Tag: Buy America

On February 12, President Trump unveiled an infrastructure plan that calls for $1.5 trillion in infrastructure investments. Surprisingly, it does not incorporate the President's strong Buy America rhetoric of  the past year. That absence has drawn criticism and can be expected to lead to efforts to incorporate local content requirements in any infrastructure bill drafted by the Congress. This post reviews the President’s proposal and recommends that any Buy America requirement inserted into infrastructure legislation follow the approach of the 2009 stimulus package and ensure compliance with U.S. trade obligations. In presenting his infrastructure framework, the President called on Congress “to draft and pass the most comprehensive infrastructure bill in our Nation’s history”. It addresses traditional infrastructure, such as roads, bridges and airports, as well as drinking and wastewater systems, waterways, water resources, energy, rural infrastructure, public lands, veterans’ hospitals, and Brownfield and Superfund sites. Under the Administration’s plan, the federal government would contribute $200 billion, with the remainder of the $1.5 trillion picked up by state and local governments and the private sector, including through broader use of public-private partnerships (PPPs). The White House breaks down the $200 billion federal contribution as follows:

• $100 billion to create an Incentives Program to spur additional dedicated funds from states, localities and the private sector;
• $20 billion for a Transformative Projects Program, focused on state and local projects that may not attract private sector investment;
• $20 billion for expansion of infrastructure financing programs;
• $10 billion for a new Federal Capital Revolving Fund, aimed at reducing leasing of federal real property in favor of purchases; and
• $50 billion for a new Rural Infrastructure Program.

Despite making Buy America a centerpiece of his trade policy, including in executive order that called for strengthening domestic preference laws, the President’s infrastructure initiative does not propose imposing Buy America requirements on the projects funded under the plan. This omission has not gone unnoticed. The American Alliance for Manufacturing criticized it for failing to include a Buy America requirement; and Politico’s Morning Trade reported that Senator Chuck Schumer “blasted” the proposal for leaving out any such requirements. Several of Schumer’s Senate colleagues, in a January 26th letter, urged the President to protect existing Buy America laws and to “work with Congress to expand these protections and address coverage gaps” in developing his infrastructure proposal. They even sought the incorporation of Buy America requirements in any alternative infrastructure financing such as PPPs. As Congress develops infrastructure legislation, the controversy that enveloped the Buy America provision in the 2009 stimulus legislation - the American Recovery and Reinvestment Act of 2009 (ARRA) - should serve as a cautionary tale. In 2009, the House of Representatives passed a stimulus package with a Buy America provision that required the use of U.S.-made iron, steel and manufactured goods in all projects funded by the legislation, without regard to whether a project was covered by an international trade agreement. That provision prompted an outcry from U.S. trading partners, who argued that it would violate U.S. commitments under the WTO Government Procurement Agreement (GPA) and free trade agreements (FTA). The Senate responded by adding a requirement that the Buy America provision be applied consistent with U.S. international obligations. That amendment was adopted as part of the final legislation. As a consequence, when ARRA funds were used in a project subject to a trade agreement, goods from parties to those agreements did not have to meet the local content requirement. Any Buy America requirement incorporated in infrastructure legislation should, at a minimum, include a similar provision to ensure that the U.S. complies with its international obligations. In addition, to impose local content requirements on infrastructure projects undertaken by PPPs could well undermine the initiative’s aim of expanding PPP use. Jean Heilman Grier February 13, 2018 Related Posts Trump’s Buy American & Hire American Order PPPs #4: TPP Parties PPPs #5: Treasury Papers on TPP Use in U.S.

  On January 24, President Donald Trump directed the Secretary of Commerce to develop a plan for the construction of American-made pipelines. This directive is an initial step in implementing the President's promise that his trade policy would be based on two main principles: Buy America and Hire America. Those are the two arms of his newly created National Trade Council. The Buy America directive raises questions regarding the potential expansion of domestic content requirements. Trump’s Presidential Memorandum gives the Commerce Secretary six months to develop a plan “under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the United States, including portions of pipelines, use materials and equipment produced in the United States”. In addition to adding the conditions that the Buy America requirement be applied “to the maximum extent possible and to the extent permitted by law”, the directive elaborates on what is meant by “produced in the United States”. The President specifies that all manufacturing processes for iron and steel products, from the initial melting stage through the application of coatings, must occur in the U.S. The made-in-America requirement will not be satisfied where steel or iron material or products are manufactured abroad from U.S. semi-finished steel or iron or manufactured in the U.S. from foreign semi-finished steel or iron. The U.S. already mandates the use of U.S.-made iron and steel and manufactured products in a variety of infrastructure projects. Existing Buy America requirements apply to public projects undertaken by governmental entities with federal funds. In particular, such requirements apply to transportation projects. In accordance with legislative requirements, the Department of Transportation imposes domestic content requirements on highway, railway and transit projects and airport expansions. Because Buy America requirements in public projects discriminate against foreign products, they are inconsistent with U.S. obligations under agreements that apply to government procurement. As a consequence, the U.S. excludes those requirements from its procurement commitments under the WTO Government Procurement Agreement and free trade agreements (FTAs). The President’s call for a plan for American-made pipelines does not appear to be limited to public projects funded by the federal government. Rather, it would appear to apply to private pipeline projects since most, if not all, pipelines are constructed by private entities. Is the President seeking a means of extending Buy America requirements to the private sector? If so, how would they be enforced? Will Congress be asked to enact legislation to mandate them? Will the Commerce plan provide for compliance with U.S. trade obligations under the WTO and FTAs in carrying out Buy America requirements for pipelines? On the same day that he issued his pipeline directive, the President issued memoranda that are aimed at advancing two private pipelines that had been stymied by the Obama Administration. The Keystone XL Pipeline memorandum to the Secretaries of State, Army and Interior invites TransCanada, the pipeline developer, to promptly re-submit its application to the Department of State for a Presidential permit for the construction and operation of the pipeline. It also directs the Department of State and other agencies to review such application expeditiously. The second Presidential memorandum to the Secretary of the Army aims to clear the way for the construction of the Dakota Access Pipeline. On December 4, 2016, the U.S. Army Corps of Engineers announced that it would not grant an easement for the pipeline under Lake Oahe and was undertaking an environmental impact statement to look at possible alternative routes. The Trump memorandum calls for expedited review and approval of federal permits and approvals relating to that pipeline. Are these pipeline projects the type of pipelines that would be required by the Trump Administration to use only American-made steel and iron products? The pipeline plan that the Commerce Department develops may provide an indication of how far the new Administration intends to extend Buy America requirements. Jean Heilman Grier January 31, 2017 Related Posts Buy American Requirements: A Djaghe White Paper Trade under Trump: Emerging Plans