President Trump is set to sign a “Buy American, Hire American” Executive Order today that is expected to direct federal agencies to buy American when possible and to refocus the H-1B visa program to discourage companies from replacing American workers with lower paid foreign workers.  Rather than a new set of rules, the Executive Order seeks to ensure enforcement of decades old existing laws and rules that have gone unenforced.

In yesterday’s White House background briefing, a senior administration official explained that the rules for buy American and hire American have been abused and “enormously diluted over time” due to waivers and exemptions.  President Trump’s executive order is intended to rectify this problem.

Buy American refers to a set of procurement laws about how goods and manufactured products are obtained and how they’re used in federal projects or federally funded projects.  And Hire American generally refers to the body of law and policy concerning how our immigration, visa and guest worker programs are operated to ensure proper protections for American workers.

It’s a well-known fact amongst those who study both procurement policy and our visa and guest worker policies that Buy American and Hire American rules have been enormously diluted over time.  And here we’ll walk through more details on Buy American, but the waivers and exemptions process in Buy American have been abused greatly, resulting in many lost job opportunities for American workers.  And similarly, the Hire American rules that govern many of our visa and guest worker policies have gone unenforced or have been abused to the point of rendered, in some cases, even inoperative.

Buy American

According to the background briefing, the lead on Buy American will be the Secretary of Commerce, Wilbur Ross.

The senior administration official provided a brief history of Buy America and Buy American:

[T]here’s a clear distinction between Buy American and Buy America laws and rules.  Buy American dates back to the passage of the Buy American Act of 1933.  This act, and related laws and rules, govern direct purchases by the federal government.

In contrast, Buy America dates back to the Surface Transportation Act of 1978. This act requires the use of U.S.-made iron and steel, and the domestic production and assembly of other manufactured goods when federal funds are used to support projects like highways, public transportation, aviation, and intercity passenger rail, including Amtrak.

The order is to be focused on “maximizing Made in America content and minimizing waivers and exceptions to Buy American laws.”

As an overview, the executive order the President will sign tomorrow ushers in a new, more muscular Buy American policy based on the twin pillars of maximizing Made in America content and minimizing waivers and exceptions to Buy American laws.  Every agency and department of government will conduct top-to-bottom assessments aimed squarely at cracking down on weak monitoring, enforcement, and compliance efforts, and at rooting out every single Buy American loophole.  The Secretary of Commerce, who will coordinate these agency efforts, will then advise the President on how to properly close these loopholes.

For the first time, the Buy American bidding process will take into account the flagrant use of unfair trade practices like dumping and injurious subsidization now used to steal government contracts from American workers and domestic manufacturers.  This order also breaks additional new ground by taking a very hard look at how waivers of Buy American and our free trade agreements may be a poster child of unfair and non-reciprocal trade in the $4.4 trillion global government procurement market.

If it turns out America is a net loser because of those free-trade agreement waivers, which apply to almost 60 countries, these waivers may be properly renegotiated or revoked.

The president’s executive order will direct Ross to provide a comprehensive Buy American performance review within 220 days.

 Buy American is the Trump administration’s highest priority when it comes to spending taxpayer dollars.

Agencies have their clear marching orders, and they will be held strictly accountable for any failure to fulfill the Buy American mission.  As part of this accountability, each agency will conduct a comprehensive top-to-bottom Buy American performance review, including an assessment of the agency’s use of waivers and exceptions, as well as a requirement to provide recommendations to strengthen Buy American.

President Trump has tasked the Secretary of Commerce, Wilbur Ross, with reviewing all the agency findings and submitting a report to his desk within 220 days.

Additionally, the President will order a review of trade deals to ensure that Buy American is enforced where possible.

Many Americans may be surprised to know here that previous administrations have regularly waived our Buy American rights as part of our trade deals.  In fact, our Buy American rights have been surrendered in almost 20 separate free trade agreements, as well as through America’s participation in the World Trade Organization’s agreement on government procurement, which covers 42 other countries besides the United States.

In these deals, which cover almost 60 countries in total, the U.S. typically provides what’s called national treatment to foreign suppliers in exchange for so-called reciprocal access to those countries’ markets, thereby waiving Buy American laws.  In effect, through these deals, foreigners are treated just like Americans in the government-procurement process.

Just why has the U.S. surrendered its Buy American rights?  The guiding hope that’s been driving these free trade agreement waivers is that America will pick up as much or more business in foreign government procurement markets as it gives away to foreigners.  However, this hope appears misguided, as compelling evidence from a February 2017 government accounting office report strongly suggests the U.S. may not be getting its fair share of the global government procurement through its free trade agreement concessions.

. . . . To that end, this executive order directs the Secretary of Commerce and the United States trade representative to comprehensively assess the effects of each of the relevant agreements to determine whether these agreements do indeed meet President Trump’s standard of being both fair and reciprocal.

Hire American

One of the president’s primary areas of concern is H-1B visas and the way/s these are being used by American companies to displace American workers for lower-paid foreign workers.

The senior administration officials explains:

Right now, as you may know, H1B visas are awarded by random lottery.  And many people will be surprised to know that about 80 percent of H1B workers are paid less than the median wage in their fields.  Only about 5 to 6 percent, depending on the year, of H1B workers command the highest wage tier recognized by the Department of Labor, there being four wage tiers.  And the highest wage tier, for instance, in 2015, was only 5 percent of H1B workers.

So 80 percent receive less than the median wage, and only 10 percent receive the median wage.  And so only 5 percent were categorized at the highest wage tier of the four wage tiers that are in place for the H1B guest worker visa.  The result of that is that workers are often brought in well below market rates to replace American workers, again, sort of violating the principle of the program, which is supposed to be a means for bringing in skilled labor, and instead you’re bringing in a lot of times workers who are actually less skilled and lower paid than the workers that they’re replacing.

Strict enforcement of existing rules and laws is also the focus of Hire American.

Now, this executive order will call for the strict enforcement of all laws governing entry into the United States of labor from abroad for the stated purpose of creating higher wages and higher employment rates for workers in the United States.  And the executive order will further call on the Departments of Labor, Justice, Homeland Security and State to take prompt action to crack down on fraud and abuse — which should both be understood as separate problems — in our immigration system in order to protect workers in the United States and their economic conditions.

Some reforms will require legislative action, though many can be accomplished via the Executive.

But with respect to the H1B program in specific, by — we’re basically saying to these agencies, tell us everything you think you can do.  And some of that will be administrative, and some if they’ll say will have to be done legislatively.

But you could be looking at things on the administrative side, like increasing fees for H1B visas.  You could be looking at things like if we could adjust the wage scale — a more honest reflection of what the prevailing wages actually are in these fields.  Obviously, taking a more vigorous stance, which various — in the Department of Justice do with respect to enforcing gross and egregious violations of the H1B program.  You could see potential — and again, we’ll have to get a full legal analysis and review from all the departments, but right now the lottery system disadvantages master’s degree holders.

There’s ways that you could adjust the lottery system to give master’s degree holders a better chance of getting H1Bs relative to bachelor’s degree holders.  There’s a lot of possible reforms that you could do administratively in addition to a suite of legislative actions.

And then again, you add that on top of the across-the-board reform process for guest worker and visa programs in general to make sure that they’re strictly complying with all the rules, laws, and protections for American workers, again, which there are many, but there hasn’t been this kind of systematic review.  And this is something that the President, if you look, actually promised that he would have the Department of Labor go and do this kind of systematic review and take these kinds of actions.

We will update this post when the Executive Order is posted.