Barack Obama is pledging to review a contentious “Buy American” requirement slapped on the monster stimulus package by the U.S. Congress this week, acknowledging the issue has struck a nerve in Canada and elsewhere.
White House spokesman Robert Gibbs said the U.S. President is eager to make sure the $820-billion (U.S.) stimulus plan doesn't violate international trade agreements.
“The administration is reviewing that provision,” he told reporters at the White House Friday. “It understands all of the concerns that have been heard not only in this room, but in newspapers produced both up north and down south.”
Even as the White House tried to defuse the controversy, support remained strong, even within the administration, for a bill passed this week by the U.S. House of Representatives that bans the use of foreign iron and steel in projects funded by the package.
“I don't view that as some of the pure free traders view it, as a harbinger of protectionism. I don't buy that at all,” Vice-President Joe Biden told CNBC on Thursday. “So I think it's legitimate to have some portions of Buy American in it.”
Mr. Gibbs acknowledged the issue would come up when Mr. Obama meets Canadian Prime Minister Stephen Harper in Ottawa next month. “I don't think there's any doubt that trade is going to be on an agenda for a bilateral meeting between the United States and Canada,” he said.
A Senate version of the bill, which has yet to be voted on, goes even further, mandating that only U.S.-made goods and equipment be used in all federally funded stimulus projects – everything from computer software to hard hats.
Ottawa argues both the House and Senate bills are violations of World Trade Organization and North American free trade rules. Canadian diplomats, working alongside groups such as the U.S. Chamber of Commerce, have been lobbying Congress to remove or water down the measure.
Trade lawyer Lawrence Herman, of Cassels Brock in Toronto, said the provisions are clearly a violation NAFTA, but a legal battle would take years and only then would Canada be able to begin compensation measures.
The provisions have so much political support in the United States that they are unlikely to be stripped out completely.
The Canadian government will probably have to fall back on arguing for an exemption, and that such rules would hurt the supply chain of U.S. firms, said Colin Robertson, the former senior Canadian diplomat now heading a major project on Canada-U.S. relations at Carleton University's Norman Paterson School of International Affairs. “At the end of the day, it comes down to our national interest,” he said.
Steel industry insiders said the measure is aimed primarily at China, not Canada.
That isn't much of a consolation to Jean-François Blouin, the general manager of steel fabricator Supermetal Structures Inc. of St-Romuald, Que.
His company buys the bulk of its steel in the United States. Workers at its three Canadian plants then cut and weld that steel into components for office buildings, plants and bridges throughout Canada and the United States.
Yet Supermetal could wind up one of the main casualties of the Buy American provision. “It's fairly scary for us,” Mr. Blouin said.
Canada exported more than $11-billion worth of iron and steel products to the United States in 2007; nearly the same amount went north. In the highly integrated North American steel industry, products in various stages of manufacturing often go back and forth across the border multiple times before reaching customers.
“We need to get across the idea that we are an integrated market,” argued Jayson Myers, president of the Canadian Manufacturers and Exporters Association.
Yet the main union representing North American steel workers and the U.S. industry's lobby group, the Iron and Steel Institute, are both enthusiastic backers of Buy American.
If Washington wants to stimulate the U.S. economy it's only “common sense” that the money should go to U.S. suppliers, said Nancy Gravatt, vice-president of the American Iron and Steel Institute. “We need to get people working again.”
The big Canadian steel makers are relatively indifferent, in part because they don't make much structural steel that goes into infrastructure projects, and also because the two largest, U.S. Steel and ArcelorMittal Dofasco, have operations on both sides of the border and can switch production back and forth if necessary.
With a report from Greg Keenan in Toronto
