A Canadian diplomatic blitz in Washington on June 9 illustrates concern among U.S. businesses and foreign trading partners about the broad potential economic impact of "Buy American" provisions gaining popularity in Congress.
Canadian diplomats armed with detailed maps of Canadian-produced jobs in the U.S. converged on Washington to lobby Congress against legislation that they said could stifle trade between the two North American neighbors. The diplomats expressed their concern over "signs of protectionism, signs of retaliation, and signs of countries working at cross-purposes," said Guy Saint-Jacques, deputy chief of mission of the Canadian Embassy in Washington.
John Murphy, vice-president of international affairs at the U.S. Chamber of Commerce in Washington, says that the economies of the U.S., Europe, and some Asian countries are so interwoven that jobs in the U.S. are imperiled when U.S. politicians raise trade barriers. "U.S. companies have complex supply chains that are being disrupted by 'Buy American' mandates, with U.S. jobs in the balance," Murphy says.
Fighting "Buy American" Clauses
Thirteen Canadian consuls general from around the U.S., accompanied by U.S. businessmen, held separate meetings with 75 members of Congress and their staffs to protest "Buy American" language inserted into federal fiscal stimulus legislation. Such a clause was contained in the $787 billion stimulus bill signed by President Barack Obama in February. Similar provisions have been inserted into other bills currently before Congress on water quality, school construction, and climate change.
In a telephone news conference, Saint-Jacques said that, when it comes to the U.S.-Canadian business relationship, attempts to protect American industry will backfire and cause Americans to lose jobs. He said the Canadian consuls carried to Congress state-by-state maps showing the number of local jobs attributable to Canadian business. Canada is the largest export market for 35 of the 50 states, he said, and the largest export market for the U.S. as a whole, buying $222.4 billion in U.S. goods last year. That was almost four times the volume of China's $67 billion in 2008 purchases, according to U.S. Census figures.
The federal government is not closing out foreign bidders for contracts in the stimulus spending, but U.S. municipalities have done so. On June 7 in Whistler, Man., the Federation of Canadian Municipalities voted to bar the letting of city contracts to U.S. companies in retaliation for "Buy American." The motion to bar U.S. companies was proposed by Halton Hills, a Canadian community with a local company, Hayward Gordon, whose water treatment equipment includes U.S. parts. In retaliation, the city has implemented a Canadian version of "Buy American." John Hayward, president of Hayward Gordon, told The Toronto Star newspaper that he relies on the U.S. for 75% of his business, and blamed "Buy American" for losing the bidding on 18 projects in the U.S. "Our markets are wide and open, and we used to be allowed to bid for projects in the U.S., but we can't any more. Yet they still can on jobs in Canada," Hayward told the Star.
Guidance for Local Government
The action by Canadian municipalities is not binding, but its passage reflects the level of unhappiness in Canada over "Buy American." The U.S. Chamber of Commerce said it has been lobbying the Obama Administration to direct U.S. municipalities to follow Washington's example by keeping contracts open to countries with which the U.S. has signed "government procurement agreements," which are designed to prevent discrimination against foreign bidders for government projects. About 40 countries have signed such agreements within the World Trade Organization.
Murphy of the U.S. Chamber said that the U.S. Office of Management & Budget has the authority to issue guidance to municipalities. "The OMB could instruct state and local governments to implement 'Buy American'" like the federal government is, he said. How U.S. municipalities are restricting contracts to Canadian companies illustrates "what makes 'Buy American' particularly damaging," Murphy said. "Certainly firms from Europe and Japan—countries that have signed the WTO Government Procurement Agreement—shouldn't be disadvantaged just because the stimulus funds flow to state and local governments before they are spent," Murphy said.
LeVine is a correspondent in BusinessWeek's Washington bureau.