How about we ‘Buy Canadian’?
The Canadian government frets about U.S. President Joe Biden’s strictures to “Buy American.” It should counter instead with own plan to “Buy Canadian.”
For the past two days, Prime Minister Justin Trudeau and key members of his cabinet have been busy lobbying U.S. officials in an effort to derail proposed Buy American schemes.
In particular, the Canadians are taking aim at a plan that would see the U.S. government subsidize the purchase of electric vehicles — subject to two criteria.
First, the vehicles would have to be built in the U.S. Second, they would have to be built in union shops.
Politically, both of these criteria are eminently reasonable. Why should American taxpayers subsidize jobs outside the United States? And why should they subsidize employers unwilling to pay union wage rates?
The answer to both questions is that the Canada-U.S.-Mexico Agreement (CUSMA), which replaced NAFTA, demands compliance. The renegotiated trade deal between Canada, the U.S. and Mexico makes it illegal in most cases to favour one of these three countries over another.
Canada is arguing hard for the sanctity of CUSMA. So far, it is not clear that Biden buys the Trudeau government’s argument. Speaking briefly to reporters on Thursday, he was deliberately vague.
The Americans have ignored the trade agreement before when it suited them — most famously in the long-running saga of softwood lumber. It would be perfectly in character for them to ignore it again.
What then should Canada do? It could appeal under CUSMA. But even if it did that, there is no guarantee that the Americans would comply with an unfavourable ruling.
What is the use of a binding trade pact like CUSMA if one of the participants is free to ignore it whenever it wishes?
Perhaps the answer is to borrow from America’s playbook. Does the U.S. insist on Buy American policies? Fine. Then Canada should counter with a Buy Canadian scheme.
If that plays havoc with CUSMA then so be it. Canadian officials like to say that continental free trade serves U.S. as well as Canadian interests. Perhaps the Americans will appreciate CUSMA more if protectionism is allowed to thrive in Canada.
Seen in that vein, some of Biden’s plans seem more reasonable. Why would Canada oppose any scheme, like Biden’s electric vehicle subsidy, that favoured unionized workers?
I can see why the Mexican government would be opposed to this particular policy. Mexico thrives on cheap, non-union labour.
But I don’t understand why an allegedly progressive government like Trudeau’s would oppose the union shop requirement that Biden is talking about.
None of this is meant to suggest that Canada should eschew all trade deals. Trade is necessary for this country. Trade with the U.S. is particularly necessary.
But it does suggest that we not be naive about such deals. For domestic political reasons, the U.S. will always have some kind of Buy America policy in play.
They had one when Donald Trump was president. They have essentially the same one now that Biden is in charge.
We can complain about America’s failure to live up to NAFTA and now CUSMA. We can accuse Biden of being a closet Trumpian. But that’s not likely to accomplish much.
Better to counter with our own protectionism. We too can subsidize electric vehicles that are manufactured in Canada by union labour. Just because the Americans are doing so doesn’t mean this is a bad idea.