Will U.S. Manufacturers Benefit From a Stronger ‘Buy American’ Policy? (Courtesy of SupplyChainBrain.com) — President Biden’s executive order reaffirming the “Buy American” policy for federal government contracting is meant to close the loopholes that have permitted some foreign sourcing of goods and services. But can U.S. manufacturers step up the pace of production to take advantage of the action?
Biden is hardly the first U.S. president to push a Buy American stance; President Trump claimed a similar commitment. But in issuing the new order, Biden claimed that “the previous administration did not take it seriously enough. Federal agencies waived the Buy American requirement without much pushback at all. That is going to change on our watch.”
The executive order sets out an arduous procedure for acquiring a waiver from the Buy American requirement, calling for extensive review and justification “for the use of goods, products, or materials that have not been mined, produced or manufactured in the United States.” All such waivers must be approved by the Office of Management and Budget by way of a Made in America Office. In addition, the Administrator of General Services is directed to create a public website including information on all requested waivers and whether they have been granted.
When it comes to assessing the true origin of a given item, the order replaces a previous “component test” with one that measures the value “that is added to the product through U.S.-based production of U.S. job-supporting economic activity.” And it increases the threshold for domestic-content requirements covering end products and construction materials.
In cases where a foreign product is substantially cheaper than its American-made counterpart, the order dictates a determination as to whether the gap is the result of dumped steel, iron or manufactured goods by the foreign supplier.
For American workers, the big question is whether the new policy will mean more domestic manufacturing jobs. Steven Kramer, chief executive officer of WorkJam, creator of a digital task-management platform, predicts that it will. “It goes a lot deeper than any other policy,” he says. “We believe it’s going to have a significant impact on the rejuvenation of manufacturing and distribution in the U.S.”
Success won’t come automatically, however. U.S. companies will have to revamp operations in order to accommodate higher production rates and labor requirements while still turning a profit. “For organizations to adapt to what we believe will be significant growth, they will need to be super-organized,” says Kramer. That means optimizing and streamlining systems and business processes, especially with the help of digital technologies.
A move in that direction is especially vital in a time of pandemic, when worker safety is paramount. Digital transformation, says Kramer, “has to happen in order to train and upskill the workforce to execute tasks and have compliance around them.” The coming of the coronavirus, he adds, calls for “a whole new set of procedures to be followed.”
To a certain degree, “digitization” might be seen as a code word for “robots.” In other words, a resurgence of American manufacturing is unlikely to bring back as many domestic jobs as were lost during decades of offshoring to China and other sources of low-cost production.
“Yes, technology will lead to not as many people being required,” Kramer acknowledges, “but people are still an important part of this equation, and they don’t get eliminated.” Humans will be needed in call centers and key logistics roles, and even in some hourly positions that one might expect to be roboticized.
Kramer does see an increase in the share of temporary and gig workers versus permanent employs. That’s especially the case in times of low unemployment, which was the norm before the pandemic and is likely to return with economic recovery.
“As we come out of the pandemic, there will be more supply on the market from a resource perspective,” he says. “It will be interesting to see how that fleshes out in a year or two.”
Expect some domestic manufacturers to keep costs low by limiting the number of permanent hires. At the same time, Kramer says, they’ll continue to push for flexibility in scheduling. Manufacturers and retailers alike want the ability to staff up or down depending on the season or time of day. Some workers will respond favorably to such actions, while others will rebel against the consequent uncertainty and schedule irregularity.
Exactly how domestic producers choose to balance these sensitive factors remains to be seen. But one thing seems indisputable: as U.S. manufacturing gears up to meet greater production requirements resulting from tighter Buy American provisions, the sector is going to look dramatically different than it did in its prior heyday.