International Trade Agreements and US Procurement Law

AuthorChristopher R. Yukins and Allen B. Green
Chapter 9
International Trade Agreements and US Procurement Law
Christopher R. Yukins and Allen B. Green
I. Introduction and Summary
Some of the most difficult issues in US procurement law stem from the nation’s several
centuries of accumulated protectionist measures and from a patchwork of trade agreements
meant to contain that protectionism. These conflicting measures reflect a push-and-pull in US
procurement policy, between those who favor closed procurement markets and those who favor
open competition; the compromises reached between the two camps have created a Byzantine set
of rules and requirements. The US system’s complexity is likely to deepen over the next few
years, as the “Buy American” policies that played such a prominent role in the 2016 elections are
addressed. At the same time, however, regulatory cooperation between nations, driven by
international and regional agreements, will help reduce some of the organic barriers—the
differences between rules s ystems that raise unnecessary barriers to competitionthat have
plagued international procurement markets for so long.
To make sense of this complex area, this chapter proceeds in several parts. Part II reviews
the major pieces of protectionist legislation passed by Congress,1 focusing first on the Buy
American Act of 1933; this discussion also references some of the most important implementing
regulations. Part III reviews the most important US trade agreements which have limited the
force of that protectionist legislation, including the World Trade Organization’s Agreement on
Government Procurement (GPA).2 Because barriers to procurement can also arise from structural
factors—“non-tariff barriers to trade,” which, in practice, may protect domestic vendors—this
part also explains how the trade agreements mitigate those non-tariff barriers. Part IV offers
some practical suggestions for those working in this field.
II. Major Protectionist Measures in US Law
In assessing major laws that protect the US federal procurement market, it is worth noting
that this type of protectionism stretches back throughout the history of the United States.3 Indeed,
even Adam Smith (whose free-market arguments helped shape the earl y economic policies of the
United States) argued for special protections in trade involving military materiel, because of the
national security implications of allowing foreign nations to control critical supplies.4 As a
practical matter, domestic preferences in procurement are deeply embedded in US politics and
law, and, once in place, are difficult to erase.
A. The Buy American Act
The Buy American Act5 was passed by Congress in 1933 as part of a broader
protectionist reaction to the Great Depression.6 The Act generally requires federal agencies to
purchase only US materials and manufactured goods.7 Under the Act, as implemented in federal
regulations (discussed below), manufactured products made wholly in the United States, or
products from “substantially all” domestic components, are eligible for price preferences over
foreign products.8 The Buy American Act’s preferences turn on the place of manufacture of the
products (or the source of raw materials), and not the nationality of the contractor. The Buy
American Act applies to the federal government’s direct purchases exceeding the micro-purchase
threshold (currently $3,500),9 and applies where a preference is consistent with the public
interest, and the proffered items are reasonable in price.10 To assess price reasonableness,
agencies apply a margin of preference, and will purchase the domestic item (even if it is more
expensive than the foreign good) if the price of the domestic item falls within the specified

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