If your business wasn’t already working with the federal government in some capacity, now may be the time to start.
On Monday, President Joe Biden signed his “Made in America” executive order, designed to strengthen the existing Buy American laws–including his predecessor’s– shore up domestic supply lines, and improve access to contracting opportunities for small and midsize businesses.
Manufacturers are applauding the effort. “Any successful manufacturing policy must ensure we can lead our economic recovery by strengthening supply chains and accelerating onshoring, through incentives for creating the next job or investing the next dollar right here in America,” said Jay Timmons, president and CEO of National Association of Manufacturers, an industry group, in an emailed statement.
Biden’s order directs federal agencies to revise the definition of American-made, raising both the threshold of U.S.-made components necessary to be considered “Made in America” and to qualify for the price preferences for domestic goods. In other words, the government will start requiring more of a product’s parts to be made domestically, and it may now be willing to pay more for a locally-made item versus one made by a foreign supplier. The original Buy American Act, which codifies these procedures, was created under President Herbert Hoover in 1933–also a time of economic stress.
Biden’s order establishes a website where American businesses can see the contracts awarded to non-U.S. vendors, along with any notice of “Buy American” waivers granted by the General Services Administration, the federal agency charged with the bulk of the government’s procurement needs. The waivers have, in recent years, served as a loophole, allowing federal agencies to buy products that may only be partially-produced in the U.S. A yet-to-be-named director of Made in America at the Office of Management and Budget will lead the new initiative and report on its progress.
For small businesses, the order also presents federal contracting opportunities, as agencies must now utilize the Manufacturing Extension Partnership, a national network that works with small and midsize manufacturers across the U.S. and in Puerto Rico. Contracting accounts for nearly $600 billion in federal spending, the White House estimates.
Collectively, the measures could be a game changer for small, would-be federal contractors, says Karen Kerrigan, president of the Small Business & Entrepreneurship Council, a nonpartisan advocacy group in Vienna, Virginia. The complexity of working with the government and the lack of transparency regarding opportunities have traditionally been stiff obstacles, she notes.
Buy American Backlash
Of course, some businesses may lose out in the effort, adds Kerrigan. Tightening the rules on Buy American may create opportunities for some smaller contractors, but hurt those who need to source from Canada and other countries. “One real concern is that upping Buy American content may mean some [small and midsize businesses] will be forced to turn to newly restricted domestic supply chains, which may raise their costs and competitively price them out these contracts, or winning new bids.” It becomes, in essence, a back-door tariff.
And to the extent that Biden hopes to restore longstanding trade relations with U.S. allies including Canada and Mexico, his order might undercut that–or even spark retaliatory measures. Based on a readout from Biden’s conversation with Justin Trudeau over the weekend, it’s clear the Canadian Prime Minister is dismayed by Biden’s decision to rescind the permit for the controversial Keystone XL pipeline being constructed to carry Canadian crude oil south. “No doubt there will be a response from Canada; other nations are watching these type of protectionist measures to determine whether the U.S. will begin to lead again on trade, or double-down on the Trump approach,” says Kerrigan.
Former President Donald Trump also boasted Buy American policies through his “America First” agenda. (Trump also imposed tariffs trying, and failing, to win trade wars.) The Trump administration issued a number of executive orders, which included limits to exemptions or waivers to “Buy American” rules, and extending those rules to loans, grants and other federal assistance programs. The day before he left office, Trump also issued a final rule increasing the percentage of U.S.-made content that an end product may contain to qualify under “Buy American” rules. It also increased the price preferences for domestic goods under the Buy American Act.
That rule is now subject to a regulatory freeze. On January 20, Biden’s Chief of Staff Ronald Klain sent a memo instructing all heads of executive departments and agencies to withdraw or hold any new or pending rules until an administration representative or Biden appointee is able to review them.