U.S. president signs executive order instituting stringent new Buy American regimen

·5 min read

WASHINGTON — President Joe Biden imposed stringent new made-in-America rules for U.S. government spending Monday.

They come with a caveat likely troubling to Canada: exceptions to those rules will be allowed only under "very limited circumstances."

Monday's Buy American executive order was the result of a cornerstone Biden campaign promise.

It was designed to corral swing-state support among the protectionist, blue-collar voters who previously elevated Donald Trump to the White House.

The policy is to ensure that American manufacturers, workers and suppliers are the primary beneficiaries of U.S. government largesse, including an estimated $600 billion a year in procurement contracts.

Biden says the Trump administration liked to talk about Buy American, but ultimately did little to toughen or even enforce the rules.

"That is going to change on our watch," he said, signing an executive order to enact a series of measures to raise standards for U.S. content, increase oversight and provide for more stringent enforcement.

They include a "Made in America" office attached to the White House Office of Management and Budget to oversee waivers — the exceptions that allow Canadian contractors, manufacturers and suppliers access to a lucrative and often essential source of business.

"I'm directing the Office of Management and Budget to review waivers to make sure they are only used in very limited circumstances — for example, when there's an overwhelming national security, humanitarian or emergency need here in America," Biden said.

"This hasn't happened before. It will happen now."

Waiver details will also be posted on a U.S. government website to provide more public transparency about who is getting around the rules, and why.

The plan would also increase the amount of U.S.-produced materials or components a project or product would need in order to qualify as American-made, and make it easier for small and medium-sized businesses to access procurement opportunities.

It requires government agencies to provide twice-yearly progress reports on their efforts to follow the new rules.

It also voices support for the Jones Act, a law that requires goods being shipped between domestic ports to be delivered on U.S.-flagged vessels that are built, owned and operated by American citizens or permanent residents.

"I don't buy for one second that the vitality of American manufacturing is a thing of the past," Biden said. "American manufacturing was the arsenal of democracy in World War Two, and it must be part of the engine of American prosperity now."

Mark Agnew, the director of international policy for the Canadian Chamber of Commerce, said Canada will find little of comfort in Monday's news.

"Buy American restrictions remain a perennial problem for Canadian businesses seeking to access government contracts with our largest trading partner," Agnew said in a statement.

"Although the rules have progressively tightened over the years, (Monday's) announcement represents another unhelpful step to make it more difficult for Canadian businesses to secure contracts in the U.S."

In the midst of a deadly pandemic and resultant economic free fall, Canada and the U.S. should be looking for ways to join forces and leverage their strengths to fortify existing cross-border supply chains, Agnew said.

"Although the full impact of (Monday's) announcement will take time to cascade to different parts of the U.S. government, its chilling effect on business will be acutely felt north of the border."

At the same time, a more stringent and orderly system of approving and enforcing waivers might eventually prove to be a "silver lining" for Canada, said Dan Ujczo, a Canada-U.S. trade lawyer based in Columbus, Ohio.

The enforcement of procurement rules can sometimes be haphazard, particularly when they are confusing and poorly understood, said Ujczo, senior counsel with the U.S. firm Thompson Hine LLP.

"Canada has a network of agreements with the U.S. to address Buy American programs, but the nuance often is lost on procurement officers that do not want to risk using non-U.S. products," he said.

"If Canadian companies can use this new Made in America office at OMB to emphasize Canada’s 'exemptionalism,' it could prove worthwhile."

The U.S.-Mexico-Canada Agreement, the replacement trade deal for NAFTA negotiated under Donald Trump, does not include specific government procurement provisions between the U.S. and Canada.

The deal envisioned relying instead on the terms of the World Trade Organization's general procurement agreement, to which both Canada and the U.S. are signatories.

Biden "remains committed to working with partners and allies to modernize international trade rules — including those related to government procurement," the White House says.

Even so, Canadian suppliers and contractors will need to remain on guard, Ujczo added.

"Make no mistake: Canadian companies, supported by federal and provincial governments, will need to remain vigilant and aggressive on this file. There is a risk that Canada gets lumped in with everybody else. "

The latest order comes just five days after Biden "disappointed" the Canadian government and enraged Alberta Premier Jason Kenney by rescinding a presidential permit for the Keystone XL pipeline expansion.

Kenney, whose government has invested US$1.1 billion in the project and secured US$4.2 billion in loan guarantees, has threatened legal action against the U.S. in order to get some of that money back, and urged Prime Minister Justin Trudeau to join the effort.

This report by The Canadian Press was first published Jan. 25, 2021.

James McCarten, The Canadian Press