News: Biden to sign Buy American EO — Senate tackles cabinet noms

Monday, January 25, 2021

Biden to sign Buy American EO — Senate tackles cabinet noms — Calling on U.S. allies

Jan 25, 2021

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With help from Doug Palmer and Gavin Bade

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Quick Fix

— President Joe Biden will sign an executive order today that tightens the rules of the Buy American program, upholding a campaign promise that could rankle trading partners.

— The Senate is expected to make moves this week on nominees to lead the Treasury and Commerce departments, key posts as the new administration tackles the sluggish U.S. economy..

— Biden has begun engaging U.S. allies, with phone calls to Canada, Mexico, France and the U.K. But while some foreign leaders want to talk trade, the new White House has other priorities.

It's Monday, January 25. Welcome to Weekly Trade. This is my first turn at the helm of our newsletter as the newest reporter on the team. Here's what I'm wondering this week: What role can trade policy play in boosting the post-coronavirus economy? Tell me your thoughts at soverly@politico.com or on Twitter @StevenOverly.

And, of course, send us your news: soverly@politico.com, gbade@politico.com and dpalmer@politico.com.

A message from the Global Business Alliance:

Members of the Global Business Alliance utilize their expertise, resources and dedicated employees to combat the COVID-19 pandemic and strengthen the U.S. communities in which they sustainably operate. Discover what global connections mean for your neighborhood by visiting GlobalBusiness.org/Invested.

Driving the Day

BIDEN TO SIGN BUY AMERICAN EXECUTIVE ORDER: Biden will sign an executive order Monday instructing the federal government to spend more of its $600 billion procurement budget on U.S.-made products, fulfilling a campaign-trail pledge aimed at boosting the beleaguered U.S. economy.

The order will instruct the Federal Acquisition Regulatory Council, which oversees government procurement policy, to revamp its definition of what it means for products to be made in the U.S. and to increase how much of a product's parts must originate in the U.S. to be eligible for the Buy American program.

The executive order also aims to eliminate exemptions that allow federal agencies to circumvent the Buy American rules. A new senior OMB official will be assigned to oversee all waivers, for instance. Waiver requests will also be published on a public website, to be developed in the coming months, so that U.S. companies have an opportunity to compete for contracts that agencies want to award to foreign competitors.

The bigger picture: The administration views the changes as key to not only stimulating the current economy, but to rebuilding U.S. manufacturing for the long term.

"We do view this as part of a broader strategy to bolster our domestic industrial strength, our domestic manufacturing capability and our ability to capture [a] greater share of global export markets," a Biden administration official told reporters Sunday.

That could rankle some U.S. industries and trading partners alike. American companies have already cautioned the Biden administration that changes to their overseas supply chains are time consuming and, in some cases, factories cannot easily be shifted back to the U.S.

And other countries may see Biden's proposal as the beginnings of protectionist-minded policies. Trading partners like China and the European Union found themselves enmeshed in unwanted trade wars with the Trump administration, which imposed frequent tariffs on foreign-made goods. Under Biden, they are hoping for a reset. (A White House spokesperson said the EO is consistent with WTO commitments.)

During the campaign, Biden outlined a four-year plan to spend $400 billion on federal government purchases of an array of American-made goods. He also promised to invest another $300 billion to develop technologies like electric vehicles, 5G networks and artificial intelligence.

His campaign boasted the two initiatives would help create at least 5 million new jobs in manufacturing and innovation. If realized, that would boost manufacturing jobs to around 17 million, a level not seen in the United States since the early 2000s.

Trump's parting shot: Former President Donald Trump also promised to aggressively use Buy American provisions to boost U.S. jobs. But critics such as Alliance for American Manufacturing, a group representing steel companies and the United Steelworkers union, say his actions never lived up to his rhetoric.

Shortly before Trump left office, his administration issued a final rule that tightens domestic content requirements for federal projects requiring iron and steel. It also increases the additional price that federal agencies can pay for domestic suppliers versus foreign suppliers.

However, the status of that rule is up in the air because of a regulatory freeze put into place by the Biden administration. Trump's final effort "Brings to mind this song: 'Too Much, Too Little, Too Late'," AAM President Scott Paul said in an email.

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CABINET WATCH: The Senate is expected to vote today on Janet Yellen's nomination for Treasury secretary. Majority Leader Chuck Schumer said as much on the Senate floor Friday after Yellen unanimously cleared the Finance Committee. But even as Yellen is set to assume her role, it remains to be seen how she might shape Biden's trade approach to China.

Sen. John Cornyn (R-Texas) pressed Yellen on what she expected her role to be in future negotiations with China. In her written responses last week, however, she shed no light on the subject, simply repeating that Biden wants to do a full China review before deciding what action to take on the tariffs that Trump has imposed.

If the past is any guide, Yellen could be a frequent visitor to Beijing. Several of her predecessors, beginning with Henry Paulson in the George W. Bush administration, had regularized meetings through the forum originally known as the Strategic Economic Dialogue.

Then on Tuesday: Biden's pick to run the Commerce Department will face the Senate Commerce Committee. Rhode Island Gov. Gina Raimondo will likely encounter a broad range of questions on topics like fisheries, climate change and 5G technology. But some lawmakers may also probe the nominee's stance on China, especially its rise as a technology superpower.

The Commerce Department became a primary channel for Trump's battle with Beijing. In recent years, the agency has added dozens of Chinese telecommunications and equipment companies like Huawei to its trade blacklist, and implemented executive orders targeting firms like WeChat and ByteDance. Senators may want to know how Raimondo will use Commerce's authority over global trade to keep China in check.

DAVOS UNDERWAY WITH XI TO SPEAK: Chinese President Xi Jinping is scheduled to give his first major speech since Biden was inaugurated at the World Economic Forum's virtual event today. So far, it's not clear when the two leaders will meet. But the first opportunity could come at the G-20 meeting on Oct. 30-31, which Italy hopes to host in-person in Rome.

There is no word yet from the White House on whether a high-level Chinese delegation will be visiting Washington early in the Biden administration, as business leaders have said they expect.

However, White House officials have indicated to business groups they want to have a more robust alignment with allies before finalizing their China strategy. That could delay high-profile public engagement until the administration knows what they want to achieve. There also could be behind-the-scenes engagement to set the stage for such a visit.

MAKING AMERICA FRIENDLY AGAIN : Biden has begun his outreach to U.S. allies, beginning as expected with calls on Friday with Canadian Prime Minister Justin Trudeau and Mexican President Andrés Manuel López Obrador. Then came U.K. Prime Minister Boris Johnson on Saturday and French President Emmanuel Macron on Sunday. The newly installed president has pledged a multilateral approach to international affairs and promised to rekindle relationships with U.S. allies that were strained by Trump.

The Biden administration has repeatedly said trade issues take a backseat to domestic policies (more on this in a minute), and official White House reports on the calls with foreign leaders made no explicit mention of trade. A spokeswoman declined to comment further. America's allies, however, have other priorities.

Oh, Canada: Trudeau urged Biden to remove duties on the softwood lumber industry, Trudeau's office stated. The leaders also discussed the importance of fortifying the U.S.-Canada supply chain, which has helped facilitate the exchange of medical supplies during the coronavirus pandemic. They also "agreed to consult closely to avoid measures that may constrain bilateral trade, supply chains, and economic growth," per Trudeau's office. Those talks will continue when the pair meet next month.

Word from Britain : Johnson made a play for the U.S.-U.K. trade talks, which were ongoing when Biden entered the Oval Office. Downing Street's report of the call noted that conversation included the "benefits of a potential free trade deal" and Johnson's "intention to resolve existing trade issues as soon as possible." Meanwhile, the call with López Obrador focused largely on immigration, and the conversation with Macron on a multilateral approach to global health and climate change.

TRADE DEALS (STILL) ON THE BACKBURNER : We heard it from Biden. We heard it from Yellen. Now, White House press secretary Jen Psaki is driving the message home: The White House is not entertaining new trade deals until the U.S. economy is on its way to recovery. So, when pressed Friday to provide a timeline for signing a U.S.-U.K. trade agreement, Psaki declined.

"I will say that what is important to the president and also our national security adviser, Jake Sullivan, is that everything we do must help advance working families and the American middle class. That certainly includes any trade agreements, and that is part of their objective and how they would approach it," she told reporters.

It's not a surprising position. Biden and his senior staff have said consistently that stemming the coronavirus pandemic and revitalizing the domestic economy take priority to trade. That's true, too, for any reconsideration of the Obama-era Trans-Pacific Partnership, Psaki said Friday. She added that "President Biden knows TPP wasn't perfect and believes we need to make it stronger and better."

EU RELEASES CHINA INVESTMENT DEAL TEXT: The EU on Friday unveiled most of the text of its agreement with China that aims to open each economy to investment by companies in the other.

The U.S. and some in the European Parliament criticized the deal over China's widespread human rights abuses in the Xinjiang province, which the State Department this month labeled a genocide.

But in the text of the deal, China committed to "make continued and sustained efforts on its own initiative" to ratify fundamental labor rights conventions. And Brussels said that all 27 members of the EU ended up backing the deal, despite claims from countries like Italy and Poland that their concerns were not properly heard. The EU was under pressure to release the text of the deal, and said the full document will be available next month.

TECH'S TROUBLE DOWN UNDER : An Australian law proposed last month would force internet companies like Google and Facebook to pay news publishers there for access to their content. Now, American companies are striking back. Google has threatened to pull its search engine from the country in response. And most recently, the Silicon Valley giants aim to raise alarm in Washington through their stable of trade associations.

Computer and Communications Industry Association President Matt Schruers called on Friday for a resolution that "does not attempt to re-design how the Internet works, or question basic principles of market-based economies." NetChoice counsel Chris Marchese, meanwhile, wrote in a blog post that the proposal "enables classic crony capitalism" by favoring Rupert Murdoch's Australian media empire. The flap comes as tech groups warned the Biden administration in a letter Friday about rising "digital protectionism."

A message from the Global Business Alliance:

From the onset of the pandemic in the United States, members of the Global Business Alliance have utilized their expertise, resources and dedicated employees to combat COVID-19 . From ensuring students from underserved communities have access to hands-on STEM learning opportunities to mobilizing AI experts to help doctors accurately synthesize the ever-growing set of COVID-19 medical research, international companies are strengthening the U.S. communities in which they sustainably operate.

Discover what global connections mean for your neighborhood by visiting GlobalBusiness.org/Invested.

International Overnight

— Mexico's president has tested positive for Covid-19, according to CNN.

— Trump administration officials could soon lobby for foreign governments after their former boss scrapped an ethics pledge, POLITICO'S Theodoric Meyer reports.

— Foreign investors are now pumping more money into China than the U.S., WSJ notes.

— A study publishing today shows that withholding the coronavirus vaccine from developing nations would harm countries dependent on trade, writes The New York Times.

— Meanwhile, a surge in coronavirus cases and slow vaccine roll out has the world's economists predicting a slower recovery than previously thought, according to Bloomberg.

— Australia's trade minister, Dan Tehan, aims to ink agreements with the European Union and U.K. before the year is done, The Australian reports.

— Tensions between China and Taiwan continue to escalate just days into Biden's presidency, Reuters reports.

— Germany wants Taiwan's chip manufacturers to ramp up their supply as one of its leading automakers seeks damages over the shortage, per a pair of Reuters articles.

THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com; gbade@politico.com; soverly@politico.com; jyearwood@politico.com and pjoshi@politico.com. Follow us @POLITICOPro and @Morning_Trade.

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