Some of the most difficult issues in U.S. procurement law stem from the nation’s several centuries of accumulated protectionist measures, and from a patchwork of trade agreements meant to contain that protectionism. These conflicting measures reflect a push-and-pull in U.S. procurement policy, between those who favor closed procurement markets and those who favor open competition; the compromises reached between the two camps have created a Byzantine set of rules and requirements. At the same time, though, this area of law holds a special promise for the future of procurement, for cross-border agreements currently offer the readiest means of erasing anti-competitive differences between national rules, by bringing many nations to a common standard of international best practice. To make sense of this complex area, this chapter proceeds in three parts. Part II reviews the major pieces of protectionist legislation passed by Congress, focusing first on the Buy American Act of 1933; this discussion also references some of the most important implementing regulations. Part III reviews the most important U.S. trade agreements which have limited the force of that protectionist legislation, including the World Trade Organization’s Agreement on Government Procurement (GPA). Because barriers to procurement can also arise from structural factors — “non-tariff barriers to trade” which, in practice, may protect domestic vendors — this part also explains how the trade agreements mitigate those non-tariff barriers. Finally, Part IV concludes by offering some practical suggestions for those working in this field, and suggests a possible road ahead for cooperation in international procurement markets.
Yukins, Christopher R. and Green, Allen, International Trade Agreements and U.S. Procurement Law (2018). Chapter 9 to The Contractor’s Guide to International Procurement (American Bar Association 2018) (Erin Loraine Felix & Marques Peterson, eds.); GWU Law School Public Law Research Paper No. 2019-55; GWU Legal Studies Research Paper No. 2019-55. Available at SSRN: https://ssrn.com/abstract=3443244
In an editorial published in Italian newspaper Il Sole 24 Ore, Professor Gustavo Piga of the University of Rome – Tor Vergata, an activist in Italian politics and and a leader in the international procurement community, responded to an article by Christopher Yukins assessing the Trump administration’s latest Buy American initiative. Professor Piga argued that, though the actual impact of the Trump order might be minimal (as Professor Yukins pointed out), Italian policymakers should emulate U.S. support for small businesses, which the U.S. undertakes through protectionist preferences. Professor Piga closed: “GliStatiUniti lo insegnano chiaramente: non pensando per le piccole, smettiamo di pensare in grande.” (“The United States clearly teaches this: by not thinking of the small, we stop thinking big.”).
On February 20, 2019, Dr. Colette Langos, a Senior Lecturer at the University of Adelaide, made a very interesting presentation at GWU Law School, on developments in Australia’s bid protest procedures. She explained that these latest reforms, outlined in her attached slides, were an important part of Australia’s accession to the WTO Government Procurement Agreement.
On January 31, 2019, President Trump issued an Executive
Order encouraging federal grantees to “Buy American” when purchasing iron, aluminum,
steel and certain manufactured products for infrastructure projects funded by
federal grants. Although the Executive Order on Strengthening
Buy-American Preferences for Infrastructure Projects only directs federal
agencies to encourage grantees to “Buy
American,” it also calls for federal agencies to assess whether federal
grantees (including state and local governments) might be required to buy
U.S.-made goods in the future.
“We want American roads, bridges, and railways, and everything else to be built with American iron, American steel, American concrete, and American hands.”
White House economist Peter Navarro, a key proponent of closing
U.S. borders to international trade, published an op-ed
on Fox News before the order was released, explaining and supporting the
order. As the President and Peter Navarro
made plain in the signing
ceremony in the Oval Office, the new order is part of a broader White House
initiative to boost U.S. manufacturing, a central theme in Trump’s reelection
efforts.
The order highlights a gap in trade agreements, because federal
grants are generally excepted from U.S. trade agreements that require open
trade in procurement. See, e.g., WTO Government Procurement
Agreement, U.S.
Annex 7, General Notes, para. 2.
But even though federal grants
are not themselves subject to the trade agreements, state grantees using
federal funds for their own procurements may be covered by those agreements —
and thus may not be able to discriminate against covered foreign vendors when
they procure using federal grant funds. Two-thirds
of the states, for example, are members of the World Trade Organization’s Government
Procurement Agreement, and so have committed not to discriminate in certain
purchases from other members of the GPA.
The new Trump executive order defers to those prior commitments to open
trade in procurement.
The new order calling on grantees to discriminate across borders contrasts sharply with prior White House guidance, through the Office of Management & Budget (OMB), 2 CFR 200.319(b), which requires many grantees to “conduct procurements in a manner that prohibits . . . state, local, or tribal geographical preferences in the evaluation of bids or proposals.” This prior OMB guidance barring grantees from domestic geographic preferences aims to encourage maximum competition in procurements using grant funds; the new order, calling for international discrimination, logically would probably hurt competition.
If grantees follow the President’s admonition and only “Buy
American,” experience suggests that public projects under federal grants may
take longer and cost more. Under Section
1605 of the American Recovery and Reinvestment Act of 2009 — which imposed a
similar “Buy American” requirement — GAO found that grantees
faced severe operational problems when they were forced to comply with similar “Buy
American” requirements. For many of
these same reasons, the National Association of State Purchasing Officers
(NASPO) has opposed
geographic preferences in procurement, because they can undermine competition and
hurt best value.
In her posting on the new executive order, Jean Heilman Grier suggested that this order is a logical successor to Trump’s April 2017 executive order which called for federal agencies to “Buy American and Hire American.” While that earlier order encouraged federal agencies to Buy American whenever they can, this order extends that admonition to federal grantees.
Because of the latticework of policies and agreements which bar or discourage discriminatory procurement by state and local governments, it is unclear exactly what impact this new executive order may have on federal grantees’ purchasing. What is clear, however, is that even the most aggressive “Buy American” requirements in procurement are unlikely to have any serious impact on the nation’s trade deficit. At the federal level, a December 2018 GAO report showed that only roughly 1.5% of federal procurement ($7.8 billion of approximately $500 billion per year) were foreign products — compared to a national trade deficit of $566 billion in 2017. Foreign purchases probably total an even smaller share of state and local procurement, compared to federal purchases from abroad, because trade agreements force open a much smaller portion of state and local public markets. In sum, therefore, no matter how aggressively federal grantees implement the executive order, it is unlikely that the new order, though trumpeted for political reasons, will reduce the U.S. trade deficit in any significant way.
Christopher R. Yukins – George Washington University Law School
The Trump administration recently released the proposed text of the U.S.-Mexico-Canada Agreement (USMCA), a major regional trade agreement that, if ratified, would replace the North American Free Trade Agreement (NAFTA). While the government procurement chapter of the proposed USMCA was largely a copy-and-paste from the abandoned Trans-Pacific Partnership agreement (TPP), the procurement chapter of the USMCA did contain a few major surprises — including the omission of Canada. This article reviews the background to the USMCA, some of the most important elements of the agreement, and the lessons learned for future international cooperation in procurement policy and law.
This article draws in part upon a paper that Professor Yukins will present at an interdisciplinary conference in procurement at the Sorbonne University, Paris in October 2018.
The European Commission has proposed expanding the European Defence Fund, an initiative to fund defense technology developed in Europe. As a general matter, only European firms would have access to the fund for development, and participating European nations would need to commit themselves to purchasing the defense materiel developed under the fund. In effect, this could lock U.S. firms out of billions of euros worth of European defense procurement over the coming years—despite long-standing reciprocal agreements under which the U.S. and its European allies agreed to open their defense markets. The fund was announced quietly last year and now, in the shadow of a trade war launched by the Trump administration, has evolved into a substantial potential barrier in the transatlantic defense market, and potentially another brick in a rising wall of protectionism between the U.S. and Europe.
The Public Procurement Institute, Moscow, kindly provided these slides, procurement-in-russia, which were delivered at a briefing at George Washington University Law School on September 21, 2016. Russia may join the WTO Government Procurement Agreement, as Jean Grier discussed in a recent blog posting, and so this sharing of information on the Russian procurement system is both timely and welcome.
An interesting comment by Jean Grier on the ongoing EU-U.S. debate over procurement trade data, and the impact that debate is having on TTIP negotiations. Ms. Grier was previously the lead negotiator on procurement for the Office of the U.S. Trade Representative, and is an internationally recognized expert on procurement and trade.
A previous post suggested that the Transatlantic Trade and Investment Partnership (TTIP) might offer a way to fill some of the gaps left by Brexit, Britain’s prospective departure from the European Union. This post flips that proposition, and asks whether TTIP’s goals for opening procurement markets might, in effect, be swallowed up by Brexit, as some in the trade community have suggested despite public support from the White House and the EU for moving forward with TTIP. This means, in turn, that TTIP’s goals for procurement may need to be addressed in another forum, perhaps under the World Trade Organization’s Government Procurement Agreement (GPA).
The previous post used procurement as a case study. The post pointed out that if the European Union agrees to the TTIP agreement before the UK departs (“Brexits”), the TTIP agreement probably will list UK procurements open to competition under TTIP, and will include guarantees of free access to those procurements. After “Brexit,” Britain arguably could then “reenter” TTIP as an independent nation, and adopt those former obligations under the TTIP agreement, in return for reciprocal access to EU and U.S. markets.
This outcome — allowing Britain access to open markets in Europe under TTIP, without any concomitant obligation to allow free movement of persons — would be exactly what the British “Leave” campaigners want for the UK; a separate TTIP arrangement with an independent UK also enjoys support from senior U.S. Republicans. This outcome is, however, exactly what the leaders of the European Union have announced they will not allow. Hope for such a British “back door” to open markets is also, incidentally, what President Obama warned againstbefore the referendum vote, when he said that an independent Britain would be at the “back of the queue” in the United States’ negotiations of trade deals.
Leave Campaign – STOP TTIP
In a raucous speech on the floor of the European Parliament on June 29, 2016, Nigel Farage, the UKIP leader in the “Leave” campaign (and a Member of the European Parliament), paused in a harangue of his fellow MEPs to call for “a sensible tariff-free deal” between the European Union and the UK. (It should be noted that the “Leave” campaign formally opposes TTIP, largely because of the broader integrative measures that might be included in the agreement.)
In the future, we hope to have the UK as a close partner of the EU and we look forward to the UK stating its intentions in this respect. Any agreement, which will be concluded with the UK as a third country, will have to be based on a balance of rights and obligations. Access to the Single Market requires acceptance of all four freedoms.
(Emphasis added.) Even if Britain could side-step this European opposition by using the “TTIP back door,” a TTIP agreement would not solve all of the United Kingdom’s trade problems. Again using procurement as an example, trade agreements such as TTIP and the World Trade Organization’s Government Procurement Agreement (GPA) are really best understood as ambitious nondiscrimination arrangements. Those trade agreements simply do not drive the same rigorous cross-border economic integration, in procurement or otherwise, that the European Union’s governance mechanisms provide.
In sum, although TTIP would hardly be a panacea, because TTIP might give Britain a “back door” to a free trade arrangement with Europe, European leaders may prove reluctant to press forward to conclude the TTIP agreement.
If TTIP does falter, what will this mean for procurement? If TTIP stalls, it may mean that the goals held for TTIP will need to be addressed under other institutions, such as the WTO Government Procurement Agreement (GPA). The GPA’s implementation is administered by the WTO Committee on Government Procurement, and logically the TTIP goals — goals which would address persistent structural obstacles to trade in procurement — could be taken up by the Committee, perhaps under the pending work programs to enhance the GPA.
The EU and U.S. negotiating goals for TTIP (at least as of the ninth round of negotiations, in April 2015) were made clearer as a result of a leak of internal European negotiating documents by Greenpeace Netherlands. According to those leaked materials and the EU and U.S. published statements of position, those TTIP goals include, on the EU side, better access to (and information on) sub-central (state and local) procurements in the United States, and on the U.S. side, stronger commitments by all parties to fighting corruption in procurement. To the extent Brexit derails those goals in TTIP, it may fall to the WTO to take them up as part of a broader effort to strengthen international procurement markets under the Government Procurement Agreement.
The Trump administration recently released the proposed text of the U.S.-Mexico-Canada Agreement (USMCA), a major regional trade agreement that, if ratified, would replace the North American Free Trade Agreement (NAFTA). While the government procurement chapter of the proposed USMCA was largely a copy-and-paste from the abandoned 
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