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TWN
Info Service on WTO and Trade Issues (Jan21/12) Geneva, 26 Jan (D. Ravi Kanth) – US President Joe Biden has signaled his intention to turn the United States into a new “manufacturing” hub for almost every product by pursuing an aggressive industrialization plan, a move that could come into conflict with Washington’s obligations to multilateral trade rules at the World Trade Organization (WTO). All these years, the US has threatened developing countries with punitive trade measures and legal disputes in their pursuit of inclusive and development-oriented industrialization policies in building domestic manufacturing capacities. In one stroke, the US now appears to want to go against the standards it had set for developing countries at the WTO and pursue measures that could prove to be inconsistent with the WTO’s agreements, such as the Agreement on Technical Barriers to Trade. [According to some past Appellate Body rulings, it may even be violative of Art. III of the GATT 1994 – SUNS] President Biden said his new “Buy American” initiative is a key part of his “Build Back Better” plan to revitalize the US economy and manufacturing, adding that his administration will spend considerable resources on research and development (R&D), AI (artificial intelligence), as well as other areas. As the US on 25 January again blocked the appointment process for filling seven vacancies at the WTO’s Appellate Body, the new plan of creating manufacturing industries regardless of existing multilateral trade rules has seemingly revealed in which direction the Biden administration is going to move in the next four years. At a press conference on 25 January, President Biden said “I don’t buy for one second that the vitality of the American manufacturing is a thing of the past,” maintaining that “American manufacturing was the arsenal of democracy in World War Two, and it must be part of the engine of American prosperity now. That means we are going to use taxpayers’ money to rebuild America.” “We will support American products and support American jobs, union jobs,” President Biden said, criticizing the previous Trump administration for its failure to implement “Buy American” rules by handing out waivers that allowed the purchase of foreign products. According to President Biden, who took office less than a week ago, the Defense Department, in 2018, purchased $3 billion worth of foreign products in foreign construction projects and $300 million for foreign engines and vehicles. He said all this could have been avoided if the US stuck to “Buy American” products. Therefore, said President Biden, the executive order that he signed in the presence of the media on 25 January “tightens existing Buy American policies and makes it more difficult for federal agencies to seek waiver in order to purchase goods. It also creates the new position of Made in America director within the Office of Management and Budget to oversee the initiative.” President Biden said he wants to strengthen the controversial Jones Act and its mandate where only US-flag vessels can carry cargo between US ports on grounds that it would support American production and America’s workers. The Jones Act was a special entitlement that the US had secured at the conclusion of the Uruguay Round without paying any price and it remains a special and differential treatment (for the US), said a former trade envoy, who asked not to be quoted. In a detailed fact sheet issued by the White House on the Executive Order, it is suggested that “President Biden is ensuring that when the federal government spends taxpayer dollars, they are spent on American-made goods by American workers and with American-made component parts.” It says, “this Executive Order fulfills President Biden’s promise to make Buy American real and close loopholes that allow companies to offshore production and jobs while still qualifying for domestic preferences. President Biden’s executive action will ensure that the federal government is investing taxpayer dollars in American businesses – both small and large.” According to the fact sheet, “this executive action is part of the President’s broader commitment to increase investments in manufacturing industries and workers in order to Build Back Better.” Further, the “Made in America Executive Order” says that “the dollars the federal government spends on goods and services are a powerful tool to support American workers and manufacturers,” and “contracting alone accounts for nearly $600 billion in federal spending.” It says that the President is taking action to reset the US government’s long-standing approach to domestic preferences to create an approach that will remain durable for years to come and grow quality, union jobs. Interestingly, it says that “Made-in-America” refers to domestic preferences related to federal procurement, federal grants, and other forms of federal assistance. The Executive Order paves the way for the following actions: (a) Directs agencies to close current loopholes in how domestic content is measured and increase domestic content requirements. Existing Buy American rules establish a domestic content threshold – the amount of a product that must be made in the US for a purchase to qualify under Buy American law. This Executive Order directs an increase in both the threshold and the price preferences for domestic goods – the difference in price over which the government can buy a product from a non-US supplier. It also updates how government decides if a product was sufficiently made in America, building a stronger foundation for the enforcement of Buy American laws; (b) Appoints a new senior leader in the Executive Office of the President in charge of the government’s Made-in-America policy approach. A bold approach to Made-in-America requires leadership and accountability. The new Director of Made-in-America at the Office of Management and Budget (OMB) will oversee the implementation of this Executive Order, make sure the President’s new rules are followed, work with key stakeholders, and carry through the President’s vision in conjunction with their executive agency partners; (c) Increases oversight of potential waivers to domestic preference laws. This order creates a central review of agency waivers of Buy American requirements, fulfilling the President’s commitment to crack down on unnecessary waivers. It also directs the General Services Administration to publish relevant waivers on a publicly available website; (d) Connects new businesses to contracting opportunities by requiring active use of supplier scouting by agencies. This Executive Order directs agencies to utilize the Manufacturing Extension Partnership – a national network in all 50 states and Puerto Rico, that supports small and medium-size manufacturers – to help agencies connect with new domestic suppliers who can make the products they need while employing America’s workers; (e) Reiterates the President’s strong support for the Jones Act. The President will continue to be a strong advocate for the Jones Act and its mandate that only US-flag vessels carry cargo between US ports, which supports American production and America’s workers. With the signing of the 2021 National Defense Authorization Act, the Jones Act has also been affirmed as an opportunity to invest in America’s workers as we build offshore renewable energy, in line with the President’s goals to build our clean energy future here in America; (f) Directs a cross-agency review of all domestic preferences. The order requires agencies to report on their implementation of current Made in America laws and make recommendations for achieving the President’s Made in America goals, and to continue to do so on a bi-annual basis. This review includes a requirement that agencies submit recommendations for ways to ensure items offered to the general public on federal property are Made in America – to the fullest extent possible – and to consider service industries in addition to manufacturing. Lastly, the Presidential Executive Order is “deeply intertwined with the President’s commitment to invest in American manufacturing, including clean energy and critical supply chains” among others, it said. Meanwhile, in a separate development at a virtual World Economic Forum (WEF) event on 25 January, China’s President Xi Jinping issued a warning to President Biden that he risks a new Cold War if he continues with the protectionist policies launched by his predecessor Donald Trump. Without naming President Biden or the US, President Xi said “to build small circles or start a new Cold War, to reject, threaten or intimidate others, to willfully impose decoupling, supply disruption or sanctions, and to create isolation or estrangement will only push the world into division and even confrontation.” If the Biden Administration has chosen to re-join the Paris Climate Change agreement on day one of his tenure, he could have also signaled the need to join the consensus at the WTO for filling the seven vacancies in the WTO’s Appellate Body. According to a news report in The Wall Street Journal (WSJ) on 25 January, “Mr. Biden’s team has said that he would lift the US blockade on judges (on the Appellate Body) but that the pandemic and US economic recovery could take precedence over trade.” “A delay would be a mistake, said James Bacchus, a former Democratic congressman from Florida who served twice as the chairman of the WTO’s Appellate Body, its top court,” but “the rest of the world is not going to wait for the US,” according to the WSJ report. However, the US stuck to its obstructionist stance at the WTO’s Dispute Settlement Body (DSB) meeting on 25 January, stating that it was not in a position to support the proposed decision on filling the seven vacancies, tabled by 121 WTO members, led by Mexico. The US said that as WTO members know, a new US president had assumed office only on 20 January.
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