By Kenneth Rapoza, CPA Industry Analyst
The Office of Trade and Manufacturing Policy recently published a quick look at some of the ways the government has tried protecting US manufacturing jobs.
The White House released its report on its Buy America track record on Friday, and as we approach an election, we are hopeful that this momentum continues to move in favor of buying US-made goods in the private and public sector.
The report, written by the Office of Trade and Manufacturing Policy, focused on increased Buy American activities in five areas: government procurement, Hire American policies, trade negotiations/tariff, defense procurement, and US-flagged shipping.
In government procurement, the report said that domestic procurement has risen 26 percent since the Obama years to $419 billion last year. That’s due to Trump executive orders including orders to reduce the exceptions that allow agencies and local governments to procure foreign-made goods.
In the Hire American section, the report said that apprenticeships have more than doubled to 250,000 a year since a 2017 Executive Order increased the federal budget for apprenticeships by $183 million. Apprenticeships are a key part of any revival plan for the manufacturing sector as the US has lost many essential skills and skilled workers with the decline in manufacturing output over the last two decades.
In trade negotiations and tariffs, the report identified thousands of jobs created by tariffs in industries including steel, washing machines, and solar panels.
First Solar and Q-Cells both benefited from tariffs on Made in China solar imports and both are now the only two non-Chinese makers of solar panels in the list of top ten global solar panel producers. China has dominated the sector for years, and we believe that without tariffs, China will come to dominate it yet again.
The 27 page report highlighted Section 201 of the 1974 Trade Act, which was the tariff rule used by President Trump to protect solar panel manufacturers that were facing an onslaught of below-market-rate Chinese competition.
From 2012 to 2016, China was dumping more of its solar panels and modules into the US at below production costs. No locals could compete against that kind of pricing. As a result, Chinese imports soared by 500 percent, and prices fell by 60 percent, the White House report stated.
US solar production fell. By 2017, at least 25 solar panel and module manufacturers were shut down, according to the USTR.
Suniva and SolarWorld, two domestic manufacturers, filed a petition to the United States International Trade Commission for relief. After the ITC court ruled in their favor, $8.5 billion worth of solar panel imports got tariffed. The report says some 2,600 jobs were created in eight factories, and another 1,750 jobs across five factories were preserved.
One thing worth noting is that the Office, led by Peter Navarro, seems acutely aware that Buy America and Trade Act rules are riddled with loopholes that need closing. These include things like allowing for government procurement of widgets made in numerous countries in the wealthy European Union. And allowances for products not sufficiently found in the US.
We highlighted this in a report on September 3 in the pharmaceuticals space.
Each year, the United States Government spends more than $200 billion on infrastructure projects that see winning bids and other contracts go to foreign firms. Congress has passed numerous bills to ensure that when the government spends money on such procurement, the products be made in whole or in part in the USA under Buy American legislation. But those laws are way too porous and Navarro’s Office knows it.
Trump signed 10 Executive Orders over the years to try to close some of those, with varying degrees of success. Supply chains take time to catch up to new rules.
One EO, signed April 18th, 2017, made it more difficult to grant waivers to companies who say they cannot find a certain product locally. Another signed on January 31st, 2019 increased the amount of American made steel used in a government purchase order from only 50 percent to 95 percent.
The report also looked at a few recent trade negotiations.
The Trump Administration renegotiated the South Korea-US deal, aka KORUS. That was originally signed in 2011 in the Obama years, after which the US deficit with South Korea doubled, from around $13 billion to $28 billion in 2016. The Trump administration renegotiated this deal and the deficit has improved to $21 billion last year, though exports remain relatively flat from 2018 to 2019.
The revised deal included steps to open up the South Korean market to more American made automotive exports. The agreement also allows the United States to continue imposing a 25 percent tariff on South Korean light trucks and pickups until 2041 – a tariff that was previously set to expire next year. The report says that “had that tariff had been lifted, the result would have been devastating to one of the most profitable and robust segments of our auto production.”
The final section, on maritime shipping, points out that tonnage carried by US-flagged ships has risen some 7 percent to 7.1 million tons after reaching a low in 2016. The Trump Administration has pushed for strong enforcement of the Jones Act, which requires certain freight to be carried by US-flagged ships. The administration recognizes the synergies between healthy commercial shipbuilding and shipping industries and their military counterparts.
“This report is a compendium of many actions and Executive Orders taken out of the spotlight, but taken together, their effect is to strengthen the US manufacturing sector, rebuilding US industry and creating high-quality jobs,” said CPA Chief Economist Jeff Ferry.