WTO Members Criticize Buy American Measures

In the WTO Trade Policy Review, U.S. procurement policies that favor domestic products were under broad attack.

In a recent review of U.S. trade policies, WTO Members raised concerns with both existing and proposed Buy American measures that favor U.S.-made products over foreign products in government procurement. They argued that such local content measures create unnecessary barriers to trade and are a type of localization barrier that the United States is attempting to combat in other countries.

The criticism was expressed during the WTO’s biannual Trade Policy Review (TPR) of the United States in December 2014. The trade policies of all WTO Members are subject to regular review under the Trade Policy Review Mechanism, which seeks to facilitate the functioning of the multilateral trading system by enhancing the transparency of such policies. During these reviews, WTO Members comment and ask questions relating to the Member’s trade policies.

In the U.S. TPR, WTO Members expressed concerns with the effect of U.S. procurement measures on trade even though government procurement is subject to WTO disciplines only through a plurilateral agreement, the WTO Government Procurement Agreement (GPA). The GPA currently applies to 43 WTO Members. Under that Agreement, no Party opens all of its procurement. Rather, each Party specifies the procurement that it will open to the other Parties. It has no obligation to provide access to its procurement to WTO Members that have not joined the GPA.

According to the minutes of the December 2014 TPR meetings, the WTO Members that raised concerns with the adoption of protectionist measures affecting U.S. federal and sub-central procurement included Canada, China, the European Union, India, Japan, Norway and Singapore.

Members’ concerns fell generally into three areas. First, several Members singled out the Buy American Act of 1933 (BAA), which applies to the procurement of goods by the federal government. It requires federal agencies to purchase only products and construction material that have been mined, produced or manufactured in the United States unless an exception applies. Even though the BAA requirement is waived for the procurement of goods covered by the GPA, Singapore noted that the Act’s implementation “can have a significant protectionist effectby distorting the playing field for imported products.

A second set of concerns related to domestic content restrictions in federal funding of state and local projects. Canada reiterated its concerns with the longstanding Buy American restrictions on transportation infrastructure and the expansion of such restrictions to the water sector. It emphasized its deep concern with numerous attempts to expand such “trade restrictive policies” at the federal and state levels.

Concerns in a third area related to the expansion of state Buy American policies. According to Norway, at least 64 Buy American bills were introduced in 24 state legislatures over the prior two years. It also questioned how the U.S. federal government ensures state compliance with their obligations under trade agreements.

In responding to the criticism, the United States pointed out that it opens “hundreds of billions of dollars of U.S. government procurement to its trading partners under the GPA and its free trade agreements (FTAs) and that it is no different from other GPA Parties in excluding certain procurement from its commitments. The U.S. also reaffirmed its commitment to ensuring that the procurement it covers under the GPA and FTAs is conducted consistent with those agreements.

The U.S. can expect its trading partners to continue to raise concerns with the expansion of Buy American measures at both the federal and state level in various fora. GPA Parties, in particular Canada, have repeatedly criticized Buy American legislation in the WTO Committee on Government Procurement, including at the Committee’s June 2014 meeting and its February 2015 meeting. Also, U.S. partners in the negotiations of the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) are also seeking commitments to curtail Buy American requirements.

Jean Heilman Grier

February 17, 2015

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