U.S. President Joe Biden signed a manufacturing executive order Jan. 25 that he said will boost federal purchases of U.S.-made goods, a major promise of his campaign as it attempts to tackle the economic fallout from the coronavirus pandemic.
The latest in a flurry of executive actions by Biden in his early days in office raises the domestic content threshold, or the amount of a product that must be made in the U.S., for a purchase to qualify under the "buy American" standards. Additionally, it directs an increase to the price preferences for domestic goods, or the difference in price at which point the government can buy a product from a foreign producer.
The order also establishes a director of "made in America" at the Office of Management and Budget who will oversee the order's implementation, with its pledges to close loopholes that have placed domestic producers at a disadvantage when it comes to federal purchases of goods and services. The new director would review waivers for Buy American requirements and would also establish a publicly available website to view the waivers.
The federal government spends about $600 billion each year on contracting, and federal law requires that agencies give preference to U.S. companies. However, the Biden administration argued that the preferences have "not always been implemented consistently or effectively" and that the requirements for domestic goods have not been thoroughly updated in nearly 70 years. Biden has pledged to invest $400 billion over the next 10 years in federal spending toward U.S.-made goods.
"It is long overdue that the U.S. government utilizes the full force of current domestic preferences to support America's workers and businesses," the Biden administration said in a news release.
The announcement comes at a time of great peril for U.S. manufacturing. The sector is still down 530,000 jobs since February 2020, according to the U.S. Department of Labor. The order may help provide a lifeline to domestic producers but could also run the risk of disrupting supply chains for companies reliant on imports and ruffle feathers with trading partners.
President Joe Biden's executive order on federal purchases of U.S. products could have some of its more immediate effects on the healthcare sector.
"The main issue with the [order] is the way in which it highlights a conflict between Biden's multilateralist instincts and need to protect American workers and citizens," Chris Rogers, senior trade researcher at Panjiva, a business line of S&P Global Market Intelligence, said in an email. "We've already seen Canadian Prime Minister Pierre Trudeau complain vis-à-vis the United States-Mexico-Canada Agreement, while it's tough to see how Buy American at a federal government level doesn't breach the World Trade Organization's Government Procurement Agreement."
Also included in the executive action is a commitment to "support the manufacturing capabilities and technology needed to build a clean energy future."
Former President Donald Trump's attempts to encourage greater government purchases of U.S.-made goods were largely unsuccessful, especially given the attempts to do so in the waning days of his administration. Trump's major "Buy American" order signed in April 2017 was more focused on the purchase of defense equipment and other heavy industry, which have supply chains that are difficult to disrupt. Biden's order is seen as having a more immediate effect on purchases of healthcare products.
The COVID-19 pandemic has highlighted the nation's reliance on foreign suppliers for drugs, vaccines and other medical supplies and the urgency to have a stronger domestic manufacturing base after many healthcare providers found themselves unable to obtain certain products.
Even before the pandemic, the U.S. Food and Drug Administration reported shortages of about 200 medicines, many of them considered essential for patient care.
Biden said in July 2020 that he would direct the FDA to identify a list of essential medicines and other countermeasures and tell federal agencies they must purchase those products from U.S. manufacturers. A month later, Trump issued an order outlining the same requirements.
The Pharmaceutical Research and Manufacturers of America — the trade group for innovator biopharmaceutical companies — has said it supports efforts to foster more manufacturing in the U.S. But it said proposals aimed at driving all drug manufacturing to the U.S. "underestimate the significant time, resources and other feasibility challenges and complexities involved."
The order was met with support from the National Council of Textile Organizations, a trade group whose members have largely shifted to producing personal protective equipment amid the coronavirus pandemic.
"Increasing the domestic procurement threshold and the price preferences for domestic goods under the current Buy American law will bolster domestic production and stimulate more investment in U.S. manufacturing," the group said in a statement.