Agencies unhappy with 'Buy American' compromise

A newly revised proposal from the Defense Department on controversial "Buy American" legislative language has failed to assuage critics within the Bush administration who say the latest proposal fails to address the gamut of concerns raised at an interagency meeting among top Cabinet officials late last week.

The Office of the U.S. Trade Representative, the State Department and the White House Council of Economic Advisers all said that the most recent compromise negotiated between House Armed Services Committee Chairman Duncan Hunter, R-Calif., and Deputy Defense Secretary Paul Wolfowitz is not acceptable, according to administration documents shared with CongressDaily. Hunter insisted the new deal is sound.

"Rep. Hunter thinks the Wolfowitz proposal is a good one, and the conferees agree," said a House Armed Services Committee spokesman. "It is not his intent to harm our allies, nor does he believe that this proposal does that."

Hunter's bill is intended to buttress the U.S. defense industrial base and ensure military readiness, although critics said the "Buy American" provisions would force many suppliers out of the defense marketplace due to increased costs and limitations on use of foreign components and manufacturing technologies.

Since the measure was passed, the language has undergone many changes as Hunter and Wolfowitz worked to appease critics and minimize potential harm to U.S. suppliers and allies.

The latest iteration amends the previous Hunter-Wolfowitz compromise-a watered-down version of the bill opposed by several administration agencies. The revised language deletes Sec. 821, which amends domestic source limitations, and adds a new provision, Sec. 810.

The new provision addresses the Office of Trade Representatives concerns by rendering provisions in the bill that restrict foreign trade inapplicable if the Defense secretary finds them inconsistent with international agreements, including those that fall under the United Nations charter, the World Trade Organization, and Memoranda of Understanding with foreign countries.

However, the Pentagon version of the language leaves ample wiggle room for the Defense secretary to either grant or deny a waiver of those provisions, a loophole that fails to satisfy USTR concerns.

State Department opposition to the new language is directed at two provisions. One, Sec. 813, demands procurement of certain essential items from American sources. Although Sec. 813 would leave intact the Defense secretary's authority to grant item-by-item waivers for foreign procurements, the process is cumbersome, and U.S. and European critics say it would create an impression of protectionism and discourage international defense trade.

The other provisions which troubles the State Department is Sec. 823, which calls for the elimination of unreliable sources of defense items and components. The provision could prohibit the Pentagon from buying military systems or equipment from countries that disagree with U.S. defense or foreign policy.

However, the Defense secretary may review and update the list of countries affected by this provision, according to the revised compromise.

The president's Council of Economic Advisers echoed the State Department's concerns. Although the White House advisory body considers the new language to be less worrisome than Hunter's original bill, some provisions still could be destructive because they support certain domestic manufacturing firms without substantially enhancing national security, and would not promote free market principles. The council recommended the administration not support the legislation.

Although the Defense Department's initial response to the measure was to recommend a presidential veto of the conferenced bill if it includes any of Hunter's original language, that position changed after Hunter entered negotiations with the department.

Internal Pentagon documents indicate that the department feels it has addressed all concerns raised by other Cabinet-level agencies at last week's meeting, although USTR, the State Department and other agencies disagree with this assertion and continue to contest the proposal.

This internal opposition leaves the defense authorization bill at a standstill until the Bush administration can present Senate lawmakers with a unified position on the Buy American provisions.

Specifically, Senate Armed Services Committee Chairman John Warner, R-Va., indicated in a Sept. 23 letter to the State Department, the Office of U.S. Trade Representative and the Office of Management and Budget, that he will not continue with the conference until the administration clarifies its position in writing.