OPINION: Donald Trump’s recent Buy American and Hire American executive order is the culmination of the president’s populist stance of putting America first. The Buy American portion of it could render some New Zealand exports collateral damage.
Specifically, the order directs federal agencies to, within the next five months, “assess the monitoring of, enforcement of, implementation of, and compliance with Buy American Laws within their agencies”.
Buy American laws are the suite of pre-existing rules, regulations and statues that stipulate preference be given to products, parts and materials produced in the United States.
While Trump’s order is motivated by the desire to protect the steel industry, it is likely the application of it will incorporate several industries. This is what New Zealand policymakers and exporters should brace for.
With a hefty government purchase budget to the tune of US$500 billion, the US provides a lucrative mass market for exporters specialising in business-to-government transactions – including hundreds of millions of dollars of business for New Zealand exporters.
Opportunities exist in various sectors, including broadcasting, defence, education, energy, federal/state/municipal governments, food and agriculture, health, housing, law and border enforcement, ports and aviation, transport, and utilities and water.
New Zealand’s Ministry of Foreign Affairs and Trade has worked tirelessly to ensure this large market is accessible to our exporters. Most of this work culminated in New Zealand’s accession to the global Government Procurement Agreement (GPA) in 2015. Trade development body New Zealand Trade & Enterprise also conducted successful roadshows to create awareness and interest among local exporters.
In principle, the GPA attempts to create a level playing field that gives exporters in any one of the 47-member countries (which include the US) a fair chance to bid on and win foreign government contracts. All this could be in jeopardy, with Trump’s executive order destined to interfere with “fair chance” and “level-playing field”.
It should be noted that the order does not necessarily release the US from its commitments under the GPA. It simply gives the Trump administration a mechanism to adjust “schedules” or sectors covered under the agreement, as well as spending thresholds. This means some exporters may be locked out of certain sectors based on non-coverage or spending limits.
New Zealand exporters such as Gallagher Security, Fisher & Paykel, HamiltonJet, ikeGPS, Tait Communications and Vega, which experienced some success before the GPA, are better poised to weather the storm, given their market presence, reputation and ongoing business relationships with government buyers.
The same cannot be said of early-stage firms whose foray into business-to-government exports was motivated by the GPA, while other firms may be discouraged from even taking the first step, given the uncertainty ahead.
Federal agencies are required to provide feedback on Buy American and Hire American within 220 days.
Regardless of the results of this consultative process, US government procurement may no longer be the lucrative market it has been for New Zealand exporters in the past.
Dr Eldrede Kahiya is a lecturer in Victoria University of Wellington’s School of Marketing and International Business.