European Affairs

Perspectives: “Buy America” and the Future of TTIP     Print Email

Jesper Packert PedersenHenrik Fogh Rasmussen The European Union and the United States government launched long-awaited negotiations on what would be the largest free trade agreement in history—the Transatlantic Trade and Investment Partnership (TTIP) on July 8th.  While officials on both sides of the Atlantic have expressed optimism about prospects for the agreement, almost everyone agrees that the negotiations will be difficult.

Much attention has been paid to potential roadblocks on the European side, but protectionism in America could also prove to be problematic for the TTIP.  According to a 2010 Pew Research Center poll, the American electorate has developed a skeptical view on free trade, with 46 percent of respondents stating that their personal economic situation had deteriorated as a result of free trade agreements and only 26 percent saying their personal situation had improved.

Another important form of American protectionism presents itself in the form of a growing number of  "Buy America" restrictions at the state level. These restrictions limit public procurement to products that are made or assembled in the USA, and sometimes extend as far as requiring U.S. sourced raw materials, and come at a time when President Obama is seeking to double US exports, clearly assuming foreign markets will be open to American products.

In 2009, Congress ensured that the $787 billion stimulus package for the US economy would benefit US companies first and foremost, triggering a significant outcry from European trading partners who have sought to keep their public procurement markets open to outside bidders.

Since U.S. states manage their own procurement policy, neither the U.S. federal government nor the European Union is particularly well positioned to intervene when these restrictions are considered at state level. According to the National Foreign Trade Council, during the first half of 2013, 20 US state governments have considered legislation with “Buy America” restrictions  - a fivefold increase from the previous year.

While the impulse to favor national products for major infrastructure projects is nothing new, the prevalence of this thinking at the state level is a troubling development for European companies. According to the OECD, public procurement accounts for approximately 11 percent of the total U.S. economy , so if this trend continues, European companies could lose significant opportunities in the US.

The "Buy America" movement spans the entire political spectrum. In Republican-led Texas, Governor Rick Perry signed a water infrastructure bill with Buy America restrictions attached, and the state has given preference to Texan and American products for many years in other public procurements.  Maryland’s Democratic Governor Martin O'Malley signed "Buy America" legislation into law in May after it passed the Maryland House of Delegates by a lopsided 138-2 vote .

Ironically, both Governors O’Malley and Perry have led aggressive campaigns to attract foreign companies to their respective states.

While the EU fully recognizes the value of unrestricted  bi-lateral trade  with states outside of Washington D.C., European companies, particularly businesses with investments and employees in the U.S., are certainly well-positioned to engage in these discussions, and actively sell the benefits of free trade to the American public. European companies employ approximately 3.5 million American workers in the US and represent the largest source of on-shored jobs in America.

For instance, Siemens employs 60,000 people in the United States , Shell and BP a combined 42,000 people , BASF over 14,000 , and BMW employs 7,500 workers at its sprawling facility in South Carolina.

Each of these workers is a tangible reminder of the benefits of a well-functioning, unencumbered trade relationship, and should not be overlooked when considering the merits of protectionist trade measures. Together they represent a potentially forceful constituency in favor of unlocking the economic potential of transatlantic trade and investment.

Experts estimate that a comprehensive transatlantic free trade agreement could increase European exports to the U.S. by up to 18 per cent. If this is correct, European companies should find it in their own best interest to engage in this discussion and explain the virtues of open trade to those American states considering restrictive measures.

Mr. Rasmussen is the founder and president of Rasmussen Public Affairs. Mr. Pedersen is a partner at Rasmussen Public Affairs and a former staffer at the U.S. House of Representatives.  He is also a member of the Board of Advisors for European Affairs.

An earlier version of this article appeared in the Danish business daily Børsen.

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