President Biden’s "Made in America" order will help U.S. manufacturers

President Biden’s Made in America order will help U.S. stampers

The Buy American executive order that President Biden signed on Jan. 25 will benefit U.S. stamping manufacturers and metal fabricators supplying the federal government, despite the requirement that the materials they purchase be produced domestically as well. By strengthening existing Buy American rules, the order is positioned to boost U.S. manufacturing because it requires preference to domestic producers and removes much of the price suppression that accompanies global cost competition.

Although the Buy American order applies only to federal government spending, that pot is sizable--$600 billion--and applies to everything from military contracts and postal and other federal vehicles to construction components for federal facilities.

The order, another in a long line of “adjustments” to the 1933 Buy American Act that directs government spending to procure a majority of materials and products from U.S. sources, includes significant improvements over previous iterations. It does so by redefining “U.S. content,” pressing to increase the content percentage, closing loopholes in the waiver process, and providing oversight and accountability.

According to the U.S. Government Accountability Office (GAO), “Problems in administering the act involve definitions of ‘substantially all’ of the components and definitions of ‘manufactured in the United States.’” Additional snags have been in the “public interest” waiver: “The provisions of the act may be waived if the head of the procuring agency determines the act to be inconsistent with the public interest or the cost of acquiring the domestic product is unreasonable.”

The executive order creates a new position in the Office of Management and Budget and imposes scrutiny of the waiver process that has been abused in the past.

“The percentage of Defense Department contracts receiving waivers … jumped under Trump. Such waivers are a key target of Biden’s executive order,” according to a Jan. 27 Washington Post article.

“Biden’s ‘Buy American’ plan will make it more difficult for federal agencies to contract with companies overseas to purchase foreign products by reducing loopholes and waivers in existing Buy American rules and changing the definition of ‘American-made’ goods,” according to a Forbes article, “Biden Signs ‘Buy American’ Executive Order—Here’s What It Means For Businesses.”

Additional good news for stampers and fab shops is a provision for small and midsize businesses to give them better access to information about contracting with the federal government and competitors’ waivers. Stampers and fabricators have a better chance of having a seat at the government contracts table.

Consumers Versus Makers

The American-made requirement resurfaces the age-old arguments about whether or not protectionism—required preference for nationally manufactured products—is good for Americans and the U.S. economy. Free trade arguments enter in.

President Biden’s Made in America order will help U.S. stampers

Global competition reduces the price consumers have to pay for goods produced. Low-cost, foreign-produced goods threaten the survival of U.S. manufacturers—which are also employers.

That conundrum has existed for decades, as the U.S. trade surplus has eroded since NAFTA. The U.S. trade deficit is a stark marker of the result of manufacturing migration.

Charles Fishman’s 2003 Fast Company article “The Wal-Mart You Don’t Know” revealed in painful detail how U.S. shoppers buying China-manufactured goods at Walmart—then the U.S.’s largest importer of products from China—unwittingly hastened the demise of their own factory jobs.

So, what’s the better trade-off—being able to buy inexpensive products but losing manufacturing jobs and revenue, or buying more expensive goods and maintaining a healthy manufacturing industry in the U.S.?

Balance Is Key

I suspect that stamping manufacturers concede that at least the U.S. government should be required to buy U.S.-manufactured products, whether for military operations and national security, postal services, or offices of administration. And who wants American flags to be made in China?

The key is to ensure that the price that U.S. manufacturers pay to manufacture products doesn’t exceed the financial benefits of supplying them.

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