President Joe Biden will take steps on Monday to harness the purchasing power of the U.S. government, the world’s biggest single buyer of goods and services, to strengthen domestic manufacturing and create markets for new technologies, a senior administration official said.
Biden will sign an executive order aimed at closing loopholes in existing “Buy American” provisions, which structure the $600 billion in goods and services the federal government buys each year, making any waivers more transparent, and creating a senior White House role to oversee the process, according to the official.
Revitalizing the manufacturing sector, which accounts for about 12% of the U.S. economy, is a key part of the Democratic president’s broader push to drive up wages, create more union jobs and strengthen U.S. supply chains, the official said on condition of anonymity.
“He does not accept the defeatist idea that automation, globalization mean that we can’t have good-paying union jobs here in America,” the official said.
Boosting U.S. manufacturing, however, has proven a vexing challenge for previous administrations, including that of former President Donald Trump.
Lower wages and weaker environmental standards have triggered the exodus of key manufacturing capabilities to China and other countries in recent decades, including the making of medical equipment, resulting in critical gaps that have been laid bare during the COVID-19 pandemic.
China overtook the United States as the world’s top manufacturer in 2010, and was responsible for 28% of global output in 2018, according to United Nations data.
Rebuilding critical supply chains and developing new ones is key to U.S. economic growth, trade experts say.
Major labor unions and some industry groups welcomed the expected order, which is to be signed by Biden at a White House ceremony later on Monday.
Kevin Dempsey, president of the American Iron and Steel Institute trade group, said strong domestic preferences for federally-funded projects were essential to ensure that taxpayer dollars were used to buy U.S.-made products.
The AFL-CIO federation of trade unions welcomed Biden’s focus on finally making good longstanding political promises.
“The Trump administration used the right words but never put in place policies to affect meaningful change. This executive order will close loopholes that allow agencies to sidestep ‘Buy American’ requirements,” AFL-CIO President Richard Trumka said.
The U.S. trade deficit surged to $68 billion in November, its highest level in 14 years, as businesses scrambled to fill shelves with foreign goods and supply domestic factories reliant on foreign parts, offsetting a rise in exports.
“The U.S. spends about $600 billion a year on contracts, and that is money that ... can also serve to spur a revitalization of our industrial strength and help to create markets for new technologies,” the Biden administration official said.
The order directs federal agencies to reevaluate the threshold used to determine U.S. content, to prevent companies that sell to the government from importing largely foreign-made goods and selling them as U.S.-made after making minor tweaks.
It sets a deadline of 180 days for regulators to finalize the changes once they are proposed, and orders up a new website to ensure transparency about any waivers granted. The official gave no new percentages for required U.S. content, saying they would be determined as a result of the process being launched on Monday.
The challenge in buying more U.S.-made goods is partly a reflection of the erosion of many basic industries. Major U.S. retailers, including Walmart Inc, have launched high-profile “Made in America” campaigns, only to court foreign manufacturers afterward to get the goods consumers wanted. In 2015, the retailer faced a probe by the Federal Trade Commission for labeling products that were only partly made in the country.
Canada, the second largest U.S. trading partner, is worried that the Biden administration could end up disrupting one of the world’s largest bilateral trading relationships, with Canadian companies and workers bearing the brunt of the pain.
“I am concerned. We are always concerned by ‘Buy American’ ... for sure that is going to be an issue very, very high on our agenda in our work with the Biden administration,” Canadian Finance Minister Chrystia Freeland told reporters in Ottawa.
Asked if the order would be seen as protectionist, the Biden administration official said it was fully consistent with U.S. commitments under the World Trade Organization, and Washington would work with trade partners to modernize global rules.
The process beginning on Monday would “make sure that we are using procurement going forward in a way that actually builds domestic capacity, particularly in those areas where we have acute economic or national security needs and vulnerabilities,” the official said.
U.S. business groups had blasted the Trump administration’s push to expand “Buy American” mandates to the medical equipment and pharmaceutical sectors, warning they could worsen shortages during the pandemic.
By Andrea Shalal and Timothy Aeppel. Additional reporting by Nandita Bose and David Ljunggren. Edited by Heather Timmons, Jacqueline Wong and Paul Simao.