New US trade policy more evolution than revolution

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The Biden administration’s US trade policy changes so far build on rather than reverse the Trump legacy

Former US President Donald Trump may be out of office, but the first initiatives of the new administration of President Joe Biden have been to encourage the American manufacture of clothing and textiles – just in a different way from his predecessor.

On 25 January, just five days into his term of office, Biden signed an Executive Order on ‘Ensuring the Future is Made in All of America by All of America’s Workers.’ It is supposed to strengthen “all statutes, regulations, rules, and Executive Orders relating to Federal financial assistance awards or Federal procurement, including those that refer to ‘Buy America’ or ‘Buy American.'” 

In practical terms, this includes establishing a ‘Made in America Office’ within the federal government’s Office of Management and Budget (OMB). It is charged with increasing transparency over any plans by federal government ministries and agencies to use waivers to avoid sourcing from American suppliers, giving it oversight over such decisions. 

Given the federal US government budget is US$4.79 trillion, the sums involved here are considerable.

Unsurprisingly, the American clothing and textile industry welcomed the move. David Trumbull, textile industry specialist and principal of Boston-based Agathon Associates, told just-style it was a “good step.” 

National Council of Textile Organizations (NCTO) president and CEO Kim Glas agreed: “The Biden administration understands that waivers, price issues and lack of uniform application are an issue.” 

Procurement preference

Trumbull, however, stressed that the new system was far from closing the US procurement market to overseas clothing suppliers through the Buy American Act, which was first passed in 1933. 

Existing commitments waive its requirements within reciprocal trade agreements, and global commitments under the World Trade Organization Agreement on Government Procurement continue, enabling American manufacturers to supply foreign procurement markets. 

As a result, Trumbull suggested that the Biden administration enacts different “government policies, such as tax policies and other incentives to make things in America.”

One possible tactic, according to American Apparel and Footwear Association (AAFA) president and CEO Steve Lamar, is strengthening the Berry Amendment to the US Code that requires the country’s defence department to give preference in procurement to locally-made products.

“Ensuring robust application of the Berry Amendment, which is stronger than many Buy America laws, has long been a priority for the AAFA,” Lamar told just-style. This is especially important given the current pandemic has shown the value of US manufacturers in terms of their ability to supply PPE.

He said the association “looks forward to working with the Biden administration to ensure that these laws continue to be accurately enforced, transparently managed, fully funded, and well-implemented – and applied in a manner consistent with our international trade obligations.” 

He noted that Biden’s actions built on provisions within the 2021 National Defence Authorisation Act (NDDA), passed in December (2020) through a new section 817 that “ensures more of the textiles purchased by the military will be produced in full compliance with the Berry Amendment.”

New opportunities

Glas was optimistic “given the priority the Biden administration has placed on reshoring these [supply] chains.” She said the US textile industry was “eager to be part of this effort to ensure that executive order is implemented in a way to maximise domestic capacity and production.”

She added that despite the ‘America First’ rhetoric of the Trump administration, US manufacturers have been “frustrated by past implementation efforts under Buy American laws for American-made products” and are expecting “meaningful new opportunities” from the Biden administration.

However, Trumbull said President Trump increased domestic procurement requirements in a tangible way. For example, the Buy American Act requires the government to purchase goods “manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States” and that had in the past been interpreted to mean at least 50% of such purchases. 

In a July 2019 executive order, President Trump “raised that to 55%.” 

Also, Trump increased the notional cost of imported products when valued within procurement orders, making them less attractive. Trump increased the price assessment (called ‘price preference’) from plus 6% to plus 20% for large business suppliers when compared to US-made product prices and from plus 12% to plus 30% when pricing supplies offered by oversea companies compared to American small businesses. 

US-China trade war

Also, while the Biden administration has placed Trump’s trade agreements on Chinese exports under review – which may ultimately see US-China trade war tariffs being rolled back – Trumbull said: “I am pleased to hear that President Biden does not plan to remove them soon.”

That is far from being a consensus across the American clothing and textile sector, however. Lamar called for a “realisation that trade – both imports as well as exports – create American jobs and economic opportunities,” and hence the duties on Chinese-made imports have a cost to retailers and consumers.

“When we tax those supply chains, we raise prices; we harm our ability to hire more American workers; and we deny resources that can be invested in innovation, such as the innovation we will need to fight climate change,” he said. 

Therefore, Lamar added: “Tariffs on US imports from China, levied as part of President Trump’s trade war with China, need to be eliminated as soon as possible.”

Trumbull said he anticipated President Biden’s position on how to respond to China will be different, with more cooperation with the US Congress, trading partners, and the World Trade Organization. But “I do not see him allowing America to return to a pattern of letting China get away with not fulfilling its WTO commitments.”

He also wants the Biden team to develop effective policy responses to clothing and textile exporter Vietnam, “now that the US government has found that nation to be manipulating its currency to the economic harm of America.” 

And he hoped that President Biden’s greener energy policy would not risk the low energy costs and reliable energy supplies that have underpinned US growth in the past decade.

Ultimately, some commentators may feel that the early record of the Biden administration indicates that in terms of practical trade policies, there may be more evolution rather than revolution when comparing the current government policies with those of its forerunner.

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