U.S. trade war tempts
‘Buy Canadian’ may be needed to fix irritants
Stephen Harper sounded like the mouse that roared when he said he “won’t take no for an answer” over President Barack Obama’s pending decision on the Keystone XL pipeline.
Like the old Peter Sellers’ movie of the same name, in which the bankrupt Duchy of Grand Fenwick declares war on the United States, in the hope of securing reconstruction funds once defeated, the suggestion was that Mr. Harper was just posturing.
Short of a Grand Fenwickstyle invasion of New York, what could he do?
How about launching a mini-trade war? Or at the very least escalating a simmering trade dispute by barring American companies from bidding on the $53-billion in new infrastructure projects about to come on stream?
This is a very real possibility, sources suggest. Frustration has been bubbling among Canadian manufacturers for years over protectionism that excludes them from access to the American public sector procurement market, unless they have U.S. factories.
During the recession, the U.S. imposed “Buy American” requirements on its stimulus funding.
An existing “Buy America” provision applied to the Department of Transportation for transit, highway and airport projects. Both provisions required spending to be directed toward domestic U.S. companies, or those with manufacturing facilities south of the border.
Canada got temporary relief from Buy American restrictions in an agreement reached with President Obama, but that deal ran out at the end of September and new bilateral talks have yet to take place.
To make matters worse, since the stimulus money ran out, Congress has become even more protectionist, applying Buy American provisions to more and more funding appropriation bills and infrastructure programs.
This uneven state of affairs has prompted the Canadian Manufacturers and Exporters organization, supported by the country’s steel producers, to write to four government ministers calling for Canada to retaliate — or in the honeyed language of trade negotiation, apply reciprocal measures.
In his letter, Jayson Myers, president of the CME, urged the government to use the $53-billion in pending infrastructure investment to “ensure that Canadian companies can compete on a fair and reciprocal basis against international competitors.”
He does not use the term “Buy Canadian” and would likely bristle at the thought of being considered anti-free trade.
But the clarion call is clearly for a limited trade war. As he points out, Canada offers open access to foreign bidders that is not reciprocated by countries like the U.S., China or Korea.
It is hardly news that a trade body representing exporters would advocate for more exports. What is new is the government’s appetite to consider retaliation.
Mr. Myers and a number of his members are set to meet with deputy ministers from the departments of Trade, Transport, Infrastructure and Public Works next Monday.
The pending Keystone decision is one reason why attitudes are hardening north of the border. The prevailing view in Ottawa is that Mr. Obama will be swayed more by the environmental crusade against the pipeline than the reasoned arguments of his closest ally.
Another factor is the ongoing negotiation over the Trans-Pacific Partnership between 12 countries that rim the Pacific, including Canada, the U.S., Japan and Australia.
Canada views the TPP as an opportunity to resolve the Buy American issue by including issues not covered by NAFTA, such as state and municipal procurement.
There is a feeling in Ottawa that Canada will never win an exemption from Buy American until U.S. companies like Nucor Corp., which bids on Canadian public projects, are locked out. The expectation is that they would then urge their government to exempt Canada.
Mel Svendsen, who owns automotive component manufacturer Standen’s Ltd. in Calgary, said he hopes that executives of the companies most vocally in favour of Buy American can work with their Canadian counterparts to build a free market.
“We can’t let Buy American escalate into Buy American versus Buy Canadian,” he said.
At the same time, he sympathizes with producers who feel Canada is being sideswiped by provisions aimed at other countries like China. “We are certainly not an unfair trading partner,” he said.
Canadian prime ministers since the Second World War have had three pre-eminent challenges: the economy, unity and the U.S.
Mr. Harper has muddled along unenthusiastically in his relations with the U.S., particularly since Mr. Obama became president. The Beyond the Border initiative may yet bear fruit but by any objective measure, the relationship is at a low ebb.
U.S.-Canada bilateral trade has slipped below the level of the 1990s; the border has thickened; there have been no efforts to broaden or deepen NAFTA; the powerful U.S. environmental lobby considers the oil sands ground zero in their war on carbon; Congress is openly protectionist and Canada is being locked out of key markets.
Mr. Harper has shown himself to rate fair trade above free trade. He may conclude he has little to lose by retaliating.