President Trump Issues Executive Order Encouraging — But Not Requiring — Federal Grantees to “Buy American”

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.

King’s College, London – GWU Law School Annual Symposium: Exclusion and Debarment – 18 March 2019

Effective international trade in government procurement depends on predictable legal structures, including those that address corruption and misconduct in tender processes.  But at this point, the purchaser’s primary tools to maintain integrity — debarment or exclusion — remain wildly out of sync on both sides of the Atlantic.  This annual free symposium on transatlantic issues in procurement, hosted by King’s College London and George Washington University Law School, focused this year on debarment and exclusion. In a highly successful day of frank and collegial discussions, judges, officials, attorneys and professors from the multilateral development banks, the European Union and the United States joined to discuss the best ways forward to harmonize a common approach to debarment in international trade.

Please note (see below) that because of the strong interest in this program, it was moved to a larger room at Gray’s Inn.

Members of the “GWU” team at the symposium at Gray’s Inn (left to right): Professor Michal Kania (Fulbright scholar), Program Director Karen Thornton, Ruairi Macdonald (alumnus), John Pachter (alumnus and panelist), Paul Khoury (alumnus and panelist), Collin Swan (alumnus and panelist), Alix Town (alumna), and Professor Christopher Yukins (symposium co-chair)
Collin Swan (World Bank), Michal Kania (University of Katowice) and Dominique Casimir (Arnold & Porter, Washington DC)

Change of Venue: The Pensions Room, Grays Inn, 8 South Square, London, WC1R 5ET (map) (map of access to Grays Inn during construction)

Reservation page here

Program materials

Introductions (10-10:15)

Panel I: Establishing an Exclusion System (10:15-11:15)

Panel I: Dominique Casimir (Arnold & Porter), Lisa Miller (World Bank), Duc Nguyen (U.S. Environmental Protection Agency), Olivier Waelbroeck (European Debarment & Exclusion System (EDES)) and Kai Hooghoff (Bundeskartellamt (Federal Cartel Office) Germany)

Panel II: Sanctions and Exclusions at the Multilateral Development Banks (11:30-12:30)

Panel II: Lisa Miller (World Bank), Prof Christopher Yukins (GWU), Collin Swan (World Bank) and Paul Kearney (European Bank for Reconstruction and Development)

Lunch(12:30-13:30)

Panel III: View from the Private Bar(13:30-14:30)

Panel III: John Pachter (Smith Pachter, McLean VA), Paul Khoury (Wiley Rein, Washington DC), Vera Eiro (Linklaters, Lisbon), Michael Bowsher QC (symposium co-chair/moderator, Monckton Chambers & King’s College, London) and Pascal Friton (BLOMSTEIN, Berlin).
  • John Pachter, Christopher Yukins & Jessica Tillipman, U.S. Debarment:  An Introduction (discussion draft 24 February 2019), forthcoming in Cambridge Handbook of Compliance (Cambridge University Press, Daniel Sokol & Benjamin van Rooij eds.).
  • Pascal Friton, Debarment in EU Public Procurement Law – Tentative progress or treading water? (presented at Thomson Reuters Government Contracts Year in Review (Feb. 2019))

Panel IV: Interactions Between Public Procurement and Civil and Criminal Claims (14:30-15:30)

Panel IV: Prof Christopher Yukins (GWU), Prof Renato Nazzini (King’s College, London), Anna Caroline Mueller (WTO) and Prof Alison Jones (King’s College, London)

Robert D. Anderson, Alison Jones & William E. Kovacic, Preventing Corruption, Supplier Collusion and the Corrosion of Civic Trust: A Procompetitive Program to Improve the Effectiveness and Legitimacy of Public Procurement (George Mason Law Review, forthcoming 2019).

Tea (15:30-16:00)

Panel V: Judges Panel (16:00-17:oo)

Panel V: Judge Marc Steiner (Swiss Federal Administrative Court), Judge Christopher Vajda (Court of Justice for the European Union), Prof Carl Baudenbacher (former Chief Judge of the EFTA Court, Monckton Chambers), Michael Bowsher QC (Monckton Chambers/King’s College, London), Judge Katja Hoegh (Chair, Ostre Landstret (High Court of Eastern Denmark), Copenhagen), Judge Helena Rosen Anderrson (Swedish Supreme Administrative Court)

Reception (17:00)

Supplemental Materials

  • Emmanuelle Auriol & Tina Søreide, An Economic Analysis of Debarment, 50 Int’l Rev. L. & Econ. 36 (2017) (arguing that debarment needs to be rethought in light of its competitive impacts)
  • Presentation by Prof Michal Kania at the University of Florida, January 2019, on U.S. and European approaches to debarment and corporate compliance
  • Christopher R. Yukins & Michal Kania, Suspension and Debarment in the U.S. Government: Comparative Lessons for the EU’s Next Steps in Procurement, 19-2 UrT 47 (2019), available at https://ssrn.com/abstract=3422499

Background materials by panelists (from a fall 2018 seminar at GWU):

Congressional Research Service: Good Introduction to U.S. Federal Bid Protests

The Congressional Research Service, a research arm of the Library of Congress, has published a very useful overview of the U.S. bid protest (bid challenge) system, by David Carpenter & Moshe Schwartz, Government Contract Bid Protests: Analysis of Legal Processes and Recent Developments (Updated November 28, 2018, CRS Report R45080), https://fas.org/sgp/crs/misc/R45080.pdf

Professor Michal Kania – European Defense Procurement – Presentation at GWU Law School

Defense_Security_UE_Michal_Kania_Final_version – Published

Visiting Fulbright scholar Professor Michael Kania (Silesian University) will present on European Defense Procurement at George Washington University Law School, Law Learning Center 006, 2028 G Street NW, Washington, DC, from 6-8 pm on Tuesday, November 6, 2018.  His presentation is linked above.  If you would like to attend this open seminar, please reserve a space with Cassandra Crawford, ccrawford@law.gwu.edu.

The U.S.-Mexico-Canada Agreement (USMCA): Some Surprising Outcomes in Procurement

Article available at:  https://ssrn.com/abstract=3268740

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.

European Commission Proposes Expanding the European Defence Fund—A Major Potential Barrier to Transatlantic Defense Procurement

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3204844

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.

60 Gov. Contractor para. 196 (June 27, 2018)

The Trade War Comes To Defense Procurement

In response to the Trump administration’s demands that Europe spend more on its own defense, and as part of a broader hardening of trade positions between the United States and Europe as a result of the Trump administration’s trade policies, Europe is moving forward with the European Defence Fund,  which will block non-European firms (including U.S. firms) from billions of dollars in European defense spending.  (Ironically, the Trump administration’s own “Buy American” initiative in procurement apparently has been stalled over the past year, and the Trump administration has pushed recently to expand foreign military sales by U.S. defense firms.)  The European initiative, which goes beyond the protections of the 2009 European defense directive, may be a violation of the many reciprocal defense procurement agreements between the United States and its European allies.  European officials have defended these bars against non-European contractors as “reciprocity” for U.S. security constraints on foreign ownership and control in the U.S. defense industrial base, but the protectionism of the European initiative appears to go well beyond normal security concerns — inspired, perhaps, by the Trump administration’s expansive use of “national security” as a rationale for protectionism.