A group of US congressional representatives have sought to set the record straight regarding the bipartisan-backed ‘Buy American’ provision in the FY20-21 National Defense Authorization Act – focusing on the nation’s continued commitment to key allies like Australia, with the US defence industrial base equally supported.
Across the globe, the post-Second World War economic, political and strategic order is coming under siege, driven by mounting waves of civil unrest and rising levels of the favourite boogeyman of much of the media, 'nationalism'.
Growing economic stagnation across the West, concerns about climate change and the increasing geo-strategic competition between the world's great powers are all undermining the global balance of power.
Adding further fuel to the fire is the global and more localised impacts of COVID-19, which range from recognising the impact of vulnerable, global supply chains upon national security as many leading nations, long advocates of "closer collaboration and economic integration", grasp at the lifeboats of the nation-state to secure their national interest.
While this economic, political and strategic turmoil is in some ways 'unprecedented', the favoured catchphrase of many a media personality seeking to describe anything from the bushfires that devastated swathes of the landmass, the economic impact of COVID-19 or the societal upheaval sweeping the West, Australia does its best work when its chips are down.
Responding to these challenges has pushed the public policy status quo to the edge, as government grapples with how to stimulate the economy, lower unemployment and prepare the nation for the increasingly disrupted and challenging decades to come.
The concept of "reshoring" has emerged as a powerful policy mechanism for enhancing national security, limiting a nation's dependence on easily contested or constrained global supply chains.
While this concept has been a favoured policy of US President Donald Trump and his "America First" campaign policy platform, there is an element of legitimacy to the concept.
Highlighting this, former US Defense Department official Jerry McGinn, who is now the executive director of the government contracting centre in the School of Business at George Mason University, in a piece for Defense News unpacks just how the model can be best used by the US and Australia to fast track economic growth, boost employment and secure national interests.
McGinn says, "US government officials have called for the 'reshoring' of domestic industrial capacity in several areas in recent weeks. Whether it is the production of pharmaceuticals and personal protective equipment, or the development of microelectronics, specialty chemicals and materials, calls for a significant increase in US manufacturing capabilities are coming through loud and clear. This makes complete sense, but how do we do this reshoring?
"The solution is not an autarkic 'Buy America'-only approach that would be counterproductive to our long-term economic health. Instead, we need to have a laser focus on getting out of the China business with respect to industrial capabilities critical to national security and, in many cases, doing that with a little help from our friends."
In response to McGinn's commentary, a gathering of US congressional and industry representatives, including Representative Donald Norcross, chairman of the Tactical Air and Land Forces Subcommittee; Representative John Garamendi, chairman of the Readiness Subcommittee; Representative Jackie Speier, chairwoman of the Military Personnel Subcommittee; Bob Martinez, president of the International Association of Machinists and Aerospace Workers; and George Williams, CEO of the American Shipbuilding Suppliers Association, have hit back and focused on highlighting the balance of the 'Buy American' push.
Hyperbole is a real threat
In the era of social media and a 24-hour media cycle of 'gotcha' moments, the public and policy makers have become accustomed barrages of public and media backlash over complex policy decisions. While some of this is warranted, the increasingly interconnected and international nature of domestic policy making presents series challenges for contemporary policymakers.
The US in particular bares significant burdens in this space, as the world's leading superpower and principle strategic partner for many great, middle and small powers alike - the vulnerability of these relationships in particular to domestic policy shifts and backlash are of major concern for Representatives Norcross, Garamendi, Speier and industry representatives Martinez and Williams.
The group explains the concerns over the impact of hyperbole in response to 'concerns' about the impact of 'Buy American' amendments outlined in the US FY20-21 National Defense Authorization Act, stating, "This year, the House Armed Services Committee advanced a major reform to our defence program acquisition rules that will grow our American manufacturing base right when we need it most.
"The 'Buy American' provision in this year’s National Defense Authorization Act is a commonsense plan to source more parts from American-made manufacturers and build more with US labour. But recently some commentators have been misrepresenting the idea of Buy American to maintain the status quo; therefore it’s important to lay out the facts.
"The critics of this provision have expressed concern that the bipartisan provision drafted to improve our Buy American laws will hurt our closest allies and force them to end their defense relationships with the US. In fact, they have gone as far as to say this would undermine NATO and our defence co-operation with Australia and Israel.
"Such hyperbole is the real danger here. Our nation’s commitments to our allies and partners, including NATO, need to be strengthened, especially at a time when this administration is ending treaties and pulling out of international organisations. What these commentators fail to mention is that nearly all our NATO allies are considered 'qualifying countries' by the Department of Defense for purposes of the Buy American Act. This means the language included in the NDAA will not hurt and may even strengthen our ties with these countries."
Balancing domestic opportunities and international partnerships is essential
The concerns raised by critics of the 'Buy American' legislation raise two distinct concerns, the first being the aforementioned potential for economic impact on key US allies through restricted procurement of foreign manufactured components as part of larger acquisition programs, and the potential impact on American industry should such provisions be ignored.
However, the group is quick to identify, "Under the Buy American Act (Chapter 83 of Title 41 U.S.C.) the government must purchase manufactured end items that have been made of 'substantially all' United States component parts, which is interpreted by regulation as being 50 per cent or more. Thus, for something to be considered American-made, it only needs to be made of 50 per cent US content."
It is critical to recognise that the group also identifies the importance of 'public interest' provisions outlined in the legislation, which empowers department heads to use discretion as to when acquisition programs will be in the public interest of US business and industry and when it's best to defer to foreign suppliers.
Critically, the group articulates: "Additionally, the law provides for a 'public interest' exemption, which grants operational latitude to our federal department heads. The Department of Defense — under the Defense Federal Acquisition Regulation Supplement 225.101 and 225.872 — has applied that exemption to 27 qualifying countries as well as those with reciprocal trade agreements.
"The list includes all but three of our NATO allies, plus Australia, Israel, Egypt, Finland, Austria and Japan. This covers every nation that is a partner to the F-35 program, meaning that supply chain won’t be impacted at all.
"The Buy American provision does not change the DoD’s interpretation of this 'public interest' exemption. It only requires that the interpretation of 'substantially all' be raised from 50 per cent to 75 per cent by October 1, 2021, and increased by 5 per cent per year thereafter, giving the department and industry time to adjust and adapt. This will ensure that we do not continue to utilise component parts from China and other non-allied or adversarial nations, while providing predictability for industry to grow American jobs."
The core driving force behind this focus appears to be what many would deem as a 'nationalist' agenda, but should be viewed purely as a nation building exercise and response to continued public concern about the offshoring of skilled manufacturing and value add manufacturing jobs in the US, something the group articulates very clearly, while taking into account the importance of the critical alliances the US has fostered around the globe, stating:
"By building more defense system component parts in the US, we will be utilising taxpayer dollars here at home rather than sending that money abroad, and we’ll foster a new generation of well-trained, well-paid, American workers. Offshoring our nation’s manufacturing base didn’t happen overnight. Industries have made conscious decisions to move materials and industries overseas in order to increase profits.
"This enhancement to the Buy American Act takes a broader view: The US must maintain our alliances while also strengthening our workforce and growing domestic manufacturing, which in turn will yield long-term benefits for American employers."
Expanding on this, the group highlights the national security and resilience implications of such a strategy moving forward in an era of 'great power' competition and potential conflict between the US and peer-competitor China, explaining:
"Moreover, if a high-end conflict should breakout with China or another adversary who has the ability to cut off shipping lanes and down our aircraft, America may face the possibility that we can no longer source a component part from abroad. Our war fighters will have to wait months for the department to identify, qualify and stand up a new manufacturer before we can start making a replacement.
"That’s time we can’t afford to lose. If the coronavirus pandemic has taught us anything, it is just how critical supply chains can be in a time of crisis.
"As we shift our focus to implement our current National Defense Strategy, which has us looking at new conflicts with peer competitors like China, we must rethink not only the platforms we procure and how we fight — as each of the services are doing — but our supply chain logistics as well.
"Our defence industrial base must be viewed as an inherent component of our national defence. We know we cannot go it alone, and we will keep our key allies and friends by our side. But we must also enhance our own manufacturing capabilities. The Buy American reforms under consideration in Congress strike the right balance between economic co-operation and comingled supply chains with the needs of the American worker and ensuring our national security in an uncertain world."
The growing popularity of policies which prioritise national sovereignty, resilience and economic competitiveness over hyper-globalisation and the increasingly vulnerable global supply chains marks a major turning point for modern policymakers, policy trend setters like South Korea and Japan have demonstrated a growing lack of long-term planning in national policy making for nations like Australia and the United States, however this paradigm appears to be shifting as the public demand more.
Australia is defined by its economic, political and strategic relationships with the Indo-Pacific and the access to the growing economies and to strategic sea lines of communication supporting over 90 per cent of global trade, a result of the cost-effective and reliable nature of sea transport.
Indo-Pacific Asia is at the epicentre of the 21st century’s era of great power competition and global maritime trade, with about US$5 trillion worth of trade flowing through the South China Sea and the strategic waterways and chokepoints of south-east Asia annually.
Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia.
Australia is consistently told that as a nation we are torn between our economic relationship with China and the longstanding strategic partnership with the US, placing the country at the epicentre of a great power rivalry – but what if it didn’t have to be that way?
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific and what you would like to see from Australia’s political leaders in terms of shaking up the nation’s approach to our regional partners.