Biden seeks close 'Made in America' loophole, spur manufacturing

The administration also wants new companies, including small ones, to have access to tenders
Last Updated 25 January 2021, 16:31 IST

US President Joe Biden will sign an executive order Monday giving American companies and products priority in contracting with the federal government, as the new administration attempts to spur domestic manufacturing.

The order is aimed at boosting national production and saving industrial jobs by increasing investments in factories and workers, senior White House officials said, and comes after Biden promised on the campaign trail to "build back better" as the US economy struggles through the Covid-19 pandemic.

It also tightens legal loopholes that allow federal agencies to buy products stamped "Made in America" but which are often manufactured by companies that only produce a small portion of their products in the United States.

Washington spends $600 billion each year on contracts, and the administration's decisions was welcomed by the Alliance for American Manufacturing trade group.

"The law should mean what it says: an American product should be truly Made in America," its president Scott Paul said.

Less than a week after his inauguration, Biden has taken to using executive orders to push through his agenda, since the Senate has not confirmed many cabinet members, including major roles like secretary of state.

This latest order is similar to ones made by his predecessors, particularly former President Donald Trump.

Trump had issued an executive order urging the federal government to purchase more US-made products and also turning tariffs into a weapon against imports -- with mixed results.

But rather than launching a trade war, Biden favours using the federal government's massive purchasing power to tighten the "Buy American" rules.

"The dollars the federal government spends... are a powerful tool to support American workers and manufacturers," an administration official said.

The Buy American Act of 1933, still in force, requires federal agencies to prioritize purchasing goods produced on US soil, but "these preferences have not always been implemented consistently or effectively," according to the Biden administration.

Biden's approach seeks to change the structure of the process, by changing the definition of what is considered a US-made product and reducing the possibilities for exemptions.

During his presidential campaign, Biden promised to strengthen the "Buy American" process with a $400 billion plan for projects using US-made products -- including steel, or protective equipment for healthcare workers battling Covid-19.

After his electoral victory in November, Biden promised that the federal government would buy American cars and inventory.

However, companies have already warned that overly restrictive rules could cause costs to soar, making it harder to buy parts made outside the US.

The executive order should also be seen as part of "the president's commitment to invest in American manufacturing, including clean energy and critical supply chains," an official said.

Washington said the pandemic has highlighted the shortages and weaknesses of the system, and said that it wanted to avoid being put in a position of depending on countries that do not share country's interests in delivering essential materials.

Biden "remains committed to working with partners and allies to modernize international trade rules... to make sure all countries can use their taxpayer dollars to spur investment in their own countries," an official said.

(Published 25 January 2021, 16:31 IST)

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