EU Targets Buy America in Trade as Streetcar Maker GrowsKathleen Miller
An Oregon streetcar maker less than a decade old is winning work across the country, its market entry helped by laws that favor American business and hamstring overseas competitors.
Now, United Streetcar’s advantage is at risk.
In trade negotiations with the Obama administration, dozens of European Union and Pacific nations are seeking to compete more equally with U.S. suppliers for state, local and federal contracts, a combined market that easily tops $650 billion annually.
American companies such as General Electric Co. and Caterpillar Inc. also support easing provisions that favor U.S. businesses, viewing them as barriers to overseas growth. United Streetcar and Nucor Corp., the nation’s largest steel producer by market value, want to keep them.
“Two U.S. companies can have dramatically different interests on Buy-American policies,” said Dan Gordon, an associate dean at George Washington University Law School and former top federal procurement official. “Their opinions may diverge based on where they do their manufacturing. The picture is far more complicated than it was before globalization.”
Buy-America laws mandate that federally funded transit projects use made-in-the-U.S.A. products, while the broader Buy American Act of 1933 affects a wide range of products across U.S. government agencies. There are exceptions to both measures.
State and municipal governments sometimes have their own contracting provisions favoring hometown companies.
The domestic preferences allowed United Streetcar, a unit of Clackamas-based Oregon Iron Works Inc. that was founded in 2005, to capitalize on a revival in downtown streetcars.
Its first project, a prototype streetcar for Portland, Oregon, received federal funding that required domestic manufacturing. It won more work from the city with financing from the state, which required the money go to a streetcar manufacturer based in Oregon.
The company now has about 100 employees and contracts with the cities of Washington; Tucson, Arizona; and Portland, Oregon. It competes with European companies that dominate the streetcar market. They include Munich-based Siemens AG, Prague-based Inekon Group AS and Beasain, Spain-based Construcciones y Auxiliar de Ferrocarriles SA.
“It would have been virtually impossible for us to have won these contracts without” Buy-America provisions, Kevin Clarke, president of United Streetcar, said in an interview.
The manufacturer isn’t lobbying Congress on the trade pacts, said Julie Skirvin, counsel for Oregon Iron Works. The company doesn’t “have the capacity to engage in the kind of international lobbying that is going on with” the trade agreements, she said in an e-mail.
President Barack Obama has urged members of Congress, where any push to loosen Buy-America protections will be a tough sell, to back broader authority for his administration to negotiate the pacts.
Trade negotiations between the administration already are under way with 11 other Pacific Rim nations on the Trans-Pacific Partnership, and with the 28-member EU on the Trans-Atlantic Trade and Investment Partnership. Those pacts would create the world’s largest free-trade zones, linking regions with about $45 trillion in annual economic output.
In both accords, countries are seeking to improve their companies’ odds of winning government work in the U.S. The contracts might include public water projects or textiles used in military tents.
Anne Eisenhower, a spokeswoman for the U.S. Trade Representative’s office, didn’t provide answers to e-mailed questions about whether the agency was considering those requests.
Nucor, whose competitors include Japan’s Nippon Steel & Sumitomo Metal Corp. and South Korea’s Posco, favors strong Buy-America provisions in the trade agreements. It is “heavily engaged” in the negotiations with both European and Pacific Rim nations, said Jennifer Diggins, public affairs director for the Charlotte, North Carolina-based company.
“Anytime you’re going to use taxpayer money in a publicly funded infrastructure project, it should benefit the local economy,” Diggins said in a phone interview.
Not all U.S. companies agree that domestic preferences are best for business.
“We’ve been very clear with the U.S. trade negotiators and indeed with trading partners around the world, that buy-national requirements or forced local-content requirements, we believe to be bad policy,” said Karan Bhatia, vice president of global government affairs and policy for Fairfield, Connecticut-based GE.
Those policies are “ultimately harmful to American companies and American workers as they seek to grow their presence in markets abroad,” Bhatia said in a phone interview.
In some countries, government spending accounts for 40 to 50 percent of the local economy, he said. It’s tough for American companies to penetrate those markets if the U.S. is seeking to protect its own domestic procurement, Bhatia said.
At Caterpillar, officials are concerned that other countries will limit access to procurement opportunities when the U.S. does, said Bill Lane, director of global governmental affairs for the Peoria, Illinois-based maker of construction equipment. About 95 percent of Caterpillar’s potential customers are outside the U.S., he said.
“What’s good for the goose is good for the gander,” Lane said in a phone interview. “Our big concern has been and continues to be that whenever one country embraces buy-national policies, what you’re doing is closing doors on all other markets where you could sell your products.”
The U.S. preferences already affect American companies’ ability to sell abroad, Lane said. In contrast, Caterpillar has had “amazing success” in countries such as Canada, Mexico and Chile -- where the U.S. has free trade agreements, he said. Those pacts remove most tariffs, and don’t typically alter domestic preferences in contracting, he said.
Last year, European Union governments gave the European Commission, the bloc’s regulatory arm, a mandate for negotiations with the U.S. They wanted lower regulatory barriers, removal of tariffs and expanded access in investment, services and public procurement.
An early version of the Pacific Rim agreement indicated it might weaken buy-American or buy-local laws, said U.S. Representative Mark Pocan, a Wisconsin Democrat who saw a draft of that agreement in August, in a phone interview.
That’s worrisome, he said, because it constitutes “taking away local control and legislative intent, and giving it to an international corporation that decides it wants a piece of the pie.”
U.S. employment opportunities may also fade if the trade agreement supersedes domestic contracting preferences, Pocan said.
Pocan is owner of Budget Signs & Specialties, a small printing business in Madison, Wisconsin. He has said free-trade agreements have made it increasingly difficult to find American-made supplies for his shop.
Opening government buying markets in the U.S. is a sticking point for vendors in EU countries, said Luisa Santos, international relations director for BusinessEurope, a Brussels-based organization that advocates on behalf of companies in EU nations.
BusinessEurope is pushing for more bidding opportunities at the federal level, as well as in states and big cities such as New York, Miami and Los Angeles, she said.
The U.S. government contracting market is about $456 billion. States spend almost $200 billion annually buying goods and services, according to an analysis by the Washington-based Pew Charitable Trusts.
Europe and the U.S. have similar wages and regulatory environments that should make their government agencies comfortable buying from businesses on either side of the Atlantic, she said.
“We are competing as equals in most places,” Santos said. “There are not the fears there are with other countries, as in Asia, where there may be lower wages paid to workers.”
Better access to procurement markets in the U.S. may benefit companies such as Alstom SA, a French maker of trains and power equipment, and Siemens, Europe’s biggest engineering company, because of the amount of transportation work done by both companies, she said.
Alstom supports “free and open markets and a consistent level playing field for all competitors in the market,” Larry McDonnell, a Washington-based spokesman for the company, said in an e-mail.
Two spokeswomen for Munich-based Siemens didn’t provide answers to questions about how domestic preferences affect the company’s ability to win government work in the U.S.
European companies’ push to relax Buy-America provisions follows recent efforts by some state lawmakers in the U.S. to strengthen them, according to BusinessEurope’s Santos.
Twelve state legislatures last year weighed measures that would have required contracting officials to favor American companies, according to data from the National Conference of State Legislatures’ Denver office.
Only one state, Maryland, passed such a law, according to the Washington-based National Foreign Trade Council, which supports efforts to open trade markets.
The measure, sponsored by state Senator Ron Young, a Democrat from Frederick, Maryland, requires state contractors to use American-made goods on public projects unless domestic products are significantly more expensive or of worse quality than overseas-made goods.
“There’s no better or faster way to bring jobs back here or increase jobs than if you buy American products” Young said in a phone interview.
Such actions may backfire as federal contract spending declines, Bill Reinsch, president of the National Foreign Trade Council, said in a phone interview.
The value of U.S. federal contracts fell 11 percent in the year ended Sept. 30 from fiscal 2012, according to data compiled by Bloomberg Industries.
As U.S. agencies spend less on contracts, other countries’ governments represent a sales opportunity for many American companies, Reinsch said in a phone interview.
“They see a lot out there and see a U.S. government that is cutting back expenditures, trying to slow spending and control its budget,” he said. “You have to ask, where is the growth going to come from?”