A TTIP commitment to curb future Buy American requirements would set a new standard for procurement agreements.
As noted in a recent post, the Transatlantic Trade and Investment Partnership (TTIP) will need to raise the bar on procurement commitments in order to achieve real success. That post presented the idea that the United States and the European Union could expand their current commitments by exchanging comprehensive coverage of federal/central government entities, using a positive list to define their coverage of services, adding build-operate-transfer projects and public works concessions, and possibly extending their sub-central coverage. That would be a respectable result, but it may not be sufficient to make the TTIP a new model for procurement agreements.
The U.S. could contribute to a new model with a TTIP commitment to curtail the scope and application of future Buy American requirements. The area that is particularly ripe for such action is federal funding of state and local government projects. Increasingly, federal funding of sub-federal projects requires the use of U.S.-made iron, steel and manufactured goods. These requirements had been primarily applied to highway, railway, transit and airport projects until Congress enacted the stimulus package at the beginning of the Obama administration. The American Recovery and Reinvestment Act of 2009 (ARRA) imposed, for the first time, a Buy American requirement on a wide array of public projects.
The EU, which was a harsh critic of the ARRA requirement, has cited removal of domestic preferences as one of its primary goals in the TTIP procurement negotiations. To respond to the EU request, the U.S. could agree to not apply any new Buy American requirements attached to federal funding for state and local governments to EU goods or suppliers. This would represent a major concession by the U.S. Not only has it never agreed to any restrictions on future funding, it has seldom even excluded trading partners from existing requirements, as described in an earlier post.
While an agreement to exclude EU suppliers from any new Buy American requirements may be difficult to obtain, it would be more likely than a roll-back of the domestic content requirements that apply to railway and transit projects. Those measures are strongly supported by the iron and steel industry and have had broad Congressional support.
To gain the necessary support from both the Administration and the Congress to curb the application of new Buy American requirements, the EU would have to make a significant offer in procurement, or perhaps some other element of the TTIP negotiations. It is questionable whether a EU commitment to give the U.S. rights to the procurement of services by its sub-central entities, which the EU withholds under the WTO Government Procurement Agreement, would be considered a sufficient exchange since U.S. firms already have de facto access to such procurement.
Seeking a significant concession from the EU in exchange for a bar against future Buy American requirements would set an important precedent for other negotiations. One trading partner that would have a strong interest in such a TTIP outcome is Canada, which is seeking a similar commitment in the Trans-Pacific Partnership (TPP) negotiations. But, given the overall objective of the TPP negotiations — of bringing the procurement of all 12 parties to a comparable level of openness, it would not likely be a forum for a major new US commitment. Canada, however, might be able to seek a similar commitment under its 2010 bilateral agreement with the U.S.
To develop a new standard for procurement agreements, the U.S. should consider curtailing Buy American requirements in TTIP.
Jean Heilman Grier
September 29, 2014