On April 18, 2017, President Trump issued an Executive Order (EO) that elaborates on his directive to the Executive Branch to “Buy American and Hire American”. The Buy American portion of the Order seeks to maximize the use of U.S.-made products and minimize the waivers of those requirements in federal procurement and federal financial assistance awards. This post examines the implications of the Order for U.S. obligations under the WTO Government Procurement Agreement (GPA) and free trade agreements (FTAs), under which the U.S. has agreed to open U.S. procurement in exchange for access to more than 60 foreign procurement markets. These agreements have not affected most Buy American requirements because the United States has either excluded procurement subject to such requirements from its commitments or it has taken an exception for the requirements in the trade agreements.
Buy American: The Buy American portion of the Executive Order requires assessments of both agencies’ compliance with Buy American laws and the impact of U.S. international procurement obligations on those laws. It defines “Buy American laws” broadly to include all statutes, regulations, rules and executive orders relating to federal procurement or federal grants, including those that refer to “Buy America” or “Buy American”, that require, or provide a preference for, goods, products or materials produced in the United States. Based on the assessments, the Secretary of Commerce, in consultation with the U.S. Trade Representative (USTR), inter alia, must provide the President with “recommendations to strengthen implementation of Buy American laws, including domestic procurement preference policies and programs. The report is due within 220 days of the issuance of the EO.
All federal agencies must examine their compliance with Buy American laws and their grants of waivers and develop policies to ensure that they are maximizing the use of U.S.-produced materials in federal procurement and financial assistance awards. The Order particularly singles out steel, iron, aluminum and cement. The agencies are to submit their findings to the Secretary of Commerce and the Director of the Office of Management and Budget within 150 days of the Order.
The Order directs the Secretary of Commerce and the USTR, within 150 days, to assess the impacts of all U.S. FTAs and the GPA on the operation of Buy American laws and on the implementation of domestic procurement preferences. According to the Washington Trade Daily, (April 18), the White House wants to determine whether the U.S. is receiving reciprocal treatment from its trading partners with regard to procurement. If those countries are not providing U.S. companies with “the same access to their procurement markets that the United States is providing, the President will either revoke the Buy American waiver or call for a renegotiation”.
In 1981, when the U.S. entered its first international agreement that covered government procurement, the predecessor to the GPA, Congress enacted the Trade Agreements Act of 1979 (TAA) to authorize the President to waive discriminatory purchasing requirements for federal procurement that the U.S. covers under international agreements. Despite the broad scope of that authority, the U.S. has used it very sparingly. In a 2005 report, the U.S. Government Accountability Office found that the TAA waiver authority is used for only two Buy American requirements: the Buy American Act of 1933 and the U.S. Department of Defense’s Balance of Payments program.
In addition, the Uruguay Round Agreements Act authorized the USTR to waive a buy national requirement that applies to financing of power generation and telecommunications projects by the U.S. Department of Agriculture’s Rural Utilities Service (RUS). The waiver may only be given to trading partners that provide reciprocal access.
With respect to the numerous other Buy American laws that mandate preferences for U.S. goods, services or suppliers, the U.S. either excludes the procurement subject to such preferences from its obligations under the GPA and FTAs or it takes an exception for the domestic preference in its procurement commitments. For example, the U.S. excludes the procurement of textiles, clothing, food and specialty metals by the Defense Department from trade agreements because the Berry Amendment mandates the purchase of U.S.-made products. The U.S. also states in its procurement commitments that it is not waiving the Buy American requirements that attach to federal funds for airports, highways, railways and other mass transit projects undertaken by states and other non-federal entities.
Public Interest Waivers: With the EO, the President also aims to reduce the use of the public interest waiver, one of the exceptions typically provided for Buy American requirements. (Others are the non-availability of domestic products or the unreasonableness of the cost of domestic products.) The Order specifically requires agencies to take into account “whether a significant portion of the cost advantage of a foreign-sourced product” results from the use of dumped or injuriously subsidized steel, iron or manufactured goods, before they issue a public interest waiver.
Hire American: With respect to Hire American, the Order calls for the rigorous enforcement and administration of the laws governing entry of foreign workers into the United States. It directly addresses the H-1B visa program, which allows U.S. firms to employ foreign workers temporarily in specialty occupations. With the Order, the President directs the Secretaries of State, Labor and Homeland Security, along with the Attorney General, to propose reforms aimed at ensuring that such visas are awarded to the most-skilled or highest-paid foreign workers.
The EO includes a provision that it is not to be construed to impair or otherwise affect existing rights or obligations under international agreements.
Jean Heilman Grier
April 26, 2017
Buy American Requirements: A Djaghe White Paper
Trade Agreements Act of 1979: Broad Authority, Narrow Application
U.S. Procurement Obligations under Trade Agreements: A Djaghe White Paper