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Buy America: Blatant protectionism - Metro US

Buy America: Blatant protectionism

Cats, it appears, can be herded if the stakes are high enough. Our provincial premiers, in an extraordinary display of unanimity, now say they support the Harper government’s desire to enshrine state/provincial and local procurement practices under the North American Free Trade Agreement.

By expanding NAFTA this way, Canada would gain an exemption from the Obama administration’s Buy America rules.

Buy America instructs state and local governments to purchase only U.S.-made steel or manufactured goods under procurement contracts funded by Washington’s $800-billion US?economic stimulus package. Exemptions are already held by several countries — Australia, Britain and Mexico among them. They, unlike Canada, had the foresight to negotiate free trade in sub-national procurement contracts with the U.S.

Buy America is blatant protectionism, the kind of appealing, but self-defeating economic strategy governments use in recessions when it’s politically necessary to appear to protect domestic jobs. It’s also the kind of measure that provokes reprisals. Why just the other day, the Federation of Canadian Municipalities voted to exclude U.S. companies from their procurements. The vote was non-binding, but typical of the pushback that accompanies trade disputes.

Ottawa has a good case for an exemption. The Canadian and U.S. economies are highly integrated. A part made in Canada might go into a U.S.-built component, which is then assembled into a finished Canadian product for shipment back to the U.S. Think of it as a supra-national supply chain.

By one estimate, about 70 per cent of Canada/U.S. trade is this sort of industrial back and forth, which means that penalizing one side automatically disadvantages the other.

Canadian officials like to remind Americans that more than seven million U.S. jobs in some 35 states, including the vote-heavy industrialized northeast, depend on trade with Canada. Equally, U.S. companies could lose something like $15 billion a year in business if Canadian municipalities cut them off from procurement contracts.

Canadian officials would like Congress to write an exemption clause into the Buy America legislation or have U.S. President Barack Obama issue an executive order doing the same. Both are remote possibilities, meaning the likeliest course is re-opening NAFTA.

This has its own hazards. In addition to swapping an exemption for access to Canadian procurement business, the U.S. might have other items on its shopping list. A new NAFTA will take time, and may not take effect until U.S. stimulus funds are long gone.

It’s great Canada is finally on the case, but we should have taken care of this business long ago.

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