TTIP TALKS

‘Buy American’ Stands in Way of Free Trade

A large 'Buy American' sign, in support of Detroit's auto industry, is seen in the back of an auto scrap yard in Detroit, Michigan May 18, 2009. Chrysler's bankruptcy proceedings show the possibility of an orderly restructuring of a major U.S. carmaker and could be a model for General Motors, the White House said on May 29, 2009. GM is expected to file for Chapter 11 protection by June 1, 2009 and President Barack Obama will likely discuss the next steps in its reorganization at that time. Picture taken May 18, 2009. REUTERS/Rebecca Cook (UNITED STATES TRANSPORT BUSINESS EMPLOYMENT)
A large "Buy American" sign, in support of Detroit's auto industry.
  • Why it matters

    Why it matters

    E.U. firms have access to barely one-third of the U.S. procurement market, which recently amounted to just under €180 billion, or about $204 billion.

  • Facts

    Facts

    • The “Buy American” clause dates to the Great Depression and requires public administrations to give preference to U.S. companies when awarding contracts.
    • In an election year when anger is targeting the political establishment, the government will do anything to avoid criticism of throwing U.S. taxpayer money at foreign corporations.
    • The head of U.S.-based Dow Chemical criticized restrictions in accessing government contracts as one of the “greatest barriers to free trade.”
  • Audio

    Audio

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The United States is the partner country at this year’s Hanover Messe and it is presenting itself as the land of unlimited investment opportunities.

“Select USA” has been the slogan it is using this week to promote itself as an industrial location. It is also intended as a strategy to breathe new life into difficult free trade talks with Europe.

But there is also another America — one that hides behind protectionist regulations and makes it tough for European companies to gain access to public contracts.

“Buy American” is the nationalistic counterpart to the more liberal-minded “Select USA.” Despite attempts by U.S. President Barack Obama and German Chancellor Angela Merkel to save the Transatlantic Trade and Investment Partnership known as TTIP, the dispute over the U.S. government procurement market could doom their efforts.

“The E.U. has expressed dissatisfaction over the United States’ initial offer because it doesn’t take (the bloc’s) priorities into account.”

European Commission

“If the Americans cling to this position, we won’t need a free trade agreement, and TTIP will fail…,” warned Sigmar Gabriel, Germany’s economics minister and vice chancellor, in an interview with Handelsblatt.

Europeans are now getting unexpected support from U.S. industry.

The head of Dow Chemical, Andrew Liveris, used his appearance in Hanover to criticize barriers in accessing government contracts as one of the “greatest barriers to free trade.”

And Tom Donohue, head of the U.S. Chamber of Commerce and its chief lobbyist in Washington, said he is fundamentally against “Buy American.”

But that isn’t the way it looks. U.S. negotiators are not willing to change anything about the market barriers. “Buy American” is considered a sacred cow in Washington, especially in a presidential election year. Just as Germans want to defend fixed book prices and the French the field of audio-visual media, U.S. negotiators say their procurement regulations are untouchable.

Labor unions and the steel industry want to keep “Buy American.” In an election year when anger is targeting the political establishment, the government will do anything to avoid criticism of throwing U.S. taxpayer money at foreign corporations.

 

Mixed Opinions on TTIP-01

 

That is why it is touch-and-go in the 13th round of talks on the free trade treaty, which began on Monday in New York. In its status report on TTIP negotiations, the European Commission noted that “the E.U. has expressed dissatisfaction over the United States’ initial offer because it doesn’t take (the bloc’s) priorities into account.”

Is it that Washington cannot or does not want to deliver?

The “Buy American” clause requires public administrations to give preference to U.S. companies when awarding contracts. It is based on a law enacted back in 1933 during the Great Depression, but is constantly renewed.

Even if a compromise is reached in TTIP talks, individual states do not have to go along with it. Michigan Governor Rick Snyder, for example, said he is keeping all options open, even though he is actually a fan of free trade. “It depends on what all the other terms are,” he told Handelsblatt, while visiting the trade fair in Hanover. “It’s not just getting rid of laws. It’s part of a comprehensive agreement.”

 

21 p21 German Foreign Trade with the United States-01

 

What is clear is that the volume of business involved is enormous. According to the European Commission, E.U. firms have access to barely one-third of the U.S. procurement market. Most recently their share amounted to just under €180 billion, or about $204 billion. Contracts tendered publicly in E.U. countries amounted to some €400 billion, or about $454 billion, the commission said. Companies from non-E.U. countries can also participate in 85 percent of the bidding.

But the U.S. side operates with different numbers. They say contacts with an annual value of $320 billion are open to Europeans. U.S. companies, on the other hand, only have access to contracts worth $158 billion in Europe, they say.

If both sides can’t even agree to the facts, things look bad for TTIP.

 

Moritz Koch is Handelsblatt’s Washington correspondent. Thomas Ludwig covers the European Union from Brussels. koch@handelsblatt.com, ludwig@handelsblatt.com

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