Ron Watkins is president of the Canadian Steel Producers' Association.
Imagine British Columbia's northern coast: Wild beauty, deep blue water, thick forests…and American steel?
That's right. At the Port of Prince Rupert in northern British Columbia, on lands owned by the Canadian government but leased to the Alaska Marine Highway System (AMHS), a $15-million ferry terminal is being built exclusively with American-made iron and steel. That is because this U.S. tenant of Canadian port lands is applying the controversial Buy America policy, which dictates that only American steel products are to be used in government-funded transportation projects – in this case, on a project in Canada.
That means iron and steel made in Canada can't be used on a major port project on Canadian soil. Taking it one step further, AMHS officials are promising to do metallurgical tests to ensure that only U.S.-made steel is used.
This application of the Buy America policy is a shining and especially ludicrous example of the uneven playing field that Canadian firms can face in global government procurement markets. A recent bridge project in Colorado was another. (Fortunately, a more sensible outcome finally prevailed.) But with relatively minor exceptions, Canadian steel products are prohibited in American infrastructure projects, while U.S. steel suppliers compete freely in our domestic market.
The Canadian Institute of Steel Construction points to the growing scope of Buy America provisions as largely responsible for Canada's annual $1-billion plus trade deficit in fabricated steel products with the U.S. Such provisions are included in a growing list of U.S. legislation. The astounding situation in Prince Rupert takes this negative economic reach to an even higher level, and latitude, by shutting out Canadian steel from use on a project in our own country.
The lack of reciprocity in government procurement opportunities illustrates the need for a more integrated North American economy. International Trade Minister Ed Fast said the Canadian government remains opposed to these kinds of restrictions and is exploring options to address the situation.
"The extraterritorial application of these protectionist restrictions on trade within Canada by a foreign government is unreasonable," he said. "Taxpayers on both sides of the border would benefit from dismantling the trade barriers and inefficiencies created by U.S. protectionist policies such as Buy America." Canadian opposition parties have joined the debate, backing the legitimate interests of Canadian industry.
And to be clear, in doing so, we do not advocate that Canada put in place its own version of Buy America. Our view goes the opposite direction. Instead, we ask that the U.S. and Canada negotiate reciprocal procurement conditions that are consistent with trade liberalization, are reasonable, and sensible – creating the same market access and conditions we allow in our own market.
The prosperity of Canada's steel industry is vitally important to the nation's economic health. It employs some 20,000 people directly, with the steel fabrication industry adding thousands more. Indirectly, a further 100,000 jobs are supported by domestic steel production. Ensuring better access to international markets for Canadian steel helps to strengthen the industry – not to mention the countless jobs that use or rely on Canadian steel daily.
As we see in so many industrial sectors, the North American economy is strengthened when both the Canadian and U.S. economies are strong, and when supply chains for both private and public sector uses are highly integrated and efficient. It is counterproductive when either country seeks to limit trade with the other.
We support the government's efforts at international trade liberalization, including fair competition and increased market access in government procurement. Our economy can only reach its potential if Canadian producers are able to compete fairly for international and domestic business. This holds particularly true with our neighbour to the south (or, in the case of Prince Rupert, to the north), our largest and closest trading partner.
Ensuring we are competing on a substantially equal basis as our major trading partners will increase industrial production and jobs in Canada by ensuring more open market access abroad and competitive, but fair, competition at home.
We call our idea to fix the problem "reciprocity". Sauce for the goose, sauce for the gander. It's fair. It's good business. And it's common sense. It is a core principle of the international trade system.
This principle goes beyond Buy America – it should apply to all our trade relationships. The latitude exists in the international trade rules to pursue a policy that ensures fairness by applying the same conditions for all players in the market.
It is in the best interest of both Canada and the U.S. to achieve more reciprocity in their procurement trade practices; not only would it strengthen industry across the continent, but it would also avoid absurd situations like the one that has emerged in the wild beauty, deep blue water, and thick forests of Prince Rupert. And it can forestall growing pressures in both countries to go the opposite direction.