Buy American, Hire Abroad: Top US Contractors Are Outsourcing Jobs, Study Finds

President Donald Trump recently signed an executive order urging the U.S. to “buy American,” in part by encouraging the Departments of Commerce and State to prioritize American firms when they dole out often lucrative contracts. But that directive, a report released last week found, may not fulfill Trump’s second stated goal — “hire American” — because most of the top American companies winning government contracts outsource thousands of their jobs.

Of the 50 U.S. companies given the largest government contracts, 28 shipped jobs overseas between 1995 and 2015; of the top 100, which received $176 billion in taxpayer funding in fiscal year 2016, 41 relied on offshoring over those two decades, according to a recent study released by the advocacy groups Public Citizen and Good Jobs Nation. Already, the Trump administration has awarded 15 contracts to United Technologies, the parent of the HVAC systems manufacturer Carrier Corp., which sent hundreds of jobs overseas late last year. More than 150 contracts went to General Electric Corp., which outsourced more jobs than any other firm among the top 100 ranked by procurement awards, the study found.

“Trump has Twitter-threatened firms considering offshoring and lobbied others to invest domestically instead of abroad,” the report said, referring to Trump’s campaign to save 1,400 jobs at a Carrier plant in Indianapolis set for shipment to Mexico last year. “But so far his jawboning has not fundamentally changed corporate behavior, as United Technology’s decision to go ahead with the offshoring of hundreds of jobs to Mexico shows.”

Under various trade agreements — which Trump has criticized — federal and state governments could face sanctions if they began explicitly targeting government procurement contracts to companies that are based in the United States or that commit to expanding their operations in the country. The idea is that trading-partner countries agree to treat all companies equally, and avoid discriminating against firms based on their location.

Those existing agreements, though, do not necessarily mean Trump is currently powerless to begin reducing the flow of federal contracts to firms that offshore jobs.

He could, for instance, begin the process of withdrawing the United States from those trade deals' procurement agreements. He could also have his administration stop issuing waivers for existing "Buy America" laws. Those waivers were designed to comply with superseding trade agreements, and ending them could spark legal challenges by trading partners -- but such challenges often take years, meaning that in the interim, more contracts could go to firms rooted in the United States.

General Electric And United Technologies Top The Offshoring List

The Public Citizen and Good Jobs Nation compared companies government contracts with their records of offshoring jobs.

First on the list of the 100 largest contractors with the most outsourced jobs was General Electric, with 8,736 jobs shipped overseas since 1995. The company received $1.9 billion in federal contracts last year. Honeywell International, another conglomerate, came in third after United Technologies, with 5,470 positions shipped overseas since 1995 and close to $2.3 billion in federal contracts in fiscal year 2016. (The advocacy groups behind the study said their offshoring estimates were likely grossly underestimated, as they relied on data from the Trade Adjustment Assistance program, which helps American workers laid off as a result of foreign trade. The workers file their petitions to get assistance voluntarily, and only certain types of laid-off workers qualify.)

United Technologies was second on the study’s list of top 2016 contractors by offshored jobs. It sent 5,716 posts abroad since 1995, the year before a multilateral World Trade Organization accord known as the Agreement on Government Procurement — which opened competition for government contracts to foreign firms based in the agreements’ signatories — first went into force. That number that did not include the 800 positions United Technologies ultimately shipped overseas at the end of 2016.

As of Thursday, the federal government has awarded approximately $174 billion in contracts for the fiscal year 2017 so far. USASpending.gov, the government site that provides data on U.S. federal government procurement, did not respond to questions about how much of that total applied to domestic firms as opposed to foreign ones.

A spokesperson for Honeywell said the firm discloses its contracts on a yearly basis, and said the company does not make its outsourcing numbers public. A GE spokesperson said the report's numbers were "deeply flawed and misleading" and said the company added 19,000 U.S. manufacturing jobs since 2009 and added 20 new manufacturing sites in the last five years, but could not confirm by press time the number of federal contracts awarded to the firm, as cited in the study. United Technologies did not respond to questions related to their government contract awards for the first quarter of 2017 — the first period during which they'd receive contracts from the Trump administration — nor did they respond to requests to confirm the outsourcing numbers presented in the study.

"Our Manufacturers Are Losing Out In Our Trade Deals"

Shortly after the heavily criticized Carrier deal, House Republicans trimmed language from a bill that had passed in the Senate and required the use of U.S.-made steel and iron in an infrastructure program to help communities where drinking water systems may be unsafe for residents, such as in Flint, Michigan. Trump praised the efforts of Tammy Baldwin (D-Wisc.), one of the senators behind the “buy America” provision, in an interview with Milwaukee’s WTMJ-TV several weeks after she reintroduced it on March 24.

But the Congressional Republicans behind the measure’s failure in the House version of the Senate bill — namely, House Speaker Paul Ryan (R-Wisc.) — came under pressure from lobbyists representing foreign steel producers.

Baldwin, along with fellow Senator Jeff Merkley (D-Ore.), had already written Trump a letter dated March 10 presenting him with a Government Accountability Office report showing that the GPA (the WTO agreement permitting the federal government to award contracts to non-U.S. companies) had allowed the U.S. to give more federal contracts to foreign firms than the next five largest signatories combined.

“You promised the American people a ‘Buy American, Hire American’ trade policy,” the senators wrote. “The report makes clear that our manufacturers are losing out in our trade deals. We are calling on you to honor your commitment by suspending Buy American waivers for foreign firms until government procurement chapters in our trade agreements are negotiated. Absent such action, every government contract your administration signs risks sending hardworking Americans’ tax dollars abroad.”

What the GAO report and the senators’ message did not include, however, was who the contracting U.S. firms could hire.

Trump's executive order sought to protect the American labor force by triggering a review of the H-1B visa program for skilled foreign workers, but the visa applies strictly to people with bachelor's degrees or higher and who work in “specialty occupations” involving subjects like mathematics and engineering. That’s not the sort of low-skilled manufacturing jobs Carrier shipped to Mexico. The Carrier deal, many have argued, was also a weak and ineffective approach to the issue.

In a statement emailed to International Business Times, Baldwin reiterated her stance, urging Trump to actively — not just vocally — support her reintroduced water infrastructure bill.

"Ultimately, when it comes to federal contracts, the government is encouraging outsourcing instead of rewarding our workers," she said. "This needs to change."

Although Trump and his daughter Ivanka are themselves beneficiaries of the practice, the president vowed in a series of early December tweets to charge companies that outsource their labor with a 35 percent tax.

The president has yet to follow through on that promise. His tax plan, by contrast, proposed a one-time, 10 percent tax on profits companies are sheltering abroad.

To most economists, like Princeton international economics professor Gene Grossman, the effort to combat globalization on all fronts is “misguided,” and lawmakers are better off preparing low-skilled workers for inevitable economic change.

“I think the appropriate policy response is to take care of those who are harmed” by globalization, he said. “In the long run and in the shorter run, we should have a more resilient social safety net for workers.”

American companies, he added, would make Trump’s 35 percent tax on offshoring firms politically impossible in any case. Many of them — especially members of the auto industry — assemble their finished products with parts made or put together in a variety of different countries. A massive tax for the use of those entities, Grossman said, “would destroy the position of U.S. firms in the global supply chain.”