The Buy American, Hire American executive order, the GPA and the EU


25 April 2017

On 18 April 2017, the President of the United States signed the so-called “Buy American, Hire American” executive order. Among other things, the order directs the US Secretary for Commerce to carry out a comprehensive assessment of US trade agreements on the basis of which the United States has allowed foreign suppliers to gain access to its government procurement markets in exchange for reciprocal rights for US suppliers abroad. The intention of this review is essentially to establish the effects of each of these agreements on the ability of the United States to promote domestically manufactured goods and domestically sourced construction materials in government procurements by means of the Buy America/Buy American legislation (including the Berry Amendment in the defence sector).

According to White House reports, if any of these agreements is deemed to work against US interests, in that it fails to provide US companies with “fair and reciprocal” access to foreign government procurement markets, the US President may decide to rescind or seek to renegotiate these.

The review of trade arrangements in this context, will also involve an assessment of the effects of US participation in the WTO’s Agreement on Government Procurement (GPA). The GPA is a “plurilateral” agreement covering 43 WTO countries (including the EU28), under which each signatory party commits to allow suppliers from other GPA parties to gain access to its government procurement markets.

The US Government’s current assumption is that the GPA is not working as it should be. This preliminary view seems to be based on a recent US Government Accountability Office (GAO) report, according to which, the United States has opened more of its procurements to foreign companies than any other GPA party. According to this report, the value of the GPA-covered procurement in the United States was $837 billion in 2010. This is said to be almost twice as large as the approximately $381 billion reported by the next five largest GPA parties – the European Union, Japan, South Korea, Norway, and Canada – combined.

The accuracy of these figures is likely to be disputed. Indeed, the GAO report in question readily accepts that there are “deficiencies” in the statistical reporting of government procurement by GPA parties, including the United States. Also, the view from Europe would seem to be rather different. For example, in the context of the TTIP negotiations, the EU’s position has been that in general the EU is guaranteeing greater government procurement access to US companies than the US does to EU companies.

One of the reasons put forward by the EU in support of this conclusion is the fact that under the GPA, access to the cumulatively more valuable non-federal US government procurements is limited, with only 37 of the 50 States agreeing to allow access to their procurement markets to foreign companies. In addition, no US city or county is covered by the GPA arrangements. This factor seems to be crucial, in that that the value of procurements by some American cities is said to exceeds the value of procurements by some States. According to the EU, other relevant factors in this context are the restrictions placed by the Buy America/Buy American legislation which, as noted above, seeks to promote domestic goods and materials in government procurements as well as SME set aside programmes, which limit competitions for certain government contracts to smaller US companies. There are currently no similar restrictions in relation to access to the EU government procurement markets.

While TTIP negotiations seem to have stalled, this review and the US Secretary for Commerce report on whether the United States benefits from the reciprocal rights of access to government procurements to which it has agreed in the context of the GPA and a number of trade agreements, are likely to rekindle debate in this area.

Ultimately, if the United States were to withdraw from the GPA or seek to limit its current commitments under that Agreement, this will have an impact on the access to which US companies currently enjoy in a number of key foreign government procurement markets, including the government procurement markets of the EU. At the same time, the US might consider that this is a price worth paying for the purposes of implementing more fully or more widely, domestic preferences in its government procurements.

Separately, if as a result of this process, access to US government procurements were to become more restricted for foreign suppliers (including UK suppliers), this is likely to increase further the importance of having access to the large and valuable government procurement markets of other key global trade players, notably the EU. If so, this factor might well be at play in the context of the forthcoming Brexit negotiations. That would be an interesting, albeit unintended, consequence of the Buy American, Hire American executive order.

Totis Kotsonis, Partner
e: totiskotsonis@eversheds-sutherland.com
t: +44 20 7919 0700