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Dear Mr. Minister,

It's been a while since you've been through town. I trust you've been well and that you are having a good summer. I see Washington again is toying with "Buy American" legislation. Sigh. This must be frustrating, especially as it comes on top of the whole Keystone XL fiasco. If only TransCanada Corp. had avoided that North Dakota aquifer in the first place, eh?

Like that vampire show on HBO, the "Buy American" saga is losing its ability to scare. I assume you and your diplomats, with an assist from the Canadian manufacturing lobby, will avert any damage. Still, it's funny how free trade comes at such a cost in time and money.

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The drama down here in Washington is the civil war within the Republican Party. Those Tea Partiers just won't quit. Just when the U.S. Chamber of Commerce and the rest of the Republican establishment thought it had the Tea Party beat, Eric Cantor, the No. 2 in the House, lost his primary. Now the Republican hardliners want an even bigger prize: the Export-Import Bank, the federal agency that has been backing U.S. export contracts since the 1930s. They say Ex-Im is simply a purveyor of "corporate welfare." The institution's charter is up for renewal in September. Many Republicans, including Mr. Cantor's replacement as House majority leader, Kevin McCarthy, say they are happy to let it die.

None of this may happen. The Chamber and other business groups have banded together to save Ex-Im and House Speaker John Boehner is under pressure from exporters in his home state of Ohio to bring the rebels in his party to heel. Ex-Im's opponents have grown in number, but Mr. Boehner probably could save it by allowing supportive Republicans to vote with the Democratic minority to reauthorize the charter. To be sure, that would be a last resort. Mr. Boehner also could decide party unity is more important than the $37.4-billion (U.S.) in exports that Ex-Im helped finance last year. These are the people who shut down the government, after all.

Mr. Minister, I wonder what you make of all this? Canada's export credit agency, Export Development Canada, occasionally teams with Ex-Im, most recently this month to guarantee sales of less than $1-million by Pratt & Whitney Canada Corp. to Brazil, according to EDC's log of transactions. One imagines, therefore, that the death of Ex-Im at a minimum would cost EDC and Pratt & Whitney a trusted partner.

National export agencies effectively underwrite the global aerospace industry. As of the end of March, Ex-Im's exposure to sales of Boeing Co.'s wide-body jets was about $32-billion, according to a report by the Government Accountability Office. I already mentioned Pratt & Whitney, and we both know that EDC is a big supporter of Bombardier Inc. A writer at MacLean's magazine earlier this month wrote that Canada should be having the same debate that is being had in Washington. EDC, too, has its detractors.

Personally, I'm agnostic on whether the government should be financing exports. Ex-Im, EDC and their peers tend to return profits to their national treasuries, and if every country is doing it, it's not immediately clear to me that the market is being terribly distorted. But I do have another thought that I can't get off my mind. It relates to "Buy American." Have you or your officials considered exploiting the Ex-Im fracas to hit back? Boeing Co. must be tiring of all of this. EDC's mandate allows it to make loans to international companies even when there is no immediate return for Canada. EDC chief executive Benoit Daignault thinks goodwill in the short term could payoff in the longer term. Mr. Daignault works at arm's length, but I'm sure if you let it be known that you'd be open to him doing more business with Ex-Im's customer list, he'd start working the phone.

Boeing and other companies that lean on Ex-Im could reward the peace that would come with an EDC loan with some investment in Canada, or an agreement to buy from Canadian suppliers. I know, this sounds like dirty pool, doesn't it? It's not really Canada's style. It's just so rare in the history of Canada-U.S. trade relations that the Americans expose such an obvious weakness.

Enjoy the rest of your summer, Mr. Minister. Do look me up the next time you are in town.

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Kind regards,

Kevin Carmichael
Washington, DC

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More


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