Buy American Executive Order

April 18, 2017

While visiting Snap-On Tools in Kenosha, Wisconsin, President Trump signed an executive order to enforce his Buy American policy. The order will tighten the waivers and exemptions that agencies use to get around procurement laws that favor American-made goods, and require agency heads to sign off on those waivers. It will require agencies to consider whether foreign governments are using unfair trade practices when considering the lowest responsible bidder. 

The White House issued a press statement last night after two unnamed officials conducted a question and answer session with reporters. Here are excerpts from that session:

The executive order the President will sign tomorrow 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.  

Every agency and department of government 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.  The Secretary of Commerce, who will coordinate these agency efforts, will then advise the President on how to properly close these loopholes.

For the first time, the Buy American bidding process will take into account the flagrant use of unfair trade practices like dumping and injurious subsidization now used to steal government contracts from American workers and domestic manufacturers.  

This order also breaks additional new ground by taking a very hard look at how waivers of Buy American and our free trade agreements may be a poster child of unfair and non-reciprocal trade in the $4.4 trillion global government procurement market.

If it turns out America is a net loser because of those free-trade agreement waivers, which apply to almost 60 countries, these waivers may be properly renegotiated or revoked.  

Now, let's walk through the detail of the actual executive order.  

As my colleague noted earlier by way of background, there's a clear distinction between Buy American and Buy America laws and rules.  

Buy American dates back to the passage of the Buy American Act of 1933.  This act, and related laws and rules, govern direct purchases by the federal government.  

In contrast, Buy America dates back to the Surface Transportation Act of 1978. This act requires the use of U.S.-made iron and steel, and the domestic production and assembly of other manufactured goods when federal funds are used to support projects like highways, public transportation, aviation, and intercity passenger rail, including Amtrak.

For the purposes of this briefing, however, and as explained in the executive order, we will refer to both Buy America and Buy American as well as additional legislation, such as the Berry Amendment as Buy American laws.

Let’s turn now to the question of just what the order does.  

The order directs every agency to scrupulously monitor, enforce and comply with Buy American laws.  They will be held strictly accountable for any failure to fulfill the Buy American mission.  As part of this accountability, each agency will conduct a comprehensive top-to-bottom Buy American performance review, including an assessment of the agency’s use of waivers and exceptions, as well as a requirement to provide recommendations to strengthen Buy American. President Trump has tasked the Secretary of Commerce, Wilbur Ross, with reviewing all the agency findings and submitting a report to his desk within 220 days.  

The Trump administration’s new policy is to maximize the use of domestic content and minimize the granting of waivers.  Going forward, public-interest waivers in particular shall be more narrowly construed and the granting of such waivers will be elevated to the heads of agencies to ensure greater accountability.  

In addition, for the first time, each agency may also consider the effect of foreign-sourced dumped or injuriously subsidized content in the determination of the low bid.  

According to the GAO February 2017 Government Procurement Report, the United States reported opening a greater percentage of its government procurement to foreign competition than the next five largest trade agreement partners combined -- the European Union, Japan, South Korea, Norway and Canada.  This executive order takes a measured approach to this problem by not immediately rescinding these agreements or calling for their renegotiation.  We recognize the jury may still be out until we get better data and analysis, and it is important to determine which deals may actually be working for America and which are not.

This executive order directs the Secretary of Commerce and the United States trade representative to comprehensively assess the effects of each of the relevant agreements to determine whether these agreements do indeed meet President Trump’s standard of being both fair and reciprocal. With this measured approach, our trading partners will be put on notice that the U.S. expects fair and reciprocal access to their government procurement markets.  If the analysis mandated by this report indicates any agreement is failing to meet the Trump standard of fairness and reciprocity so that the U.S. is a net loser, these findings will inform the President’s decision to rescind or renegotiate these deals

The final element of this executive order strongly reaffirms the melted and poured standard for U.S. steel production.  Semi-finished steel, such as steel slab, accounts for about 90 percent of the input costs of a finished steel product.  The use of the melted and poured standard ensures that the benefits of Buy American are felt throughout the supply chain, assisting suppliers of raw materials critical to steelmaking, such as iron ore, coal, and limestone miners.

Q&A

Q: So the question was, does this apply to only government agencies, or also to government contractors?

SENIOR ADMINISTRATON OFFICIAL:  It applies to both in the sense that this is a direction that the agencies are the ones who set the contract rules and contractors have to follow that.

Q:  You said that the order directs the Secretary of Commerce and USTR to comprehensively assess the (inaudible) trade agreement and determine whether they meet the President’s standard of being fair and reciprocal.  What is the President’s standard of judging whether something is fair and reciprocal?

SENIOR ADMINISTRATON OFFICIAL:  Well, reciprocity is not what we've been getting across a whole range.  Basically, what the GAO report told us and indicated was that foreign governments, contractors are getting a lot more of our business than we're getting of theirs.  So that dimension would say that we need reciprocity.  In other words, we shouldn’t be a net loser in the government procurement game by entering into these waivers.  And it looks pretty much like that's the case.As I said, we want to take a measured approach to this, look at the data, do a deeper dive on it, but so far it looks like we're losers.

Q:  I just want to understand the process here in both of these -- both Buy American and Hire American.  Once this is signed tomorrow, is there anything specifically that will change about policy tomorrow, or is it all going to follow a review process within departments and agencies?

SENIOR ADMINISTRATION OFFICIAL:  Okay, so the culture immediately changes across the agencies.  We have a lax enforcement, lax monitoring, lax compliance.  In terms of the waiver process itself, from day one, starting tomorrow, we’re going to take a much closer look at all of those waivers.  And I can assure that, from day one, there are going to be fewer waivers that are going to be granted even as we’re evaluating the waiver process.  We are adding, for example, this new standard for looking at the bid by taking into account the role of dumped and injuriously subsidized content that might give a low bidder an unfair advantage relative to domestic-sourced content.

 

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