Wynne suddenly facing an ugly U.S. trade battle
Since Donald Trump won the United States presidency on promises of rewriting trade deals, Ontario Premier Wynne & Co. have been meeting with governors, senators, members of Congress and Wall Street financiers to beat the free trade drum.
It was a fight Ontario thought it had won, or at least gained a convincing advantage in, David Reevely writes.
But America is in a protectionist mood, forcing renegotiation of the free-trade treaty that covers private business, and governments are changing their minds about how they’ll use public money.
In New York state, a law banning foreign iron and steel from public construction projects kicked in over the weekend, and Ontario promptly retaliated: No new Ontario construction contracts can be signed if they would include New York iron.
Texas, meanwhile, has a Buy American law for state-sponsored construction.
The stakes are not insignificant: The Canadian Steel Producers Association says Ontario exports $4.8 billion worth of steel to the U.S. each year. New York bought $368 million and Texas bought $228 million worth of Ontario steel in 2016.
We’ve embraced the role of supplier to American industry, with the openness to American products that requires in exchange.
But what happens now, with our usually stable role suddenly in jeopardy?
After years of vigorous trade diplomacy reminding American politicians how important free trade is to their state economies, Premier Kathleen Wynne is in a fighting retreat against New York state over rules against foreign iron and steel.
A law there banning those metals from public construction projects if they don’t come from U.S. suppliers kicked in over the weekend, prompting the Ontario government to retaliate by banning structural iron from New York in construction the province supports here. No new construction contracts can be signed if they would include New York iron.
“We are levelling the playing field,” Wynne said. “But it remains my hope that New York and other jurisdictions that might consider ‘Buy American’ laws will abandon their protectionist approach. The best outcome is open procurement on both sides of the border. Should New York agree to repeal its Buy American restrictions against Ontario, we would immediately repeal our regulations against New York as well.”
That could happen. But the trade barriers are likely to get wider and higher first. The law that took effect April 1 talks about expanding the Buy American rules to other products, “which shall include but not be limited to concrete, cement and aluminum.” A Republican state legislator introduced it, Democrats and Republicans in the Albany legislature supported it, and Democratic Gov. Andrew Cuomo signed it.
The New York move wasn’t sudden: Cuomo signed the bill before Christmas and last month the Ontario legislature passed the Liberals’ Fairness in Procurement Act to give Wynne and her cabinet the power to respond: any state-level trade restriction can now get a quick clapback from the premier’s office. The law took effect the same day the New York rules did and Wynne used it within hours.
Other states are going down the same road: Texas has a Buy American law for state-sponsored construction. Wynne’s announcement said the Ontario government is still determining whether its specific language applies to our goods.
According to the Canadian Steel Producers Association, Ontario exports $4.8 billion worth of steel to the U.S. each year. A lot of that goes to states with big auto plants but New York bought $368 million and Texas bought $228 million worth of Ontario steel in 2016. From them, we buy iron ore, coke and recyclable scrap, and finished steel products in some places. (Those dollar figures are for all steel and related products, not just government purchases, but public construction accounts for a lot of it. Bridges, pipes, culverts, building frames and components. Governments build a lot of stuff.)
This was a fight Ontario thought it had won, or at least gained a convincing advantage in. Since Donald Trump won the presidency on promises of rewriting trade deals, Wynne & Co. have been taking every chance to talk to governors, senators, congressmen and congresswomen, Wall Street financiers — any American, anybody they could get into a room with, just about — to beat the free trade drumbeat. Last year, a massive lobbying effort got more sweeping Buy American language cut out of the New York state budget bill.
We are levelling the playing field.
“This decision recognizes lawmakers’ commitment to building on (our) strong relationship,” Wynne said at the time, almost exactly a year ago. “The result also supports and sustains the economic opportunities created for people in Ontario and New York through open access to government procurement.”
Whoops, no. America is in a protectionist mood after all. Trump is forcing us to renegotiate the freetrade treaty that covers private businesses and governments are changing their minds about how they’ll use public money.
“I am proud to sign this legislation to support hardworking men and women, revitalize infrastructure across the state, bolster the strength of our manufacturing industries and cement our status as a global economic leader,” Cuomo said in December as he approved the less-restrictivebut-still-plenty-restrictive bill.
That’s the sort of language they all use: spending more public money on goods that are less desirable is good for the economy.
We do it with large transit projects, so it’s not like we’re free-trade paragons. Toronto is in a deal with Bombardier to buy streetcars from a plant in Thunder Bay — ones the company is hilariously late in delivering — because of patriotism, not good business.
But in general, we’ve embraced the role of supplier to American industry, with the openness to American products that requires in exchange. The danger in these disputes is that one protectionist move begets another and another and another — that the battles escalate into war.
Wynne’s retaliation against New York has been careful, even slight, but it’s only the first of what could be many volleys.