Earlier this week the Biden administration once again made protectionism official U.S. trade policy in issuing the Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers.
Of course this is not new. Whether Republicans or Democrats occupy the White House, protectionism remains good politics as it has since the first Buy American policy came to be in the 1930s. Of course, history shows clearly that this very protectionism exacerbated the negative effects of the Great Depression. But as the saying goes, those who do not learn from history are doomed to repeat it. So here we are.
And this is precisely the case with protectionism. To be sure, it’s bad for businesses and bad for consumers. But when a politician stands up and says they will take care of their own workers first, it is a potent tonic for the masses and history has shown time and again that it works.
Everyone knew this was coming. For months the Biden administration has pledged to toughen up existing Buy American provisions. The newly issued Executive Order states the U.S. government will “maximize the use of goods, products, and materials produced in, and services offered in, the United States.”
It will also force private sector businesses to “Buy American” if they want to tap into federal funding. And with a high-spending, prime-the-pumps, break-the-bank administration in charge, businesses are likely to fall in line.
The implications have the potential to be significant. After all, the U.S. federal government is a buying behemoth. A White House communiqué issued alongside the Executive Order points out that federal contracting alone is worth nearly $600 billion annually.
Forcing every single department and government agency to buy American will be a windfall for the lucky domestic recipients and downright ruinous for the unlucky foreign providers.
The Canadian Chamber of Commerce was quick to criticize the policy calling it “another unhelpful step to make it more difficult for Canadian businesses to secure contracts in the U.S.”
Ironically, in the recent NAFTA modernization talks, the U.S. pushed for greater access to Canadian and Mexican government procurement markets.
But if Buy American is questionable policy for free trading purists and those with contracts at stake, the threat of COVID-19 vaccine protectionism is truly next level.
And what is where the week has ended as Europe is committed to imposing export controls on vaccines due to shortages and manufacturing capacity challenges.
The export controls will require vaccine manufacturers to obtain permission before supplying doses to non-EU countries.
Like Buy American provisions, exemptions may be granted, however, we don’t yet know all the details.
One thing is for sure: This week protectionism went from bad to downright ugly.
The ‘Jab in Arms’ race is on.