"Buy American" bogeyman: Instead of fretting about US purchasing policies, we should focus on stimulating Canada's economy and local communities

July 22, 2009

Who knew? It turns out the biggest threat to the Canadian economy and jobs is not collapsed global financial institutions, weak markets, lack of innovation or declining infrastructure. No - apparently the clear and present danger Canada suddenly faces is "Buy American."

As if out of nowhere, Buy American policies are at the top of the agenda for the Harper government, premiers, business lobbies and the media. It matters little that the Buy American provisions of the recent Obama stimulus bill are much the same as those first instituted way back in 1933 and strengthened by the Reagan administration in the 1980s. It's now all hands on deck to stop the Americans from insisting that U.S. jobs be created when U.S. tax dollars are invested, even though Canada has had little problem with the policy for nearly eight decades.

Surely taxpayers in both the Canada and the U.S. have every right to expect local opportunities and jobs when local tax dollars are invested. Local procurement policies are a legitimate economic and social policy tool that can be especially powerful during an economic slowdown. They also make particular sense when we're trying to address environmental concerns - such as encouraging "100-mile diets" and reducing the transportation of goods over long distances.

Yet Canadians are being told that in order to persuade the U.S. to give up Buy American, Canadian municipalities and provincial governments should voluntarily tie their own hands when it comes to local purchasing. On June 9th, the premiers called for a whole new trade agreement between Canada and the U.S. that would restrict the ability of local, provincial and state governments to use their purchase of goods and services to pursue community objectives. These restrictions could seriously limit policies intended to create local jobs, encourage equity hiring and support ethical suppliers.

There is currently nothing in either NAFTA or the WTO that limits local or subnational governments from giving preference to local suppliers when purchasing goods or services. Indeed, in the U.S., this practice is longstanding and widespread. A 2007 survey by the National Association of Procurement Officials found that 39 states use the location of a firm as a tiebreaker if all other aspects of a bid are equal. Fifteen states allow in-state bidders to ask for a higher price (between five and 15 per cent) and still receive the contract. Several dozen cities in the U.S. favour local businesses and products when they purchase and many use procurement as a tool to leverage greater opportunities for minorities.

Given how widespread these practices are, it seems unlikely that U.S. communities will agree to give them up just because Canadian governments volunteer to. In reality, the pressure from the Harper government for provinces and municipalities to give up local procurement powers may have as much to do with negotiations with the European Union for a new Canada/EU trade deal as with the concern about Buy American. European corporations and the EU have made it clear that gaining access to Canada's $22 billion provincial and municipal procurement market and to services in provincial jurisdiction are their top priorities in the talks.

There are many better and more hopeful economic options for Canada than hassling the U.S. about its longstanding economic policies or volunteering to hobble our democratically elected local governments.

One important policy option is to adopt "Buy Canadian" policies ourselves. A great example is the decision in Ontario to invest $1.2 billion to build new streetcars in Thunder Bay, creating some 5000 badly needed manufacturing jobs.

Another approach is to expedite federal and provincial infrastructure investment. In far too many cases, Canadian federal stimulus funds get tied up in long administrative processes. The long delayed Evergreen rapid transit line is a prime BC example. While the complex quest for a "P3 partner" continues, months and years go by without the rapid transit the northeast sector has needed for so long and the jobs that will come with its construction.

Instead of fretting about U.S. purchasing policies, Canada's government and business leaders should focus on our own poor record in innovation and research and development. We could be making post-secondary education, apprenticeships and skills training more accessible so workers can adapt rapidly to changing economic circumstances. We could quickly change E.I. rules so the unemployed are not forced onto social assistance. We could develop an urgent national action plan to create green jobs in energy efficiency and retrofitting, alternative energy and transit.

There is much that could and should be done right now to reduce rising unemployment in Canada. Lighting our national hair on fire about "Buy American" policies is not one of them.

Blair Redlin is a research associate with the Canadian Centre for Policy Alternatives and a researcher with the Canadian Union of Public Employees. He is a former Deputy Minister with the BC government.