reported a sum “about twice as large” as its next five trading partners combined in the opening of its government procurement market to foreign bidders.

“The executive order ushers in a new, more muscular Buy American policy based on the twin pillars of maximizing Made in America content and minimizing waivers and exceptions to Buy American laws,” the official said. “Every agency will conduct top-to-bottom assessments aimed squarely at cracking down on weak monitoring, enforcement and compliance efforts and at rooting out every single Buy American loophole.”

A final part of the order “strongly reaffirms” the so-called “melted and poured steel standard” of origin determination that according to the administration, “ensures that the benefits of Buy American are felt throughout the supply chain.”

The Alliance for American Manufacturing, a coalition comprised of leading manufacturing groups and the United Steelworkers, praised the move, calling it “a step in the right direction” while also noting that it was “just the first step.”

“The true test will come as agencies review their existing procedures and recommend action to improve and apply Buy American laws,” Scott Paul, AAM’s president, said in a statement. “It should be the policy of our government to maximize the amount of American-made steel, iron, and manufactured goods bought with our hard-earned tax dollars. We’re pleased the president agrees.”

The order was not welcomed by all businesses, however. The Association of General Contractors, a lobbying group with about 26,000 members, said that trade restrictions such as Trump’s “Buy American” policy, “limit the ability of producers – whether it’s contractors or manufacturers – to get the best prices for the things they need, and ultimately the public is either going to pay more or receive less.”

The U.S. Chamber of Commerce was also critical, calling the executive order a “mistake” and claiming that whenever the government has enacted domestic sourcing rules in the past, “the resulting experience has been higher overall construction costs, increased compliance burdens, reduced competition, and disruption of supply chains without significant American job creation.”

Background Documents:

Buy American Presentation
White House Background Briefing
, Press Gaggle and Fact Sheet