U.S. President Barack Obama’s proposed new $447-billion American Jobs Act is reigniting trade tensions with Canada, its biggest trading partner.
The act, released in full by the White House this week, contains yet another protectionist Buy America provision of the type that strained the Canada-U.S. relationship for much of 2009.
Those who closely watch the Canada-U.S. trade relationship were crestfallen to see Section 4, with its heading “Buy American – Use of American Iron, Steel and Manufactured Goods.”
The section 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.”
The bill would commit more than $100-billion toward the renovation of schools, the construction of roads and bridges and improving transit.
There are some exceptions to the Buy America provision, 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 questions about the new provision at a two-day Canada-U.S. manufacturing summit.
“We obviously believe in maintaining trade between our two countries … and that’s the position we'll take again in Washington if we need to,” Mr. Doer said.
Mr. Jacobson said he hadn't seen the language in the American Jobs Act. But he said such legislation is “intricately complicated” and depending on the wording of the bill, it might not be something Canada needs to worry about.
At the summit, Mr. Jacobson called the Canada-U.S. trade relationship the top item of international business in the American capital, saying “a huge amount of time” is being spent on easing trade between the two countries at the highest levels of government — including the White House.
Mr. Jacobson was referring to the long-awaited perimeter security deal, billed as an effort to boost cross-border trade and reduce congestion without compromising security.
In Ottawa, the Prime Minister's Office wouldn't comment on the jobs act issue in detail except to say the Canadian government will “continue to oppose protectionism and defend Canadian interests.”
“History has shown protectionist measures stall growth and kill jobs,” a Harper spokesman said.
Birgit Matthiesen of the Canadian Manufacturers and Exporters Association expressed her dismay about the provisions, given how hard Canadian officials worked two years ago to persuade their American counterparts of the dangers inherent in hindering trade and commerce between two economies so closely linked.
“It’s this de facto Buy America 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 the 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 America dispute consumed Canada-U.S. relations for much of 2009 until Canada finally earned an 11th hour waiver from the Buy America provisions contained in Mr. 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, Ms. Matthiesen 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.”