In late April the U.S. Department of Transportation introduced the GROW America Act, a piece of legislation ostensibly aimed at promoting infrastructure investment across the US. The Act carries with it over $300 billion in spending towards transportation and infrastructure projects.
Unfortunately for Canadian manufacturers, the legislation includes language that expressly limits access to U.S. suppliers. Section 28701 (page 312) of the Act notes that all “steel, iron, and manufactured products used in the project are produced in the United States.” As Barrie McKenna writes in the Globe and Mail, the impact on Canadian manufacturers could be severe.
This isn’t the first example of the U.S. putting barriers in front of Canadian manufacturers. In 2009, the American Recovery and Reinvestment Act carried with it a similar set of procurement restrictions. Outcry from this side of the border saw, in February 2010, both countries sign the Agreement on Government Procurement (AGP) which struck down the discriminatory language against Canada in exchange for, what we thought, was a permanent exchange of procurement access. Waiver exemptions are available for the newest set of U.S. procurement rules, if judged to be counter to the public interest, and it’s evident that Canadian politicians will need to aggressively press their American counterparts for this.
That option aside, this most recent legislation shows that despite the AGP, and despite our NAFTA relationship, domestic pressures in the U.S. related to employment keep bringing these policy measures forward. And it’s not just the U.S. that is feeling the heat. Last year, my colleague Dr. Andrew Cooper and I wrote an academic piece in Contemporary Politics on the rise of a new protectionism. In it, we argue that unlike the 1930’s where tariff increases were used as a punitive measure to deter imports, the post-2008 global economy has seen a significant rise in industrial promotion efforts aimed at boosting domestic employment. We concluded that “the longer demand and economic growth remain in the doldrums, and the longer, and more pervasive, trends related to long-term unemployment persists, the greater the chance” that economic cooperation will suffer.
The full piece is available here http://www.tandfonline.com/doi/abs/10.1080/13569775.2013.835112#.U7QMFPldUz4 and/or email me for a copy. Unfortunately our thoughts remain pretty accurate.
For Canada, a relatively small economic fish in a big pond, the options are limited. Canada possesses somewhat limited economic leverage and/or ability to trade off market access with the Americans. Opening up provincial and municipal procurement is challenging because of sub-national government involvement, however the Comprehensive Economic and Trade Agreement (CETA) with the European Union shows that it’s doable. Building a true North American open market benefits Canadians. Related to this, our biggest card is an ability to work closely with others, notably Mexico, who are similarly discriminated against by the U.S. Our NAFTA partners in Mexico have a significant set of growth requirements related to infrastructure and energy that are very congruent with Canadian expertise. Why we haven’t prioritized this relationship is puzzling and need to be addressed.
Ultimately, while domestic pressures will mean forms of protectionism will always be present, Canada needs to act both diplomatically and strategically to mitigate such discrimination and proactively build alternative relationships that ensure Canadian economic and employment growth well into the future.