Maximizing Use of American-Made Goods, Products, and Materials

Overview

Intent and Context

Executive Order 13881, issued by President Donald Trump on July 15, 2019, aims to fortify the use of American-made goods, products, and materials in federal procurement. This order seeks to amend and strengthen the criteria under the Buy American Act, with the goal of enhancing the domestic manufacturing sector and reducing reliance on foreign imports. By doing so, it is part of a broader effort by the administration to boost economic growth and advance national security through strategic utilization of U.S.-made products.

Amendments to Procurement Processes

One of the key provisions in this executive order mandates federal agencies to amend their procurement processes, effectively raising the threshold for classifying a product as foreign-made. Specifically, iron and steel products now fall under this category if they contain more than 5% foreign materials, while the threshold for other products is set at 45%. This modification requires significant changes to the Federal Acquisition Regulation (FAR) to ensure that federal procurement aligns with the Buy American Act's goals and objectives.

Focus on Economic and Security Interests

At the core of EO 13881 is an emphasis on economic benefits paired with national security interests. By prioritizing American production, the order is aimed at fostering economic self-reliance and curbing the vulnerabilities associated with global supply chains. It complements the administration's 'America First' policies that emphasize self-sufficiency and support domestic industries deemed critical to national security.

Coordination and Review

The order calls for collaborative efforts across federal agencies, guiding the FAR Council to review and modify existing regulations. Executive agency leaders are tasked with ensuring their procurement practices align with any new rules, thus showcasing the government's commitment to enforcing the Buy American Act to the utmost extent allowed by law. Moreover, the directive foresees periodic reviews to further reduce the foreign product content threshold, indicating potential tightening of regulations in the future.

Strategic Economic Policy

Ultimately, Executive Order 13881 serves as a strategic policy tool aimed at reviving American manufacturing and safeguarding economic autonomy. It forms part of a larger agenda to mitigate the negative effects of globalization on U.S. industries, elevate domestic economic participants, and protect crucial supply chains from international disruptions.

Legal and Policy Implications

Revocation of Prior Orders

This executive order partially revokes and supersedes previous directives, notably Executive Order 10582 from the Eisenhower era. The updated procurement standards were initially established to support a broader use of foreign materials in federal purchases. By tightening these criteria, EO 13881 updates the statutory mandates of the Buy American Act to better suit the modern economic environment.

Legal Changes and Adjustments

Statutorily, the order revises legal definitions and methodologies for determining a product's national origin in public projects. These changes carry legal weight as they redefine compliance measures under the Buy American Act, significantly influencing how federal contracts are solicited and managed.

Policy Foundation

Policy-wise, this order underscores the executive branch's commitment to enforcing existing legislation, pushing for an expansive statutory interpretation of the Buy American Act. It mandates the FAR Council to explore regulatory changes through a public notice and comment framework, emphasizing transparency and accountability in administrative processes.

Constitutional Considerations

Constitutionally, the order operates within the regulatory purview of the executive branch, exercising presidential authority over government procurement policies. While it does not pose direct challenges to constitutional limits, its overlap with international trade agreements and federal preemption doctrines may invite legal scrutiny, particularly in the context of compliance with WTO obligations.

Public Interest Determination

The introduction of a public interest determination formula, setting price differentials for bids with foreign content, presents questions about balancing economic protectionism with market competition. This inherent tension complicates policies designed to prioritize American-made products, reflecting broader debates within trade policy discussions.

Who Benefits

Domestic Manufacturers

American manufacturers are the primary recipients of the benefits conferred by Executive Order 13881, especially those who provide goods for federal projects. By increasing the requirements for domestic content, this order enhances demand for U.S.-produced goods, giving local firms a competitive edge.

Steel and Iron Industries

The stricter definition placing a 5% foreign content cap on iron and steel products greatly benefits the domestic iron and steel industries. This promotes the strengthening of domestic market share, with potential outcomes including job creation and expansion of production capacities in these sectors.

Small Businesses

Small businesses frequently find themselves disadvantaged in international markets; however, they receive assistance under this order through differential bid evaluation formulas. By offering a higher percentage preference to smaller entities, the order aids local entrepreneurs in obtaining federal contracts, promoting sustainable growth.

Job Growth Advocates

Advocates focused on job growth and economic self-determination perceive this order as advantageous. It aligns with broad socioeconomic objectives that target the revitalization of American industry and encouragement of domestic employment, dovetailing with narratives advocating reduced reliance on foreign suppliers.

Local Economies

With increased federal spending directed towards American goods, local economies may be stimulated. As much-needed investment streams into U.S. manufacturing, the order is poised to eventually support community-based initiatives as infrastructure developments progress, contributing to economic stability at the local level.

Who Suffers

Foreign Suppliers

Foreign manufacturers based in Europe and Asia, who traditionally supplied goods for U.S. federal projects, cite reduced access to the market as a critical challenge. Heightened domestic content requirements diminish their involvement, potentially straining diplomatic and trade relations.

Multinational Corporations

Large multinational corporations with diversified international operations may find their flexibility curtailed, as these organizations need to adjust sourcing strategies to meet tighter U.S. regulations. This can increase costs and necessitate strategic realignment for firms accustomed to global procurement.

Import-Heavy Industries

Industries heavily reliant on imports due to limited domestic resources or cost-effectiveness face obstacles as they strive to comply with the new order. These sectors must manage the complexities of identifying compatible products while remaining price-competitive in the global arena.

Trade Partners

The emphasis on domestic purchasing potentially challenges trade partners with bilateral U.S. agreements, potentially leading to retaliatory measures or renegotiation of existing deals. The shift could exacerbate ongoing tensions in global trade environments, impacted by a move towards protectionism.

Federal Procurement Operations

In terms of federal procurement operations, adapting to new mandates and restructuring existing processes is cumbersome. Agencies must promptly adjust to avoid inefficiencies and delays, as they negotiate compliance with the newly established executive directives.

Historical Context

Buy American Act History

The Buy American Act of 1933 emerged during the Great Depression as a means to bolster the U.S. economy through domestic industry promotion. Executive Order 13881 intensifies this foundational policy by addressing modern economic concerns, including the impacts of globalization and the need for economic resilience.

Revisiting Eisenhower’s Legacy

By revoking certain aspects of EO 10582 from Eisenhower’s administration, Trump's order marks a transition towards more protective policies. It reflects a larger trend of modernizing long-standing executive orders to better accommodate evolving economic conditions.

America First Doctrine

As an element of the Trump administration's broader "America First" agenda, EO 13881 represents a focus on preserving American interests. The order aligns with similar strategies seen in trade policies, such as renegotiated NAFTA agreements and tariffs on foreign steel.

Trend of Regulatory Change

In keeping with a historical trend of executive actions pursuing regulatory alterations, this order seeks to align with socio-political climates. The ambition is often to satisfy domestic demands for economic empowerment while acknowledging realistic constraints of international cooperative frameworks.

Parallel Policies

Policies like EO 13858, which bolsters preferral treatment for infrastructure projects, are consistent with the strategic aims of the administration: revitalizing American industry as a barrier against perceived global economic adversities.

Potential Controversies or Challenges

International Trade Compliance

The compatibility of EO 13881 with international trade laws, particularly concerning the WTO, is a matter of concern. The directive must navigate complex trade frameworks to prevent conflicts or retaliations stemming from perceived protectionist measures.

Budget and Resource Allocation

The logistics of implementing this executive order demand considerable government resources to amend procurement frameworks and ensure compliance. Critics may debate budgetary allocations, questioning the cost-effectiveness and administrative burden associated with transitioning to the new procurement paradigm.

Legal Challenges from Industries

Legal challenges may arise as affected industries contest the government's emphasis on domestic products, contending that such priorities violate trade norms or pre-existing agreements. Central to potential litigation is the interpretation of "unreasonableness" regarding pricing differentials.

Congressional Reactions

Potential congressional opposition is possible, especially from lawmakers whose constituencies rely on international trade. Such opposition could manifest in legislative proposals seeking to balance executive adjustments with statutory oversight, supporting fairness between U.S. and global competitors.

Enforcement Concerns

The effective enforcement of EO 13881 presents challenges, necessitating robust oversight systems to curb circumvention. Federal agencies must ensure compliance while avoiding administrative bottlenecks that could potentially halt progress in procurement activities.