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What does 'Buy American' mean for industrial partnerships?

April 19, 2017 (Photo Credit: Laura Buckman/AFP via Getty Images)
Correction: An earlier version of this story stated that New Balance won the contract to produce sneakers for the military. That contract has not been awarded.

WASHINGTON — Ever since U.S. President Donald Trump’s election win in November, international governments and industry have tried to sort out what his "America First" policies would mean for the global partnerships that define the defense industry in 2017.

Those questions will remain in focus following an April 18 executive order calling for a look at how the 1933 Buy American Act is applied across government, including to the Department of Defense. While the administration enters a review period, including a look at how waivers for foreign products are used, industry figures are trying to understand how this will impact them and whether American companies now have a leg up on competition.

Fights about whether American companies should get preference for defense contracts are nothing new, of course, and have largely played out in the public relations arena. When the U.S. Air Force selected the Embraer A-29 Super Tucano to supply the Afghan Air Force, for example, competitor Textron launched a wide-ranging campaign focused on the fact that the Brazilian-owned company Embraer was not an American firm, despite plans to build the A-29s in Florida.

Members of Congress have been known to insert protectionist provisions into the National Defense Authorization Act, such as an amendment that forced members of the military to buy only American-made sneakers. Another example came in both 2015 and 2016, when congressmen, at the encouragement of American firms Orbital ATK and Aerojet Rocketdyne, tried to insert legislation requiring every DoD tactical missile program to include an American rocket motor supplier. That was a direct attempt to steal back the tactical rocket motor market from Norwegian-based Nammo.

Norway provides an interesting test case for how an American-first industrial defense policy might create challenges. The Norwegians are stout allies of the U.S., both through NATO and bilateral cooperation. They are also defense technology partners, having purchased the P-8 maritime surveillance aircraft and F-35 joint strike fighter, among other equipment, while also working to develop new capabilities that could be shared with the U.S., such as the Joint Strike Missile.

At an April 6 event hosted by the Norwegian-American Defense and Homeland Security Industry Council, or NADIC, the question of an America First policy under Trump was a hot topic. Norwegian Deputy Defense Minister Øystein Bø said he expects industrial cooperation to continue with the U.S., while Morten Brandtzæg, the CEO of Nammo, downplayed the idea of an American-focused industrial base impacting his company, noting protectionist policies are commonplace.

"You see this in the Middle East, you see this in Europe, in Poland; they all have different names like 'Polinization,' 'Saudiazation,' 'Make in India,' 'Buy American’ — it’s everywhere,” Brandtzæg told Defense News. “What it actually means, to me as an industry, it means create local jobs where you sell your stuff. Meaning for the defense industry, if you want to be international it’s not about only international sales. You need to get your feet on the ground where you want to sell you products.”

Nammo, Brandtzæg believes, is well-positioned to do that, with 25 percent of the company’s employees based in the United States.

“There is rhetoric, but from the industry side, I think the message we receive is that the focus is on jobs in the U.S., more than who owns your shares at the end of the day,” he said. “It’s about creating jobs for Americans in the U.S. And as long as industry can provide that, I am not that seriously concerned.”

Speaking at NADIC earlier in the day, Rep. Adam Smith, D-Wash., the ranking member on the House Armed Services Committee, acknowledged that a new look at America’s trade agreements would be a good idea. But Smith, who is a frequent critic of the administration, expressed skepticism that an America First industrial policy crafted by the Trump team will work.


“I am concerned that the White House, while they want to reconsider that policy, just like with health care, they don’t have the foggiest clue about details,” Smith said, referencing the failure of the White House and Republicans to pass changes to the former President Barack Obama's health care law. “And the details do actually, at some point, matter.”

Jeff Bialos, a former deputy undersecretary of defense for industrial policy now with Eversheds Sutherland, pointed out one such detail: Any move toward greater Buy American enforcement might result in a loss of foreign military sales, which serve as lucrative market opportunities for American defense firms that are often greased by offsets, such as jobs created in partner nations.

In other words, Bialos said, the White House needs to be aware that tightening Buy American rules might increase jobs in the U.S., but cause partner nations to look elsewhere for foreign weapons sales — which could result, ironically, in less production requirements, and hence job cuts at American facilities. 
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