‘Buy America’ policies called ‘outrageous’ as Canada gets ready for NAFTA talks
The United States wants to maintain - and even expand - the Buy America provisions that restrict government procurement to companies using materials from within its borders, while making it easier for U.S. firms to get those contracts in Canada and Mexico.
The contradictory goal was among the objectives for the revamped North American Trade Agreement that U.S. Trade Representative Robert Lighthizer released earlier this month, suggesting the Americans want to have their cake and eat it too.
“I think it’s rather outrageous,” said Lawrence Herman, an international trade lawyer who has represented Canada at the World Trade Organization.
Step aside, dairy cows. Government procurement - meaning the process of who gets to bid to build bridges, highways and all sorts of public infrastructure projects - is likely to become one of the toughest issues the Liberal government will have to deal with during the NAFTA talks that start next month.
There are two main kinds of protectionist policies when it comes to government procurement below the border and confusingly, they have similar names: the Buy American Act, which has been around since 1933, and various Buy America provisions, which take on different shapes depending on the type of project and level of government involved.
Under the former, the WTO and the current NAFTA exempt Canada from the requirements, as long as the contract is being offered by a U.S. federal department or agency and the amount is above certain thresholds.
Expanding the other kind the one without an ‘N,’ - is what appears to be the focus of the new NAFTA negotiating objectives for the U.S.
It currently applies to procurement done by state and local governments (also known as the sub-federal level), but also to transportation services and any state and local projects that receive federal funding, which makes up the majority of infrastructure spending.
It comes with no special exemption for Canada.
This became a big problem when the previous administration of former president Barack Obama rolled out a major stimulus program to help the economy recover from the financial collapse in 2009, with the requirement that only iron, steel and manufactured goods produced within the U.S. could be used for its projects.
That strained the relationship between the two countries, but they reached a one-year deal in 2010 that allowed Canadian materials to be used in some of these projects in 37 states, in exchange for Canada opening up most of its own sub-federal infrastructure projects.
Since Trump promised a $1-trillion national infrastructure program on the campaign trail, maintaining or expanding the Buy America provisions could cause Canadian suppliers a lot of grief.
A group of deputy ministers raised this as a concern when they gathered to discuss intergovernmental relations this February, according to a document Infrastructure Canada released to The Canadian Press under the Access to Information Act.
“Buy American provisions may have adverse impacts on the Canadian construction sector - and opportunities may be lost with respect to the (Trump) administration’s trillion dollars infrastructure plan,” said the minutes of the meeting.
Canada does have some leverage.
The Liberal government has a major infrastructure program of its own, one that calls for $81.2 billion in spending over the next decade, while the plan Trump promised on the campaign trail does not appear to be rolling out any time soon.
U.S. Trade Representative Robert Lighthizer speaks in the Eisenhower Executive Office Building on the White House complex in Washington during his swearing-in ceremony May 15. The United States wants to maintain and even expand the Buy America provisions that restrict government procurement to companies using materials from within its borders, while making it easier for U.S. firms to get those contracts in Canada and Mexico.