New 'Buy American' restrictions could be coming down pipeline By Carl Meyer Published February 24, 2010

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Liberal Trade critic Scott Brison.

A new protectionist American stimulus bill that could be signed into law soon has prompted fresh accusations from the opposition that the government has severely mishandled the recent Buy American deal.

However, the trade minister says the new Canada-US agreement, while not perfect, will in fact give Canadian businesses a competitive advantage.

The US "Jobs for Main Street Act, 2010," colloquially known as Stimulus II, or the Jobs Bill, has billions in construction projects that will be covered by another Buy American provision.

A version of Stimulus II has already been passed by both the US House and the US Senate, and the two versions are currently being reconciled. On Monday, the Senate took steps to avoid a Republican filibuster.

US President Barack Obama is intent on signing the bill into law, demanding in his recent State of the Union Address to see the bill on his desk "without delay."

On Feb. 5, the Canadian government announced it had reached a deal with the US exempting Canadian businesses from Buy American requirements in the original federal stimulus spending program, known as Stimulus I.

This deal had three parts. One is access to seven US stimulus projects, which had to be ready to proceed to construction within 12 months of February 2008. Critics have said this provided very little time for Canadian companies to compete.

In exchange, all provinces and territories signed on to the World Trade Organization's General Procurement Agreement, allowing American companies to bid on provincial and municipal procurement contracts.

The third part of the deal is an agreement to enter into negotiations within the year to set up a permanent procurement deal.

Because the US-Canada deal only covers Stimulus I, if the US passes Stimulus II before a permanent agreement is reached—a situation that is almost certain—Canada will have to negotiate again to receive exemptions.

Trade Minister Peter Van Loan said that even if the government wanted to be proactive on Stimulus II, it can only move on legislation that has been already signed into law by Mr. Obama.

"Obviously you cannot have a waiver that covers stuff that hasn't been passed yet. You can't fetter the discretion of Congress," he said.

Rather, Mr. Van Loan argued that "if there are any subsequent pieces of legislation that come through and have Buy American provisions in them, there will be a fast-track consultation process, and obviously the hope is...we can achieve the same kind of agreement for programs in the future on a rapid basis."

But Liberal trade critic Scott Brison said that after Stimulus II, there may be no more US stimulus packages to benefit from, as the US feels its employment heats up again and focuses on other matters. He blasted the government for failing to secure an agreement that would protect against future Buy American provisions in US legislation like Stimulus II.

"The US this year will have a $1.6-trillion deficit. Future spending packages are going to pale in comparison to last years stimulus. The mother lode of US stimulus packages is gone and we missed the big boat."

"Harper was desperate for a symbolic victory," said Mr. Brison. "I cannot understand why the Harper government did not negotiate exemptions for future US investment packages."

The Liberals are also questioning why the government took so long to secure a Buy American deal after provinces came on board during the summer. Mr. Van Loan defended the government's timeframe for negotiations as an "ongoing negotiation process."

"Some things pick up, some things slow down, and we got the American response to our October offer on the Friday after I became minister," Mr. Van Loan said.

"It was moved on vigorously. We all would have preferred that there never were Buy American provisions, we all would have preferred a deal sooner, [but] we're all happy that we got a deal as soon as we did."

But Mr. Brison said the speed of negotiations was a question of political will as opposed to a bureaucratic process.

"Trade relations and foreign relations are simply human relations," he said. "We haven't had time for any minister to actually get a handle on these files or to build the relationships required to defend our interests."

Many trade critics, including Mr. Brison, have criticized the overall agreement as well, saying bidding on seven projects under Stimulus I in exchange for open procurement at the subfederal level in Canada is imbalanced and represents a bad deal for the country.

"Given the late hour, and the fact that these projects have already been designed to comply with the Buy American provisions, Canadian suppliers can expect to see very little practical benefit," wrote Scott Sinclair, director of the Trade and Investment Research Project at the Canadian Centre for Policy Alternatives in an email.

"The negative effects will far outweigh any small export boost that this agreement might provide. This is the first time that Canadian provincial procurement has been covered under an international trade deal. Canadian provinces have sacrificed the flexibility to use procurement as a policy tool for purchasing worth tens of billions annually."

But Larry Herman, a former foreign service officer, now a lawyer at Cassels Brock & Blackwell LLP specializing in international trade and international business, argued that while the deal isn't perfect, it represents "a reasonable deal under the circumstances."

"Open markets on procurement are highly desirable in any event in the North American context. The reason we didn't achieve that in 1994 when we negotiated [the North American Free Trade Agreement] is that the provinces were unwilling to open their markets," he said.

"I thought it was a reasonable deal where there was tremendous concern over Canadian suppliers cut out of US subfederal procurements. The problem was that Canadian suppliers on an active basis were being told that they no longer qualify."

cmeyer@embassymag.ca