In the rollout of the Trump administration's new Buy American and Hire American executive order, White House officials cited a February report as proof of a massive imbalance in between foreign and domestic contractors they were bent on ending.
But they may want to take a closer look at the fine print.
The new executive order tasks agencies with reevaluating their contract trade policies, especially ones that allow agencies to waive preferential purchasing requirements and buy from foreign contractors through free trade agreements with those countries.
As part of its reasoning for the move, the White House cited a Government Accountability Office report that examined the opening of foreign procurement deals versus domestic ones through the World Trade Organization's Agreement on Government Procurement — a free trade agreement among 49 WTO members, including the U.S.
"Just why has the U.S. surrendered its Buy American rights? The guiding hope that has been driving these free trade agreement waivers is that America will pick up as much or more business in foreign government procurement markets as it gives away to foreigners," said a senior administration official, whom the White House asked not to be identified, at an April 17 briefing with reporters.
"However, this hope appears misguided, as there’s compelling evidence from a February 2017 Government Accounting Office report strongly suggests the U.S. may not be getting its fair share of the global government procurement market through its free trade agreement concessions."
But that’s not exactly what the report says.
The GAO found that while the U.S. did spend more on foreign procurement than the five next largest trading partners combined — $837 billion compared with $381 billion — in 2010, the most recent submission of U.S. data to the WTO, data reporting on government procurement was rife with inconsistencies, delays and incompatibilities.
"A lack of timely, complete and consistent statistical reporting by the parties limits transparency, one of the GPA’s main goals stated by the WTO. As a result, trade officials are limited in their ability to identify anomalies in, and monitor, other parties’ compliance with their GPA commitments," the report said.
"These reporting deficiencies also reduce policymakers’ ability to obtain an accurate understanding of the relative benefits of the GPA — that is, the extent to which they and other parties have opened procurement to one another’s suppliers."
The report also noted that a lack of consistent standards made it difficult to compare procurement reporting between countries and that while the North American Free Trade Agreement requires its partners to submit annual procurement reports, none had done so since 2005. Other agreements required no submission of procurement data.
The GAO offered six recommendations centered on improving statistical reporting, accuracy and timeliness, but doesn’t address a trade imbalance.
Alan Chvotkin, executive vice president and counsel of the Professional Services Council, said that while it may be directionally correct that the U.S. has more trade agreements than other countries — and therefore opens more of its business to other markets — it’s not necessarily proof of trade partners gaming the federal government.
"The purpose behind many of those free trade agreements was more than just than just opening up reciprocal trade opportunities or procurement opportunities," he said. "Even in 2010, which was probably the height of the U.S. federal procurement marketplace, the federal government was probably only spending $500 billion on the purchases of all goods and services from all sources.
"It’s still a big marketplace, but by no means is all of that marketplace open and available to foreign countries."
Chvotkin added that the order’s direction to agencies to evaluate their Buy American policies, waivers and exemptions would provide a clearer picture of the practice and its opportunities, but a deep clawback of the waivers that allow foreign procurement could have drawbacks.
"I think there are a number of potential risks," he said. "Timeliness of performance could be one. In many respects, the waivers that have been granted are because of the inadequacy of supply.
"I don’t think the waivers have been arbitrary or just granted without some analysis, but I would never say they that they are all well thought out."