SPECIAL COMMITTEE ON THE ECONOMIC RELATIONSHIP BETWEEN CANADA AND THE UNITED STATES
THURSDAY, APRIL 8, 2021
My experience with buy America began in Albany in 1981, when my then boss consul general Ken Taylor and I travelled from New York City to Albany to see then governor Hugh Carey to push back on buy New York policies on steel and cement, an experience that over the years I would repeat in different states and on Capitol Hill.
Protectionism through preferential procurement policies for goods and services is not particular to the United States. It is practised by all nations, including Canada, and at every level of government.
If all politics is local, so is trade. Voters prefer that their tax dollars be spent locally, even though buying local generally costs more and provides less choice. But these are economists’ arguments, and they don’t matter much to the public. Neither does the bleat that Canada deserves an exemption from buy America because we are America’s friend and neighbour. While polls consistently show that Americans like Canada more than any other nation—in fact, more than we like them—the business of America is business.
We’ve learned to deal with buy America policies on four levels.
First is by negotiating a procurement agreement within our trade agreements, as with defence production sharing. At the Trump administration’s insistence, there is no procurement chapter in the current Canada-U.S.-Mexico Agreement. Yet, much of what was included in the NAFTA is included in the WTO’s plurilateral agreement on government procurement. There are more likely to be deletions from the entities listed in this agreement, given the current protectionist mood on both sides of the aisle in Congress and the “Made in America” approach of the Biden administration.
Second is to offer reciprocity in procurement at the state and province level, because that is where the money is spent. This is how we dealt with President Obama’s Recovery Act program in the wake of the 2008-09 recession. Prime Minister Harper turned to the premiers’ Council of the Federation. Premier Jean Charest and his successor as chair, Premier Brad Wall, reached out to their governor counterparts, including through a trip by seven premiers to the National Governors Association in February 2010, to make the case for reciprocity.
The arguments that the premiers made then still apply. By opening to outside vendors, local cartels’ ability to game the market was curtailed. Competition means better value. Most states are constitutionally prevented from running deficits. Governors need to make their dollars count, especially as they face huge costs in public services because of the pandemic. The 2010 Canada-U.S. Agreement on Government Procurement did not include every state nor cover every sector, but it did open procurement opportunities for Canada.
Third, working with labour is vital. When our unions are part of the negotiations, as we saw during the CUSMA negotiations, we make progress. United Steelworkers leads the charge for buy America, but their membership is both Canadian and American. In the early 1990s, we gained respite from buy America on steel because then trade minister Michael Wilson went to Washington with then Canadian Steelworkers national director, later Steelworkers president, Leo Gerard. After talks with then Steelworkers president Lynn Williams, the administration agreed that buy America would not apply.
Fourth, with those Americans we buy from and sell to, we need to make permanent our campaign that making things together is mutually profitable for jobs and prosperity. Look at our mutually profitable integrated auto trade. Before a car is assembled, its parts have criss-crossed the border at least six times. A car assembled in Canada contains 60% American-made parts, often from Canadian manufacturers with U.S. operations, like Magna, Martinrea or Linamar.
We need to underline that our regulatory standards, especially labour and environmental, are commensurate with those of the United States. We also need to avoid the “tyranny of small differences” that keeps us out of the U.S. market.
Given America’s growing national security concerns about reliable supply and resiliency, we need to point out that we are their closest ally and the source of their energy independence, including for the critical minerals required for next-generation manufacturing. When it becomes an American issue with Americans who want to preserve their supply chains, we increase our success rate, as we witnessed with the dismissal of the Trump tariffs on steel and aluminum.
To conclude, there is no magic bullet for buy America. Hoping for an exemption because we are Canadian won’t work. We need to make our case around reciprocity and better value, while underlining the security of our mutually beneficial supply chains. Buy America is not going away, so making our case must be a permanent campaign, a team Canada effort involving the Prime Minister, premiers, cabinets and legislators working with business and labour.
We’ve had a long trade screen when we cross the border. After 9/11, we had a security screen. We’re now going to add a health screen. We need to look at border crossings.
Regionally, there’s very good work being done by the Pacific NorthWest Economic Region out there in terms of pilots as to how to make the border work better. There’s something going on at the Wilson Center. Ultimately, it’s going to be the Prime Minister and the premiers, in their Thursday night conversations, who will make the decisions on where we go.
It’s an opportunity for us to also think about how we reimagine this border, post COVID. Yes, we should be looking at this, and we shouldn’t be bound by the notion that one size fits all. There may be a variety of things we can try, opening it in certain parts of the…. We have a massive border. It’s not just the 49th parallel; it’s also the border between Yukon and Alaska.