The Potential Market Shifts of Buy American and Hire American
On April 18, 2017, President Trump issued Executive Order 13788, “Buy American and Hire American.” Executive Order 13788 aims to “create higher wages and employment rates for workers in the United States, and to protect their economic interests” by decreasing American reliance on foreign workers and products. While the “Buy American” and “Hire American” aspects of the executive order have a common underlying theme, each facet will have significant impacts on policy changes independent of each other. In accordance with the executive order, heads of all agencies have until September 15, 2017, to:
- Assess the monitoring, enforcement, and implementation of, as well as the compliance with all the Buy American Laws within their agencies.
- Assess the use of waivers by type and impact on domestic jobs and manufacturing.
- Develop and propose policies to ensure that federal financial assistance awards and federal procurements maximize the use of materials produced in the United States, including manufactured products, components of manufactured products; and materials such as steel, iron, aluminum, and cement.
While the concept of “Buy American” is not fundamentally new (see FAR Part 25), the new executive order will attempt to limit existing exemptions and waivers being utilized by heads of executive departments and government agencies. By doing so, the “Buy American” prong of Executive Order 13788 intends to:
- Promote economic and national security.
- Help stimulate economic growth and the creation of good paying jobs to strengthen the middle class.
- Support the American manufacturing and defense industries by maximizing the use of goods, products, and materials produced in the United States.
To meet the “Hire American” aspect of Executive Order 13788, new proposed rules will seek to “overhaul the current immigration system and protect the interests of American workers through the prevention of fraud and abuse.” The policy also calls for a reform of the H-1B program to ensure that H-1B visas are awarded to the most skilled or highest-paid applicants. It should be expected that this change will make the H-1B program more restrictive and demand higher salaries.
By introducing these changes into the labor market, the “Hire American” prong of Executive Order 13788 seeks to protect the economic interest of workers in the United States by:
- Creating higher wages.
- Increasing employment rates.
- Strictly enforcing the laws governing the employment of foreign nationals in the U.S.
While the impact of “Buy American and Hire American” remains largely to be seen, it is important that government contractors prepare by recognizing any potential effect to their supply chain or sourcing of goods and services. If you have any questions or concerns regarding Executive Order 13788, please do not hesitate to contact one of our experienced GovCon professionals for assistance.