Military trade deals end up hurting U.S. industry

Topline: The United States government purchases an average of $5.2 billion of military supplies from foreign countries each year, but the Pentagon and Department of Commerce “haven’t fully determined whether the agreements help or hurt U.S. industry,” according to a new report from the Government Accountability Office.

Key facts: The Department of Defense has Reciprocal Defense Procurement Agreements with 28 countries. The agreements supersede the Buy American Act, which requires federal agencies to buy most supplies from U.S. manufacturers.

Since 2018, the DOD “has skipped important due diligence steps for entering into and renewing” its 28 agreements, according to the GAO.

Four of the agreements have been renewed since 2019. For three of them — with Poland, Luxembourg and Czech Republic — the DOD did not ask domestic defense suppliers to comment on how the agreements would affect U.S. industry, as is required by a 1988 statute.

“Without this input, DOD missed opportunities to collect firsthand information from U.S. defense industrial base suppliers that would help assess the potential effect on U.S. industry for these agreements,” the GAO wrote.

America’s agreement with Italy expired in 2019, but the DOD continues to ignore the Buy American Act to buy supplies from Italy anyway, the GAO reported.

The DOD is also required to ask the Department of Commerce for advice on how a trade agreement will “help or hurt” U.S. industry. The requirement was ignored when Finland’s deal was renewed in 2018, the GAO found.

When Commerce advice is given, it “has several weaknesses,” according to the GAO. For example, the Department of Commerce analyzed only how buying military goods — not services — from foreign countries affected America. Services make up 49% of military purchases.

Two-thirds of the agreements can be renewed automatically, and there are no “written policies and procedures” for reviewing the agreements or signing new ones. That means the agreements could be hurting U.S. businesses, but the DOD would have no idea. One agreement with Germany has likely not been reviewed since 1991, the GAO said.

The U.S. sells an average of $9.7 billion of military supplies to its 28 trade partners each year, the GAO said.

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Summary: The DOD frequently has issues managing its gigantic budget, and more steps must be taken to ensure its purchases are not hurting American businesses.

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