Agathon Associates Responds to President Biden's Executive Order on Buy America Act

The Order directs the Director of the Office of Management and Budget (OMB) to establish within OMB the Made in America Office. The Made in America Office shall be headed by a Director of the Made in America Office (Made in America Director), who shall be appointed by the Director of OMB. Before an agency grants a waiver from any Buy American rule, and unless the OMB Director provides otherwise, the agency (granting agency) shall provide the Made in America Director with a description of its proposed waiver and a detailed justification for the use of goods, products, or materials that have not been mined, produced, or manufactured in the United States. Read more HERE.

U.S. manufacturers welcome any action on the part of President Biden to promote U.S. manufacturing. Establishing a Made in America Office within the Office of Management and Budget and giving it oversight of waivers from Buy American requirements is a good step. It follows on President Trump’s executive order which strengthened Buy American requirements. The Buy American Act gives a preference to articles made in America of components substantially all produced in the United States.” However, the executive branch long construed “substantially all” to mean at least 50%. President Trump raised that to 55%. The Buy American Act encourages the use of domestic products by imposing a price preference for domestic products. President Trump increases the price preference from 6 percent to 20 percent for large businesses and from 12 percent to 30 percent for small businesses.

However, the Buy American Act, alone, cannot save U.S. manufacturing. The Buy American statute is waived in situations where the United States has reciprocal trade agreements, including the World Trade Organization Government Procurement Agreement. That’s a long list of countries for which it is waived (See https://ustr.gov/issue-areas/government-procurement/wto-government-procurement-agreement). Since the 1990s the U.S. has severely limited our own ability to give a preference to domestic manufacturing in government procurement as we have opened government procurement to foreign competition. In return, those nations have opened their government procurement to us.

Additionally, contracts awarded by State and local authorities under Federal grant programs are not covered by the act unless authorizing statutes explicitly provide for application of the act.

What is needed is government policies, such as tax policies and other incentives to make things in America. So I'll be watching to see what the 117th Congress and the Biden Administration do in the areas of taxation and manufacturing incentives. One thing that causes concern is President Biden's energy policy. The resurgence in U.S. manufacturing over the past decade was driven, in part, by relatively low energy costs and reliable energy.

President Trump's imposition of tariffs on China was long-overdue, and I am pleased to hear that President Biden does not plan to remove them soon. Certainly President Biden's position on how to respond to China will be different -- more likely to work with Congress, with our trading partners, and with the World Trade Organization -- but I do not see him allowing America to return to a pattern of letting China get away with not fulfilling its WTO commitments. It also will be interesting to see how President Biden handles Vietnam, now that the U.S. government has found that nation to be manipulating its currency to the economic harm of America.