Ottawa is vowing to fight the latest attempt in the US to place a Buy American restriction on a new multibillion-dollar government job creation package.
September 15, 2011
by CANADIAN PRESS
OTTAWA: Ottawa is vowing to fight the latest attempt in the US to place a Buy American restriction on a new multibillion-dollar government job creation package.
Trade Minister Ed Fast said the Canadian government was “disappointed” to learn the new proposed $447 billion spending bill from President Barack Obama would resurrect protectionist measures.
Fast said he would have appreciated a heads-up from the White House, particularly after Ottawa fought for over a year to secure a Canada exemption to the Buy American provisions in the previous US$900-billion stimulus in 2009.
“There’s no obligation on the Obama administration to give us advanced notice, but obviously it would have helped,” Fast said in a telephone interview.
“I’m disappointed that after the strong case we made that putting up barriers is counter-productive, they’ve now gone back to the well and resurrected that approach.”
Protectionist barriers between the two countries makes no sense given the close integration of the North American economy and would cost both countries jobs and efficiencies, he said.
The 2010 compromise agreement between the two countries gave a waiver to Canadian suppliers in exchange for a commitment by Canadian provinces they would not discriminate against US contractors. Although the two sides continue exploring a permanent arrangement on government procurement, the deal does not apply to the second round of stimulus being proposed by Obama.
But Fast said he has invoked a provision in the 2010 agreement for fast-track consultations on future disputes.
“We have initiated the fast-track consultations that were contemplated under the previous agreement … and we’re hoping saner heads prevail.”
Fast said his officials are currently mapping out strategy on how to proceed, but Jayson Myers, head of the Canadian Manufacturers and Exporters, said his understanding is that direct contacts with US officials could begin within days.
Myers said Canada has several advantages in talks this time that might lead to a quicker resolution.
“We have a fast-track consultation procedure and that’s very important. The second thing is that the arguments around this are exactly the same, so if it made sense two years ago, it makes sense today.”
He added that the Republican-dominated Congress is more likely to favour free trade than in 2009, when Democrats ruled both houses of the legislature.
The issues in the current bill are almost identical to what Canadian exporters faced two years ago.
Section 4 of the proposed bill, titled “Buy American – Use of American Iron, Steel and Manufactured Goods” – contains a directive that none of the government money may be used for “the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States.”
The provision likely would apply to more than US$100 billion to be directed toward the renovation of schools, the construction of roads and bridges and improving transit.
Myers said it is impossible to predict how much business Canadian suppliers could lose out on, but said a benchmark is seven to 10%, or $700 million to $1 billion.
The bill does state the jobs stimulus package must be “consistent with United States obligations under international agreements,” an exemption that was also contained in the original stimulus law two years ago.
And it would allow foreign participation in cases where excluding them raises project costs by more than 25%.
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In the previous dispute, analysts estimated Canadian suppliers likely lost on billions of dollars of US government infrastructure procurement.
Suppliers of everything from steel and sewers to metals, pipe and construction materials, were affected.
Some of the most dramatic examples that came to light included a Toronto company that had its plastic piping ripped out of a project in California.
A Halton, Ont. company also complained publicly that it was being shut out of bidding for work and had briefly contemplated moving south of the border to comply with the new rules.
While the examples were anecdotal, the Federation of Canadian Municipalities became so incensed by the law that it passed a resolution to discriminate against US suppliers in their procurement unless a solution was worked out.
NDP critic Robert Chisholm was critical of the Harper government for trying to score “political points” in the current dispute. He said “nation states have a right to make decisions they think is going to best serve their population.” He notes that Ontario is trying to maximize local participation in spending on the Green Plan.
But Fast rejected the approach. Protection hurts economies in the long run, and winds up costing rather than creating jobs, he said.
“Any time we erect barriers we negatively impact our economic prosperity,” he said.
The new protectionist measures come at a time when Canada and the US are believed to be close to signing a new expanded arrangement to allow more secure flow of goods across the border along with stepped up security
© The Canadian Press