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WASHINGTON: US President Joe Biden signed an executive order on Monday (January 25) prioritizing American companies and products in contracting with the federal government as the new administration tries to stimulate domestic manufacturing.
The order aims to boost domestic production and save industrial jobs by increasing investment in factories and workers, and comes after Biden promised in the election campaign to “rebuild better” as the US economy battles the COVID-19 pandemic.
Washington spends $ 600 billion each year on contracts, and the order fills in loopholes that allow federal agencies to purchase products marked “Made in America” but are often made by companies that only produce a small portion of their products. products in the United States.
Revitalizing the manufacturing sector, which makes up about 12 percent of the U.S. economy, is a key part of Biden’s broader drive to raise wages, create more union jobs, support minority-owned businesses and strengthen companies. US supply chains, White House officials say. .
“American manufacturing was the arsenal of democracy in World War II and must now be part of the engine of American prosperity. That means we are going to use taxpayer money to rebuild America,” Biden said.
“America cannot stay on the sidelines in the race to the future. Our competitors are not waiting,” Biden said. “To ensure that the future is made in America, we need to win not only the jobs of today, but also the jobs and industries of tomorrow.”
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But the order runs the risk of colliding with the country’s outsourced supply chains and also irritating US trading partners, especially Canada.
The United States and its northern neighbor Canada, along with Mexico, are part of a free trade agreement that came into effect last year, and Canadian Prime Minister Justin Trudeau raised the “Buy American Products” policy in a phone call. recent with Biden, Vice Premier Chrystia Freeland said Monday.
However, he noted that “the United States sells more to Canada than to China, Japan and the United Kingdom combined. And what we are really going to focus on in our work with the Biden administration are those benefits for everyone.”
AVOID A TRADE WAR
Less than a week after his inauguration, Biden has so far used executive orders to push his agenda, although this latest order is similar to those of his predecessors, in particular former President Donald Trump.
Trump had issued an executive order urging the federal government to buy more American-made products and also to weaponize the tariffs against imports, with mixed results.
Biden has said that he does not plan to immediately change Trump’s trade policies or issue new tariffs, but instead uses the enormous purchasing power of the federal government to strengthen domestic industry.
The Buy American Act of 1933, still in effect, requires federal agencies to prioritize the purchase of goods produced on American soil, but Biden said that “big corporations and special interests have long fought over loopholes.” of that law.
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“That is going to change under our supervision,” he said, adding that he will create a White House position to find ways to get federal government contracts for American factories.
The administration will also modify the definition of what is considered a US-made product and reduce the chances of exemptions, while also reviewing exemptions already granted.
“We will work with small American manufacturers and businesses to give them an opportunity to raise their hands and say, ‘Yes, I can do that here in my store, in my city,'” Biden said.
Manufacturers have been attracted to lower wages and weaker environmental standards in China and other countries in recent decades. This exodus has led to critical gaps that were exposed during the COVID-19 pandemic, such as the manufacturing of medical equipment.
China overtook the United States as the world’s leading manufacturer in 2010 and was responsible for 28% of global production in 2018, according to United Nations data.
The Alliance for American Manufacturing trade group welcomes Biden’s move, and its chairman Scott Paul said, “The law must mean what it says: An American product must be truly Made in America.”
STRENGTHENING THE SUPPLY CHAIN
During his presidential campaign, Biden promised to strengthen the “Buy American” process with a $ 400 billion plan for projects that use products made in the United States, including steel or protective equipment for health workers fighting COVID. 19.
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However, companies have already warned that overly restrictive regulations could make it difficult to buy parts made outside the country and cause costs to skyrocket.
The coronavirus pandemic introduced an element of national security into the debate, highlighting the vulnerabilities of the country’s supply chains for critical supplies like masks and other equipment to protect against the virus.
“We can never again be in a position where we have to depend on a foreign country that does not share our interests to protect our people during a national emergency,” Biden said.
HARD CHALLENGE
Major US retailers, including Walmart Inc, have launched high-profile “Made in America” campaigns, only to woo foreign manufacturers afterward.
Rebuilding supply chains and developing new ones is key to America’s economic growth, trade experts say.
The U.S. trade deficit rose to $ 68 billion in November, its highest level in 14 years, as companies filled shelves with foreign products and supplied domestic factories that relied on foreign parts, countering increased exports.
Biden’s order directs federal agencies to re-evaluate the threshold used to determine US content, to prevent companies that sell to the government from importing largely foreign-made products and selling them as made in the US. After minor adjustments.
The new percentages for required US content will be determined as a result of the process that will launch Monday, authorities said.
When asked whether the order would be considered protectionist, a Biden administration official said Sunday night that it would be fully consistent with the United States’ commitments under the World Trade Organization, and Washington would work with trading partners to modernize the global rules.
