At best, President Biden’s new commitment to “Buy American” is largely symbolic and won’t change much in practice. At worst, it marks a real intention to raise new import barriers, and poses a threat to international cooperation on trade. In either case, it represents a failure to explain to the country where its interests really lie.
President Biden’s order for the U.S. government to buy more U.S. goods won’t encourage other countries to lower their barriers. If other governments decide to follow America’s lead and tighten their own procurement rules, U.S. jobs will be lost. Evan Vucci/Associated Press
On the face of it, Biden is saying that President Donald Trump was right about trade, but should have gone further. Alongside other policies to restrict imports, Trump beefed up the existing protectionist rules on government procurement; now Biden is tightening them further. His new plan calls for goods bought by the federal government to have more U.S.-made content. In addition, the rules will be more stringently applied. As things stand, suppliers can be granted waivers based on a lack of reasonably priced domestic alternatives and other factors. Biden’s order says these exemptions should be harder to obtain.
A lot will depend on how vigorously this system is enforced – but, taken together, the new rules could force the government to buy more expensive and/or lower quality goods. If that happens, it’s taxpayers and users of U.S. public services who’ll suffer the consequences.
Failing to promote cost-effective government is only the beginning of what’s wrong with this approach. Federal procurement has knock-on effects across the economy, because the firms that supply the government have their own supply chains to manage. When the government imposes itself on these systems – especially when it allows itself wide discretion in choosing how and when to act – it causes disruption and uncertainty across a wide front. The damage won’t be confined to the suppliers, domestic and foreign, directly contending for government business.
Worst of all, the U.S. wants, or ought to want, other countries to open their own procurement to American suppliers. It played a key role in developing the World Trade Organization’s Agreement on Government Procurement, which aims to do the opposite of what Biden has chosen to advocate. The Government Procurement Agreement promotes competition in a global procurement market worth some $1.7 trillion – and U.S. firms and their workers have a big stake in that business. Biden’s announcement won’t encourage other countries to lower their barriers. If other governments decide to follow America’s lead and tighten their own procurement rules, U.S. jobs will be lost.
Trump considered formally withdrawing from the Government Procurement Agreement but was apparently talked out of the idea. What Biden intends is unclear. The WTO’s purchasing pact sets limits on the administration’s ability to put protectionist restrictions on big federal contracts. If he honors the spirit of the agreement, the changes he’s announced will be somewhat muted; if he intends his policy to make a mark, he’ll be led to question not just the Government Procurement Agreement but also the country’s wider commitment to the WTO and global commerce. That path would compound Trump’s mistakes – and could be disastrous for the U.S. and its partners.
This is the bind you get into when you fail to make the case for competition. Protectionist barriers are a proven failure when it comes to promoting good jobs and raising living standards. Other policies – especially investing in skills, mobility, innovation and infrastructure – would be vastly more effective. Biden needs to set his face against trade barriers, concentrate on what can work, and tell the country why.
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