Buy America/American protectionist measures are costing jobs on both sides of the border.
When Canada and the US entered into a free trade agreement in 1988, then added Mexico with NAFTA in 1994, the idea was to break down protectionist barriers, thus increasing business for all. And creating a more open North American market has been good for business, especially for manufacturers in the partner countries.
But alas, the relationship is now under increasing strain. The US has defaulted to more of a free-ish trade posture with its protectionist Buy America/American measures, which are creating friction among manufacturers on this side of the border.
Both free trade agreements opened up procurement federally but did not include the sub-federal levels of government. Buying American rules have been around for decades, yet Canada and the US, two best friends and each other’s number one trade partner, managed to do business mostly in harmony, applying a waiver or special consideration here and there when issues arose.
That harmony began to fray post recession with billions of dollars in US infrastructure investment up for grabs. Buy American got a tune-up to broaden its reach and combined with Buy America, these measures are tuning out Canadian manufacturers who are now viewed no differently than pillaging interlopers from overseas.
This is a troubling turn of events that’s generating belligerence between “friends” and costing jobs on both sides of the border.
Alaska’s dust-up over a ferry terminal upgrade on leased land in Prince Rupert, BC could have easily been avoided. The $20 million project was subject to Buy America provisions, but Alaskan Governor Bill Walker arrogantly blew off Canadian diplomatic efforts to waiver the problem away.
This over about $2 million worth of steel.
As a result, Canada invoked the rarely applied Foreign Extraterritorial Measures Act (FEMA) to penalize the firm that wins the contract and implements the Buy America stipulations on Canadian soil. Result: no work for anyone.
And one American company has closed Canadian operations over Buy America shenanigans, while a small town in the US almost had to pay back the federal funding used to build a bridge because a Canadian plant had supplied a small amount of its steel.
But there is a more troubling development. New Jersey has passed a law requiring its municipalities to apply Buy America to all their purchases, begging a Canadian response; and this may be just the beginning of a protectionist plague spreading across the US, which is worrying the CME.
It’s all so blatantly unfair. No such restrictions apply in Canada’s provinces or municipalities, but that could change. CME is encouraging Canadian municipalities to “buy Canadian” and there are some takers.
Such a response may irritate enough American companies to cause some blowback against the US measures, but reciprocity perversely validates the protectionist behaviour and does nothing to diminish the inevitable cost to taxpayers when open procurement is abandoned.
We should be accustomed to America’s bipolar view of trade (you mustn’t keep us out but we might not let you in unimpeded). The ongoing US bullying of Canadian softwood lumber producers comes to mind.
But with the energy industry in cyclical decline, Canada is looking to manufacturing to pick up the slack.
Ottawa is up against American domestic politics, but it must step up efforts to remind our trade partner that we have common purpose and both benefit from a relationship that must not be taken for granted. Trade should be free, and fair.