‘Buy America’: Protectionist Peril or Politically Practical?
The Issue of Government Procurement:
In January of 2021, President Biden signed executive order 14005, “Ensuring the Future is Made in All of America by All of America’s Workers.” Commonly known as ‘Buy America’, E.O. 14005 is a prime example of the Biden Administration’s commitment to reducing reliance on critical foreign supply chains. This initiative seeks to redirect government procurement spending, which accounts for nearly $600 billion dollars annually, from foreign to domestic manufacturers. Through lenient waivers and concessions in previous ‘Buy America’ initiatives, government procurement in the United States has the potential to become an international enterprise. Foreign nations often reap the benefits of these allowances, as it was estimated in 2017 that nearly 80% of the United States’ government procurement contracts were open to foreign suppliers. Though government procurement flows are standard, especially among WTO GPA(World Trade Organization Agreement on Government Procurement) members, some nations, like China, currently operate outside of this framework. This makes government procurement from China, a nation that has disregarded international human rights standards and adopted a recalcitrant attitude towards international regulation, more difficult to justify.
President Biden’s plan has the ambitious goal of mitigating some of the political and moral ambiguity associated with current procurement practices. While similar ‘Buy America’ initiatives have been championed by nearly every U.S. president in recent memory, President Biden’s plan distances itself through unprecedented investments in domestic manufacturing and elevated thresholds for what can justify a ‘Made in America’ label. Though currently, ‘Made in America’ can apply to any product with 55% of its components or value coming from domestic sources, the renewed plan “proposes an immediate increase of the threshold to 60% and a phased increase to 75%”. Though the protectionist initiatives outlined in ‘Buy America’ are not typical pillars of Democratic Party ideology, the Biden Administration, given the effects of the pandemic and his support from middle America, have opted to think differently.
A Case for Protectionism:
This shift towards an ‘America first’ mentality is not reasonless, nor is it a true continuation of President Trump’s domestic or foreign policy agendas. During the COVID-19 pandemic, the United States’ reliance on foreign supply chains and manufacturing became abundantly clear. As a result, the Biden Administration adopted the position that some goods “are simply too important to our national and economic security to be dependent on foreign sources”. Reliance on foreign supply chains for Personal Protective Equipment (PPE) provided a glaring example of the vulnerabilities that exist in the United States’ highly globalized consumption economy. In addition to pandemic-related infrastructure, ‘Buy America’ seeks to fortify supply chains associated with US semiconductor and clean energy industries. Like the production of PPE, semiconductor and solar infrastructure production is dominated by countries like China and Taiwan; both of whom have made large, continuous government investments in these critical sectors. While there is nothing inherently problematic about reliance on foreign production advantages, heightened tension between the United States and China has complicated trade partnerships. Some of the tension between the United States and China exists as a result of the B.R.I. (Belt and Road Initiative), which serves as a foil to President Biden’s ‘Build Back Better’ plan. The Belt and Road Initiative has “financed and built everything from power plants, railways, highways, and ports to telecommunications infrastructure, fiber-optic cables, and smart cities around the world”. By engaging with foreign nations in these capacities, the P.R.C. (People’s Republic of China) hopes to situate itself as an alternative, if not a preferred option to the United States in the international development space.
A Globalized Reality:
Even though a bolstered ‘Buy America’ plan would theoretically reduce reliance on nations like the P.R.C., it is by no means infallible. Some experts believe that the current efforts being made by the Biden Administration to restore domestic manufacturing will be detrimental to the average taxpayer. The Peterson Institute of Economics estimated that “the annual taxpayer cost for each US job “saved” by Made in America probably exceeds $250,000”. This assumption is rooted in the historical precedent that ‘Buy America’ and related initiatives do not promote job creation, but rather “shuffle jobs from other sectors of the economy to the procurement sector”. This reallocation functions as a ‘leaky bucket’, decreasing efficiency and raising prices through its efforts to cultivate domestic manufacturing. Additionally, the success of this initiative will rely on the participation of major private sector actors. The prospect of increased costs and inefficiencies may already raise some red flags, but some private sector leaders note “that federal government purchases by themselves are not big enough to persuade manufacturers to reshore supply chains”. These large corporations may require more lucrative incentives before reorienting their business strategies, mitigating the effectiveness of President Biden’s plan.
Though the Biden Administration has trended towards protectionism when confronting supply chain deficiencies, the necessity for collaboration when confronting an ambitious P.R.C. remains. Questions regarding whether a “coalition of Western democracies might have the heft to confront a rising China about its authoritarian, state-capitalist ways” continue to cast doubts on positively messaged, inward looking economic policy. Through organizations such as the Quad (U.S., India, Australia, and Japan) and its renewed strategic interest in the Indo-Pacific region, the United States seems willing to confront China with the support of its regional neighbors. However, it is likely that if the United States wants to shepherd China towards global norms, support of the European Union will be a prerequisite for success. President Biden’s commitment to ‘Buy America’, though messaged differently than his predecessor, is seen by some EU nations as a continuation of President Trump’s hard-line, America-first platform. For this reason, European policymakers have been concurrently developing a ‘Buy European’ procurement plan. The publicization of these deliberations serve as “a clear warning shot for the U.S.”, leveraging new norms for reciprocity in international procurement markets against the President’s current agenda.
Looking Forward:
The effectiveness of President Biden’s ‘Buy America’ initiative remains to be seen as he faces immense pressure to revive the US economy, mitigate its reliance on adversarial economies, and maintain strong relations with historical allies. Throughout the Covid-19 pandemic, inherent global connectivity has been illustrated time and time again through the spread of the virus itself, but also through collaborative action such as vaccine diplomacy. Though, as a developed, globalized nation it may be tempting to look inward during times of crisis, leaning into ‘Buy America’ will not mitigate our international competition problem, but rather, exacerbate it.
Established in 1995, the Georgetown Public Policy Review is the McCourt School of Public Policy’s nonpartisan, graduate student-run publication. Our mission is to provide an outlet for innovative new thinkers and established policymakers to offer perspectives on the politics and policies that shape our nation and our world.