Wednesday 08 Apr 2020 | 16:59 | SYDNEY
Wednesday 08 Apr 2020 | 16:59 | SYDNEY

Reader riposte: Sydney protectionism


Sam Roggeveen


18 June 2009 11:20

Linda Weiss from the University of Sydney writes about the New South Wales Government's recent protectionist moves, which I argued could lead to retaliatory measures:

There is no need to fear other governments following the New South Wales lead. Foreign governments are already way ahead. You might want to let readers know that in matters of government procurement, a ‘buy national’ preference (‘protectionism’ as you call it) is the norm, not the exception. You might also want to point out that Australia is one of the LEAST protectionist countries in procurement policy, famously so at the level of federal government contracting, where favouring foreign bidders over domestic suppliers became the national norm during the Howard years.

Looking to our neighbours, consider, for starters, the Buy American Act (passed in 1933 by Congress). Here are a few tasters of what the Act requires:

  • All goods for public use (articles, materials, or supplies) must be produced in the US, and manufactured items must be manufactured in the US from US materials.
  • Price preferences (premiums) must favour ‘domestic end products’ of American firms on US federal government (and state) contracts.
  • Agency heads may determine the premium offered to local firms in competing against foreign bidders.
  • Many states and municipalities include similar geographic production requirements and price premiums in their procurements.
  • Foreign suppliers of goods or services are ineligible for any federal contract set aside for US small business (defined as 500-1500 employees).

Numerous other pieces of Federal legislation extend similar Buy American requirements to third-party purchases that utilize Federal funds, such as highway and transit programs. For example, almost all large transportation contracts in the US are federally funded, but they are administered by state and local governments or private sector organizations. Projects funded by the Federal Transit Administration require that:

  • All steel and manufactured products must have 100% US content and to be 100% US-manufactured.
  • Rolling stock (trains, buses, ferries, trolley cars, etc.) components must have 60% US content, with final assembly occurring in the US.
  • Similar conditions prevail for airport projects.

The Act, when applicable, provides a preference for US domestic products unless the product is not available in the US; procuring a US domestic product is not economically feasible; or preference for a US domestic product is inconsistent with the public interest.

The President has the authority to waive the Buy American Act within the terms of a reciprocal agreement or otherwise in response to the provision of reciprocal treatment to US producers. For example, under the World Trade Organization (WTO) 1996 Agreement on Government Procurement (GPA), the US provides access to the government procurement of certain US agencies for goods from the other parties to those agreements. However, the Buy American Act was excluded from the WTO’s Government Procurement Agreement’s coverage. It is also excluded from AUSFTA, the US bilateral trade agreement with Australia. Readers interested in the details may refer to our Chapter 4 on Government Procurement, in How to Kill a Country.

Of course, all of this buying stuff ‘off the shelf’ is old-style procurement. The really sexy stuff is ‘technology procurement, where public agencies contract for the making of items that don’t yet exist and then provide the demand pull of a large government market for the final product (for example, computers, software, semiconductors, aircraft, medical devices etc, etc). In this domain, the US is world leader and the Europeans are probing ways and means of emulating the US system of procurement-driven innovation. No danger of copying the Australian approach any time soon!