Thursday, 3 September 2020
This year has seen an unprecedented rise in trade barriers – both direct and indirect – involving public procurement. Join a free 60-minute webinar sponsored by George Washington University Law School’s Government Procurement Law Program, to hear leading experts on emerging trade barriers affecting grants and procurement.
Cybersecurity Controls and the Section 889 “Huawei” Ban: Scott Sheffler (Feldesman Tucker) and Tom McSorley (Arnold & Porter) will discuss two important measures that the U.S. government is taking to address security risks – the U.S. Department of Defense’s Cybersecurity Maturity Model Certification (CMMC), and the governmentwide interim procurement rule and final grants guidance banning Huawei and other Chinese companies under Section 889 of the National Defense Authorization Act for FY2019.
These measures, driven in part by the broadening role of foreign firms in the U.S. government’s supply chain, and in part by the specific challenges posed by Huawei and other Chinese high-technology firms to U.S. security, impose substantial compliance burdens on contractors and grantees in U.S. procurement. For many in the U.S. government, it would be “nothing less than madness to allow Huawei to worm its way into one’s next-generation telecommunications networks,” and Section 889 and parallel initiatives (such as the “Clean Network” initiative) are intended to shield the United States.
In practical terms, the Cybersecurity Maturity Model Certification (CMMC) and Section 889 may make it very difficult – if not impossible – for foreign vendors to compete in U.S. markets
In practical terms, the CMMC and Section 889 may make it very difficult – if not impossible – for foreign vendors to compete in U.S. markets, raising questions under the United States’ international free trade agreements and reciprocal defense procurement agreements. (The vulnerabilities in the U.S. government’s information technology supply chain are the subject of an upcoming GAO report, and a separate private-sector study is assessing barriers to procurement trade generally.) Although the Trump administration, bowing to industry pressure and the Defense Department’s concerns, extended the Section 889 implementation deadline to September 30, 2020 for Defense Department contractors, the compliance burdens remain quite serious.
Trump Administration’s “Buy American” Order for Medicines – and the Biden Plan: From its start, the Trump administration has adopted a broad range of “Buy American” measures, including a recent change to federal grants rules which says that grantees should, when possible, buy U.S. goods. Although even some supporters have criticized the Trump administration’s “Buy American” efforts as ineffective, Trump’s protectionist rhetoric has undoubtedly affected the international debate over free trade in procurement.
In response to the COVID-19 pandemic, on August 6, 2020 President Trump issued an executive order for “on-shoring” the manufacture of essential medicines bought by the U.S. government. The order calls for limiting U.S. market-opening commitments under the World Trade Organization (WTO) Government Procurement Agreement (GPA) and free trade agreements – a process which could trigger months of renegotiations with trading partners and result in limiting U.S. access to foreign markets. Jean Heilman Grier, former procurement negotiator at the Office of the U.S. Trade Representative, has written on the Executive Order.
Jean Grier has also written on Democratic candidate Joe Biden’s own Buy American plan, which also calls for broader U.S. domestic preferences. Jean Grier will join Robert Anderson, former lead at the WTO on GPA issues, to discuss trade, procurement and the upcoming U.S. elections. Jean’s recent posts: (1) Trump’s Buy American Order for Medicines, (2) Buy American legislation, and (3) Biden Buy American Plan.
Impact of the Pandemic: Of course controversial trade measures have been driven in part by the COVID-19 pandemic.
Robert Anderson co-wrote an article with Anna Mueller of the WTO on the constraints and flexibility afforded by the WTO’s Government Procurement Agreement. For their part, co-moderators Laurence Folliot Lalliot and Christopher Yukins co-wrote a piece in Concurrences, the competition periodical, on the pandemic’s lessons for international markets, including especially the pandemic’s disruptive effect on protectionism. While the pandemic exacerbated economic nationalism and trade barriers, the pandemic also pointed up the sometimes mortal dangers of cutting off international supply chains.
European Trade Measures: Roland Stein (of the BLOMSTEIN firm, Berlin) and Professor Michal Kania (University of Silesia/Poland) will discuss important developments in access to European procurement markets:
White Paper — Possible Exclusion of Subsidized Foreign Firms: Following on 2019 guidance from the European Commission to member states on abnormally low bids from vendors from outside the European Union, in June 2020 the Commission issued a white paper on “levelling the playing field as regards foreign subsidies.” The white paper launches an EU-wide consultation on how to address foreign subsidies which distort EU procurement markets; among other measures under consideration, member states might exclude vendors that receive foreign subsidies. The white paper notes that the EU continues to assess the proposed International Procurement Instrument, a measure which has received cautious support from European industry and which would allow member states to raise new barriers against vendors from nations (including potentially the United States and China) that do not cooperate in EU efforts to open procurement markets.
Exclusion for Non-Domestic Content: Article 85 of EU Directive 2014/25/EU, which governs utilities’ procurement, says that a bid may be rejected if more than 50% of the products being offered would come from nations that have not entered into a free trade agreement with the EU (such as China) – a rarely enforced restriction which, as codified in German law, was recently applied by an important German court, the Brandenburg higher regional court.
Program Moderators: Professor Christopher Yukins (GW Law School) and Professor Laurence Folliot Lalliot (Université Paris Nanterre).
