TTIP: Expansion of Buy America Requirements

Last week, the European Union released a 17-page report on the 12th round of negotiations of the Transatlantic Trade and Investment Partnership (TTIP), in which it reviewed the status of the various elements of the negotiations. The EU also reiterated that public procurement is a priority and one of its main “offensive interests”. The procurement talks focused on the initial market access offers, which the EU and the United States had just exchanged. The EU also questioned new restrictions on U.S. procurement, as well as the expansion of federal and state commitments and the legal framework for federal funding of U.S. infrastructure procurement, which is subject to domestic preferences – topics the EU has raised throughout the TTIP negotiations.

One of the EU targets in the TTIP is the extensive Buy America requirements that several agencies of the U.S. Department of Transportation (DOT) impose on federally funded highway, transit and railway projects undertaken by state and local entities. Domestically produced steel, iron, and manufactured goods must be used in these projects. The U.S. takes an exception for these restrictions under the WTO Government Procurement Agreement (GPA). That means that EU suppliers may participate in such projects when they are covered under the GPA, provided the supplier is able to meet the domestic content requirements. According to Politico (Mar. 11, 2016), the EU acknowledges that removal of these requirements is not likely in the TTIP negotiations; instead, it is seeking exceptions and waivers.

In the recent procurement talks, the EU contended that new Buy America restrictions included in the “Fixing America’s Surface Transportation Act” (FAST Act) affect access by its suppliers. The FAST Act, which President Obama signed on December 4, 2015, reauthorizes surface transportation programs through fiscal year 2020. In doing so, it increases the domestic content requirements for rolling stock (such as buses) from the current 60% of the cost of all components to 65% for fiscal years 2018-19 and to 70%, beginning in FY 2020. The DOT’s Federal Transit Administration, which provides financial and technical assistance to local public transit systems, including buses, subways, light rail, commuter rail, trolleys and ferries, will implement the new requirements. This strengthening of the domestic content requirements works against the EU interest in seeking a relaxation of these requirements for its suppliers.

The FAST Act also tightens the FTA’s waiver process to ensure that U.S. products are available to meet the project requirements when a waiver is denied. The FTA may waive the domestic content requirements where the materials are not produced in the U.S. in sufficient and reasonably available quantities and of a satisfactory quality. The new legislation adds the requirement that in denying an application for such a waiver, the FTA must certify that the steel, iron or manufactured good is produced in the U.S. in a sufficient and reasonably available amount, and of a satisfactory quality. It must also include a list of known U.S. manufacturers from which the item can be obtained and disclose the waiver denial and accompanying rationales on the DOT website.

The EU and U.S. plan two more rounds of negotiations, as well as intercessional work, before the summer break, in an effort to complete the negotiations by the end of the year.

Jean Heilman Grier

March 29, 2016

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