07.16.14

Senators Baldwin, Merkley to GAO: Do Trade Agreements Undermine “Buy American” Manufacturing Policy?

Senators Ask for Government Accountability Office to Evaluate Trade Agreement Impacts on Manufacturing and Investigate Whether U.S. Companies Get Fair Shot at Foreign Government Contracts

WASHINGTON – In a letter sent to the Government Accountability Office (GAO) this week, U.S. Senators Tammy Baldwin (D-WI) and Jeff Merkley (D-OR) called for the investigative agency to open an inquiry into the impact of trade agreements on the U.S. federal government’s domestic procurement preferences, known as “Buy American,” and specifically the impact on U.S. manufacturing.  The Senators urged the agency to update previous findings that trade agreements had not delivered sufficient commercial value and provide recommendations to ensure there is truly a level playing field between the U.S. and our trade partners for U.S companies and workers in government procurement markets.

Under current policy, the U.S. generally grants its trade agreement partners access to the U.S. federal government’s procurement markets, where it purchases goods and services, and in return, U.S. companies are permitted equal access to overseas procurement markets by our trading partner governments.  This runs contrary to the normal “Buy American” policies that require that taxpayers’ dollars used when the U.S. government purchases goods and services be prioritized to purchase U.S. manufactured products.  Instead, it is based on the promise that U.S. workers and businesses will benefit equally from foreign governments purchasing American goods and services.  Whether those promises have been fully enforced has been an on-going concern of Americans businesses and workers.

As Senators Baldwin and Merkley wrote in the letter: “[W]hen allowed to play on a level playing field, American manufacturers can compete with the best in the world and U.S. firms and workers benefit with fair access to international markets.  But the playing field must be truly level for these benefits to accrue. […] We are concerned that the playing field has not been level.”

The senators urged the GAO to update its previous reports regarding the effectiveness of trade agreements and re-assess whether access to procurement markets is fair and even between both parties. They requested the GAO address four key areas:

  • An investigation and full analysis of trade agreements that involve U.S. federal and sub-federal government procurement, particularly their impact on the U.S. economy and U.S. manufacturing.
  • Updates on how recommendations from the last GAO report on government procurement – released in 1984 and which found agreements had less commercial value than originally anticipated – have been implemented. Specifically, the letter asks the GAO to evaluate the status of enforcement of present agreements on government procurement and offer options to strengthen enforcement of existing U.S. obligations.
  • The extent to which foreign companies that compete for U.S. procurement contracts receive direct and indirect subsidies from their governments. The letter asks the GAO to address whether subsidies give foreign firms unfair competitive advantages for procurement contracts as compared to U.S. firms.
  • The effects of U.S. procurement policy on small businesses, including how well small businesses can access and benefit from foreign markets.

Last December, Senators Merkley and Baldwin introduced the Level the Playing Field in Global Trade Act to fully account for unfair subsidies that exist in global trade.

An online version of the signed letter can be found here.