Canada seeks Buy American exemption

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AppId is over the quota

Canada is seeking an exemption from the new Buy American provisions in U.S. President Barack Obama's proposed jobs act, weeks before the exemption for the previous stimulus is set to expire.

Minister of International Trade Ed Fast, citing concerns over a potential "trade barrier initiative," has launched a round of consultations with Washington to negotiate an extension for a Canadian exemption before a Sept. 30 deadline.

Obama's proposed $447-billion US American Jobs Act is intended to give a much-needed jolt to a stalled U.S. economy, but in an interview with Evan Solomon on CBC's Power & Politics Wednesday, Fast characterized the bill as misguided.

"We believe that protectionism is counterproductive, especially during these difficult economic times around the world," the minister said, adding that 75 per cent of Canada's trade is with the U.S.

The measures contained in the bill echo Washington's original stimulus package in 2009 — a fight that Canada thought it had already won.

"I do know the last time this happened, which was back in 2009, we engaged with our American counterparts, and we were able to resolve the issue, at least on a temporary basis. Now we're back at the same place where we're now it's a new stimulus package that the U.S. has introduced," Fast said.

The minister said he was "very surprised and certainly disappointed" to learn of the provisions, adding that Canada is working "very aggressively" to raise the same arguments made two years ago with the Obama administration and to Congress.

The offending passage in the act is contained in Section 4, headed "Buy American — Use of American Iron, Steel and Manufactured Goods."

The section contains a directive that none of the funds made available under the American Jobs Act may be used for "the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States."

The "Buy American" section also notes that it "shall be applied in a manner consistent with United States obligations under international agreements," which offers Canadian businesses some protection under the North American Free Trade Agreement. But NAFTA doesn't apply to municipal contracts, and the bulk of spending in both the previous U.S. stimulus plan and Obama's proposed jobs plan is at the municipal level.

The bill calls for more than US$100 billion towards the renovation of schools, the construction of roads and bridges and improving transit.

Fast said history shows protectionist measures stall growth and kill jobs.

Canada is now asking for an extension for the previous NAFTA deal extending to sub-national governments, which is set to expire at the end of this month.

Ottawa is concerned about a "chill effect" that could take place as a result of the Buy American provision, as it has been noted that just because states and municipalities might be allowed to buy Canadian doesn't necessarily mean they will.

Even if the NAFTA agreement is renewed beyond Sept. 30, Canadian suppliers might worry they will still be frozen out by U.S. contractors, the CBC's Hannah Thibodeau reported from Ottawa.

"They have this box they tick that says, 'Buy American,' they tick that off and if they don't know and look at the fine print of any of these deals, then they won't know that Canada is exempt," she said.

Jayson Myers, the president of Canadian Manufacturers & Exporters, the country's largest industry and trade association, said the concern is that business owners in the U.S. may find the deal "tremendously confusing" if they don't understand Canadian companies can be included in bidding processes.

"But the bigger impact here is not just the direct opportunity that's lost for Canadian exporters; this has a chill right through the supply chain," Meyers told CBC News on Wednesday, noting that distributors may not be able to distinguish between what would be considered foreign, Canadian or U.S. goods.

With files from The Canadian Press Accessibility Links

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'Buy American' provision returns in Obama's jobs act

AppId is over the quota
AppId is over the quota

U.S. President Barack Obama's proposed new American Jobs Act is aimed at creating much-needed jobs in the United States, but it's also reigniting trade tensions between the country and Canada, its biggest trading partner.

The act, released in full by the White House this week, contains yet another protectionist Buy American provision of the type that strained the Canada-U.S. relationship for much of 2009.

Section 4, with its heading "Buy American —Use of American Iron, Steel and Manufactured Goods," contains a directive that none of the funds made available by the American Jobs Act may be used for "the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States."

There are some exceptions, however. The act states that if using all-American products increases the cost of the project by more than 25 per cent, the requirement will be waived. So too if the goods needed for the project aren't manufactured or available in the U.S.

But a fair amount of time-consuming red tape must be hacked through in order to receive such a waiver.

"If the head of a federal department or agency determines that it is necessary to waive the application ... the head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived," the act reads.

Section 4 concludes by insisting it "shall be applied in a manner consistent with United States obligations under international agreements."

At an event in Montreal on Tuesday, Gary Doer, Canada's U.S. envoy, and David Jacobson, the U.S. ambassador to Canada, faced a series of questions about the new provisions at a two-day Canada-U.S. manufacturing summit.

"They both wanted to wait to see what the exact wording was in the act ... it was certainly on their radar," said Jayson Myers, president of the Canadian Manufacturers and Exporters organization.

The Canadian government will "continue to oppose protectionism and defend Canadian interest," a spokesman for Prime Minister Stephen Harper said Tuesday.

"History has shown protectionist measures stall growth and kill jobs."

Birgit Matthiesen, the U.S. representative of the CME, expressed her dismay about the provisions given how hard Canadian officials worked two years ago to convince their American counterparts of the dangers inherent in hindering trade and commerce between two economies so closely linked.

"It's this de facto Buy American sentiment now that is so disappointing and frustrating," she said in an interview from Montreal.

"It's really disconcerting that this administration and the U.S. Senate seem to have decided that Buy America had to be inserted into this bill, ignoring our concerns that we've expressed so strongly previously and the reasons why we expressed those concerns."

Maryscott Greenwood, an international trade specialist at the McKenna, Long law firm in D.C., predicted the bill will likely pass U.S. Congress in some form given the urgency of the job situation in the United States right now.

She added there's no guarantee Section 4 will be removed by either Republicans or Democrats with a presidential election a little more than a year away.

"I think some version of it will get through, and Canada will have to press for a waiver," she said.

"It means that Canadian business interests must remain vigilant in continually explaining to U.S. policy-makers the interconnectedness of our two economies," she added. "Canada needs to constantly point to the futility of measures that don't take the special bilateral relationship into consideration."

The Buy American dispute consumed the Canada-U.S. relationship for much of 2009 until Canada finally earned an 11th hour waiver from the Buy American provisions contained in Obama's $787 billion stimulus act.

The deal allowed the use of Canadian products in many local U.S. projects funded by the stimulus program. In return, Canadian provinces agreed to sign the World Trade Organization's government procurement agreement, something they'd refused to do when the WTO was established in 1995.

That's the only bright spot, Matthiessen said -- Canadian provinces won't be excluded this time around from bidding on projects at the state and federal level in the United States.

"But if these monies get funnelled down to the municipalities and counties, then we have no protection, and the vast majority of money was spent at that level under the recovery bill," she said.

"Our work is really cut out for us."

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