The Senate and the House of Representatives passed different versions of the Water Resources Development Act of 2016 (WRDA). The Senate version included a Buy America provision that applied to water infrastructure projects, but the House bill did not. In reconciling the differences between the two bills, Senate and House leaders removed the Buy America provision. This may be the beginning of a broader Buy America debate, if, as expected, the new Administration presses forward with major infrastructure spending. This post considers the Buy America requirement from the perspective of U.S. obligations under international agreements, and the model provided by the 2009 stimulus legislation.
In September, the Senate passed the WRDA (S. 2848) with bipartisan support. The bill’s Buy America provision required the use of American-made steel and iron in infrastructure projects funded by the Drinking Water State Revolving Fund. It also included three exceptions that commonly accompany “buy America” requirements. American-made iron and steel products need not be required when use of such products would be inconsistent with the public interest, such products are not produced in the United States in sufficient and reasonably available quantities or of satisfactory quality, or their use would increase the cost of the overall project by more than 25%.
When the House passed its own version of the WRDA legislation, it did not include the Buy America provision. In reconciling the two versions, the congressional negotiators reached a compromise package that stripped the Buy America provision from the final legislation. On December 2, 25 senators from both sides of the aisle wrote a letter to the congressional leadership expressing their concerns with the omission of the provision from the WRDA conference report and seeking its reinstatement. Despite the protest, according to Senator Sherrod Brown, the Buy America provision was excluded from the final water infrastructure bill that was announced on December 5th.
The United States has long faced criticism from its trading partners for its extensive use of Buy America requirements in government procurement, which range from the Buy American Act of 1933 to federal funding of state and local infrastructure projects, such as highways, mass transit and wastewater treatment. The U.S. has commitments with more than 60 countries under the WTO Government Procurement Agreement (GPA) and free trade agreements (FTAs) to not discriminate against products from its trading partners in procurement covered by the agreements. Buy America requirements run counter to this fundamental requirement.
The trade agreements only apply to the procurement that the U.S. has agreed to open under those agreements. While the U.S. opens considerable federal procurement under these agreements, its coverage of state procurement is not nearly as comprehensive, and it covers little procurement at the local government level. So, many federally financed state and local infrastructure projects are outside the scope of trade agreements.
In 2009, the debate over the stimulus package that President Obama proposed brought the Buy America issue to the fore. The American Recovery and Reinvestment Act of 2009 (ARRA) included a Buy America provision that required the use of U.S.-produced iron, steel and manufactured goods in projects that used ARRA funding. When the House of Representatives initially passed ARRA, its Buy America provision prompted an outcry from U.S. trading partners as violating U.S. trade obligations since it provided no consideration for procurement covered by trade agreements.
That was remedied when the Senate inserted a requirement in ARRA that the Buy America provision be applied consistent with U.S. obligations under trade agreements. As a consequence, the requirement was not applied to products from U.S. trading partners in procurements subject to an international trade agreement. This qualification has become a standard addition to Buy America requirements, and was included in the WRDA bill that passed the Senate.
Politico’s Morning Trade (Dec. 5, 2016) observed that the Speaker of the House, Paul Ryan, and other free trade supporters have long opposed Buy America provisions, but President-elect Trump appears to have embraced such provisions. If the incoming President undertakes major infrastructure investment, as promised, the WRDA Buy America debate may just be the beginning.
In any new infrastructure legislation, it will be important to exclude procurement covered by trade agreements if Buy America requirements are attached to the funding.
Jean Heilman Grier
December 6, 2016