The U.S. Chamber of Commerce warned against the adoption of “buy American” policies for government contracting in the North American Free Trade Agreement, arguing in a submission to the U.S. Trade Representative’s Office on Monday that adding policies explicitly favoring U.S. companies or products in upcoming negotiations with Canada and Mexico would do more harm than good for the economy.
“Some have suggested eliminating the NAFTA’s procurement chapter. While this might appear to be a pro-‘Buy American’ move at first glance, it would have the opposite effect: It would lead directly to reduced sales of made-in-USA products and harm the American workers who make them,” the Chamber said in its official submission. Monday was the deadline for parties to submit comments ahead of the renegotiations, which are likely to begin in August.
NAFTA’s procurement chapter prohibits its members from favoring domestic companies in government contracting. President Trump strongly favors ‘buy American‘ policies and has indicated that he wants to eliminate or at least weaken that section of the trade deal. He signed an executive order this year calling on Cabinet agencies to “more narrowly construe” the public interest provisions of federal contracting rules, such as taking into account whether contractors use materials such as steel obtained from outside the U.S.
The Chamber pushed back against that in its NAFTA submission: “It is incorrect to say that NAFTA’s procurement rules have stopped the U.S. government from ‘Buying American.”
It argued that federal data shows that “just 2 percent of all contracts were secured by foreign-headquartered companies” last year, and 80 percent of those were defense contracts obtained by the U.S. affiliates of European countries, which are not covered by NAFTA. “Just one of the 50 largest contractors to the U.S. government in [fiscal] 2016 was a foreign-headquartered firm. Just one Canadian company showed up in the top 100 contractors; no Mexican companies appeared in the list,” it stated.
Scrapping the procurement chapter also would allow Canada and Mexico to adopt rules favoring their companies in contracting, a potential blow to U.S. business that bid on them.
The Chamber also argued against adoption of “even a modest increase” in the “rules of origin,” the standards by which a product is deemed to be made in a particular country. Under current NAFTA rules, a product can be called “made in America” if at least 62.5 percent of its components come from there. That benefits U.S. companies, particularly automakers, that have supply chains spread across the three countries. Critics have argued the current standard is too low, and Commerce Secretary Wilbur Ross has said the rules could use some “tightening.”
