| 18 April, 2017

Trump's Buy American crackdown may hurt Build America push

Such rules reflect another era

Donald Trump speaks in Spencer, Iowa.

Donald Trump speaks in Spencer, Iowa.

Reuters/Mark Kauzlarich
18 April 2017

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

By Gina Chon

WASHINGTON, April 18 (Reuters Breakingviews) - Getting tougher about buying American could hurt efforts to build America. The White House wants to discourage the use of foreign goods in U.S. construction projects and procurement. Disregarding global supply chains and relying on arcane definitions add to the risk of rising prices. The same is true of Donald Trump's infrastructure plans.

The president's expected executive order on Tuesday is part of his campaign to promote U.S. companies and jobs. Federal agencies will be required to review their processes to eliminate loopholes and curb the use of waivers. Senior administration officials complain that previous administrations haven't adequately enforced the rules and granted too many exceptions.

"Buy American" laws rely on decades-old criteria that don't take modern manufacturing methods into account. One law put on the books in 1933, for example, requires steel products to be "substantially transformed" on U.S. soil. Another provision from 1982 made the definition for American-made steel even stricter, requiring melting and pouring in the United States.

Such rules reflect another era. While raw materials get liquefied at some factories, more modern mills now import slabs of steel, often more cheaply, and convert them into sheets, pipes and other products. That doesn't conform to the Buy American standards, which have hurt companies like California Steel Industries and its 1,000 employees. It is lobbying Congress to change the definition of U.S.-made steel, arguing that there are inadequate domestic supplies.

Various oil and gas companies also have warned the Trump administration about the Buy American initiative for new and refurbished pipelines in the United States. Energy Transfer Partners said in an April letter to the Commerce Department that such restrictions would "severely delay project schedules, drive up costs, decrease availability, and lower quality." The company also pointed out that the bulk of its pipes are made at home, but that some 80 percent of the steel in them comes from abroad.

Similarly, the new push could mean the $1 trillion Trump wants to invest in America's roads, bridges and such won't go as far as it could because of added expense. Like his protectionist trade views, propping up domestic products to promote nationalist doctrine also could spark retaliation from elsewhere. The dogmatic emphasis on "Buy American" is a tough sell.

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- U.S. President Donald Trump plans to sign an executive order on April 18 aimed at strengthening so-called "Buy American" rules for federal infrastructure projects and government procurement contracts.

- Senior administration officials said such rules have not been adequately monitored or enforced in the past. Each federal agency will be required to review their processes to root out loopholes and lax compliance.

- The White House also wants to crack down on waivers granted as part of trade agreements, foreign-government subsidized products and projects that use supplies that are purposely undervalued by overseas competitors. The Commerce Department will conduct a 220-day review of such issues and submit a report to the White House on its findings.

- Trump also plans to sign an executive order on his "Hire American" initiative, which includes a review of H-1B visa holders for highly skilled foreign workers. The Labor Department and other agencies will be asked to take a closer look at fraud and other abuses of the program, in addition to submitting recommendations for reforms.


(Editing by Jeffrey Goldfarb and Martin Langfield)

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