WITA Panelists Concerned About Buy American Executive Order
A former White House economic adviser said he's “very worried” about the possibility of an executive order that would expand Buy American rules to pharmaceutical purchases by the Veterans Administration or other government agencies. Currently, there is a waiver for federal procurement if supply is not available or if it would be much more expensive; in order for this to drive pharmaceutical production or medical device production to the U.S., that loophole would have to be closed.
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Clete Willems, a partner at Akin Gump, told attendees on an April 30 webinar hosted by the Washington International Trade Association that nationalizing production isn't realistic. “ Let’s talk about regionalization,” he said. “Trusted supply chains with allies. Let’s look at stockpiling.”
Scott Paul, CEO of the Alliance for American Manufacturing, is concerned about the proposed executive order for another reason -- he thinks it might be toothless. “Neither [Buy American] executive order so far has resulted in a meaningful change in policy,” he said. “It may well be that they are more rhetorical in nature than practical, and I think that would be a missed opportunity and mistake.”
Paul said that “this [COVID-19 pandemic public health] crisis has certainly demonstrated that every country is going to act in its own interest.” He said that medical distributors have squeezed companies to cut costs, which has left them “no choice but to go to China or other low-wage countries.” He called it the “Wal-Martization” of the medical supply chain.
Willems said decoupling should be reserved for strategic, high-technology goods. “I do think the U.S. does need to look more broadly at industrial policies,” he said. He praised the studies of the Information Technology and Innovation Foundation, and said the government should be asking: “What are the technologies we need to be more competitive on?”
“It is inevitable that for certain products, some certain types of technologies, there’s going to be a severing of those supply chains with China,” he said. “You see a little bit of that happening and I think you’re going to see more of it. A lot of companies are worried about this U.S.-China dynamic.”
When it comes to China, Willems said, “Let’s not peddle conspiracy theories. Let’s be strategic. Let’s have long-term strategic answers that think through the second-order and third-order effects.”
The webinar also covered the Defense Production Act, which has been used to boost production of swabs, and control exports of high-grade masks produced in the U.S. Jeff Bozman, special counsel at Covington & Burling, told listeners that Congress appropriated $1 billion to support companies ramping up production for the fighting the COVID-19 pandemic, which is distributed through the DPA. It also waived the requirement that it approve grants of more than $50 million. Bozman cautioned that the DPA is not unlimited. “It cannot be used to compel contracts of employment,” he said, so if a company cannot produce at the volume the federal government wants, it just tells the government that. He also noted that while the DPA talks about domestic sources of goods, those sources include Canada, and require that all R&D, engineering, manufacturing, and nearly all components, come from the U.S. and Canada.