Georgetown Public Policy Review / “Buying America”: Protectionist or Politically Practical Peril?


Buy America ‘: protectionist or politically practical peril?

The issue of public procurement:

In January 2021, President Biden signed Executive Order 14005, “Ensuring the Future is Made in All of America by All of America’s Workers. Commonly referred to as “Buy America,” EO 14005 is a prime example of the Biden administration’s commitment to reducing reliance on critical foreign supply chains. This initiative aims to redirect government procurement spending, which represents nearly $ 600 billion annually, from foreign manufacturers to domestic manufacturers. Through waivers and lenient concessions in previous “Buy in America” initiatives, government procurement in the United States has the potential to become an international business. Foreign countries often reap the benefits of these allowances, as it was estimated in 2017 that nearly 80% of US government procurement were open to foreign suppliers. Although government procurement flows are standard, especially among the WTO GPA (World Trade Organization Agreement on Government Procurement), some countries, such as China, currently operate outside this framework. This makes government procurement in China, a nation that has ignored international human rights standards and adopted a recalcitrant attitude towards international regulation, more difficult to justify.

President Biden’s plan has the ambitious goal of alleviating some of the political and moral ambiguity associated with current procurement practices. While similar ‘Buy America’ initiatives have been championed by nearly every US president in recent times, President Biden’s plan stands out with unprecedented investments in domestic manufacturing and high thresholds for what may warrant a label. Made in America ”. Although currently “Made in America” can apply to any product where 55% of its components or value comes from national sources, the plan renewed “Proposes an immediate increase of the threshold to 60% and a gradual increase to 75%”. Although the protectionist initiatives described in “Buy America” ​​are not typical pillars of Democratic Party ideology, the Biden administration, given the effects of the pandemic and its support from Central America, have chosen to think differently.

A case for protectionism:

This shift to an “America First” mentality is not without reason, nor is it a true continuation of President Trump’s domestic or foreign policy agendas. During the COVID-19 pandemic, the United States dependence on foreign supply the chains and the workmanship became very clear. As a result, the Biden administration adopted the position that some goods “are simply too important to our national and economic security to depend on foreign sources.” Use of foreign supply chains to Personal protective equipment (PPE) provided a glaring example of the vulnerabilities that exist in the highly globalized consumer economy of the United States. In addition to infrastructure related to the pandemic, “Buy America” seeks to strengthen supply chains associated with the US semiconductor and clean energy industries. Like PPE production, semiconductor and solar infrastructure production is dominated by countries like China and Taiwan; both have made significant and ongoing government investments in these critical areas. While there is nothing inherently problematic about relying on the benefits of foreign production, the heightened tension between the United States and China has complicated trading partnerships. Some tension between the United States and China exists following the BRI (Belt and Road Initiative), which serves as a foil to President Biden’s “Build Back Better” plan. The Belt and Road Initiative has “Financed and built everything from power plants, railways, highways and ports to telecommunications infrastructure, fiber optic cables and smart cities around the world.” By engaging with foreign nations in this capacity, the PRC (People’s Republic of China) hopes to position itself as an alternative, if not a preferred option for the United States in the international development space.

A globalized reality:

While a strengthened Buy America plan would theoretically reduce dependence on countries like the PRC, it is by no means foolproof. Some experts believe that the current efforts of the Biden administration to restore domestic manufacturing will be detrimental to the average taxpayer. The Peterson Institute of Economics felt that “The annual cost to taxpayers of each American job ‘saved’ by Made in America is probably over $ 250,000.” This assumption is rooted in the historical precedent that ‘Buy America’ and related initiatives does not promote job creation, but rather “reject jobs from other sectors of the economy towards the purchasing sector”. This reallocation works like a “leaky bucket,” decreasing efficiency and raising prices through its efforts to cultivate domestic manufacturing. In addition, the success of this initiative will depend on the participation of key players in the private sector. The prospect of rising costs and inefficiencies may already raise some red flags, but some private sector leaders Remarkthat federal government purchases by themselves are not large enough to persuade manufacturers to relocate supply chains ”. These large companies may need more lucrative incentives before reorienting their business strategies, thus dampening the effectiveness of President Biden’s plan.

Although the Biden administration has had a tendency towards protectionism when confronted with shortcomings in the supply chain, the need for collaboration when faced with an ambitious PRC remains. Questions whether a “coalition of Western democracies could hold the clout to confront a rising China over its authoritarian and state-capitalist ways” continues to cast doubts on an inward-looking, positive-messaging economic policy . Thanks to organizations such as the Quad (United States, India, Australia and Japan) and its renewal strategic interest in the Indo-Pacific region, the United States seems ready to face China with the support of its regional neighbors. However, it is likely that if the United States is to guide China to global standards, the support of the European Union will be a prerequisite for success. President Biden’s commitment to “Buy America”, although expressed differently from that of his predecessor, is seen by some EU countries as a continuation of President Trump’s hard-line America’s platform. ‘on board. For this reason, European policy makers have developed a “Buy European” procurement plan in parallel. The publicity of these deliberations serves like “A clear wake-up call for the United States”, leveraging new standards of reciprocity in international public procurement compared to the President’s current agenda.

Looking forward:

The effectiveness of President Biden’s “Buy America” ​​initiative remains to be seen as he faces immense pressure to revive the US economy, ease its reliance on competing economies, and maintain strong relationships. with its historic allies. Throughout the Covid-19 pandemic, the inherent global connectivity has been exemplified time and again by the spread of the virus itself, but also by collaborative actions such as vaccine diplomacy. While as a developed and globalized nation it can be tempting to look inward in times of crisis, looking at “Buy America” ​​will not alleviate our international competition problem, but will rather exacerbate it. .

Leave A Reply

Your email address will not be published.