OP/ED: Leggett calls out MP again, this time on 'Buy American'

by Rob Leggett on 03 Mar 2010
in
OP/ED: Leggett calls out MP again, this time on 'Buy American'

I must admit, I wasn’t at all surprised to read that MP Alex Atamanenko didn’t consent to the agreement that Canada and the US came to concerning the American “Buy American” provisions (MP decries “Buy American” deal – Castlegar Source).

After all, the NDP solution to the issue was to try and institute a foolish Buy Canadian Act instead of working cooperatively to come to a reasonable solution.


If history has shown us anything, it’s that protectionism during a global economic crisis is not a wise road to travel, and the NDP wanted to escalate an already precarious situation by creating their version of protectionism. Which could have had the potential to lead us down the same road as the 1930’s Great Depression, since most economists agree that protectionism was one of the factors that contributed to it.


Putting aside the NDP’s absurd bill, I am still left wondering where Atamanenko gets his facts. First, he stated that of the $275-billion US stimulus fund, only up to $5 billion was available to bid on, yet according to Recovery.gov, the US government’s official website to Recovery Act spending, of the $275 billion allocated to contracts, only $200 billion was awarded as of February 2010.


I am also confused as to why Atamanenko believes that provincial and municipal contracts will be offered up to the European Union, since this agreement is between the US and Canada and does not affect trade with Europe.


However, if I ignore Atamanenko's seemingly misleading information, I believe that this deal is a benefit to Canadian companies.


It will provide companies in both countries with permanent access to projects at the sub-federal level, which means they can bid and work on public works projects at the provincial, state, and municipal levels. The only relevant concern  in this instance would be if  Canadian companies are not competent  to compete with US bidders for contracts on either side of the border.


The two sides also agreed to continue important negotiations on a broader deal governing procurement and there is a “fast track” provision that would resolve disputes should similar Buy American provisions be applied to future legislation.


This deal is structured to allow the White House to use executive powers to treat sectors of the Canadian economy as American, by claiming that supply chains are so integrated they can not be separated. This has been done because President Obama can not rely on Congress to pass legislations exempting Canada from Buy American provisions.


With companies now able to bid on contracts once out of their reach, a provision to protect Canadian business from future protectionist provisions, and a continuation in negotiations, in my opinion MP Atamanenko should have viewed this agreement as a win for Canadian business, but instead he chose to criticize it and promote an immature tit-for-tat bill that could have potentially driven us into a second Great Depression.


And he wants to take the Conservatives to task?

Comments

Leggett needs to read up on 'Buy American' deal

by Stuart Trew on 03 Mar 2010 at about 21:23.
Rob Leggett asks some strange questions about Alex Atamanenko's excellent critique of Harper's 'Buy American' deal. Strange, that is, for a journalist who should be used to quick Google searches. For example, Mr. Leggett might have read up on something called the global recession. Countries around the world are using all kinds of economic policy levers to kick-start growth. In Brazil, that means capital controls, new bank regulations and directed investment. In China, the government has increased its share in state-owned companies and massively ramped up public infrastructure spending. Part of the U.S. plan has been to attach 'Buy American' conditions to major infrastructure projects -- something they have been doing at the federal, state and city level for over 75 years. What did the Harper government do? Sure it put some new money into infrastructure, but jobs continue to disappear as his government overseas the liquidation of innovative leaders like Nortel. Harper could have included 'Buy Canadian' conditions to transfers to the provinces and cities with minimal impacts on trade and absolutely no possibility of backlash from his G20 buddies, who were all doing the same. Instead, he complained. He whined about how Canadian companies were not getting their fair share of U.S. government (i.e. public) stimulus money that by rights should be going to U.S. companies and creating U.S. jobs. Mr. Leggett also could have looked into the Canadian Centre for Policy Alternatives report that estimated the total benefit of Harper's "Buy American" deal at $5 billion. Yes, there was probably $70 billion left in the U.S. stimulus package when Minister Van Loan agreed to the final deal, but Canadian companies did not win the right to bid on all of it, only a fraction in seven specific areas. When it comes to municipal projects, Canadian companies have no recourse if a U.S. city were to rip pipes out of the ground tomorrow. On the other hand, U.S. companies can now challenge Canadian municipal construction contracts that they don't win in WTO tribunals whose decisions are binding. If it doesn't sound all that fair that's because it isn't. Like past agreements with the United States promising the all-elusive market access that neither the original free trade agreement nor NAFTA could set in stone (think of Harper's Softwood Lumber Sellout), this 'Buy American' deal is a total waste. Canadian provinces have sold out crucial policy space in the area of government procurement -- how our local governments spend public money -- for little or no gain in terms of secure new contracts in the U.S. for Canadian firms. The term 'protectionism' gets tossed around unthinkingly a lot these days. 'Buy American' policies do not have nearly the same effect as hiking tariffs would. In fact, creative responses to the global recession are not only grudgingly accepted by formerly rabid free-traders -- they are endorsed! But not in Canada. Putting local content quotas and other investment or employment conditions on public spending was one of the last vestiges of public control over economic development in the provinces and municipalities. Harper's 'Buy American' plan took care of them forever in many areas and Mr. Atamanenko is correct that the European Commission is asking, through current free trade negotiations, that Canadian provinces and cities limit their spending powers even more. Mr. Leggett could have read up on these things before attacking one of the few critical articles we've seen in print about the 'Buy American' sellout. Instead, he simply repeated the Harper government's empty promises about new market access and the evils of so-called protectionism. Promises that will not create the jobs we need, and that leave communities powerless to direct how they grow and prosper.

Mr. Trew couldn't be farther from the mark

by rleggett on 07 Mar 2010 at about 13:53.
I would like to thank Mr. Stuart Trew for responding to my column. For those of you who do not know, Mr. Trew is the Trade Campaigner for the Council of Canadians –a seemingly rabid, anti-American group that appears to have fought every major trade agreement that Canada has agreed to since the group’s inception. They believe that the WTO is an extension of U.S. foreign policy and that any country that questions it's basic precepts is suspect in other ways, and they use seemingly paranoid propaganda like “There is some pressure for us to return to our nationalist "roots" and launch a campaign to stop the threat of the Americanization of Canada and defend the sovereignty of our country before it is too late.”, in an attempt to mobilize Canadians against international trade agreements and more specifically Trade agreements with the US. I will admit that I agree with Mr. Trew that countries have and need to develop innovative ideas to combat the global recession and to kick start growth, however protectionist “Buy American” and “Buy Canadian” provisions, like the NDP tried to introduce, are not the answers. And I am amazed that the Trade Campaigner for the Council of Canadians doesn’t appear to understand basic economics. He doesn’t believe that “Buy American” and “Buy Canadian” provisions are protectionist, and in fact calls them “creative responses to the global recession”, but in the context of economics it refers to policies or doctrines which protect businesses and workers within a country by restricting or regulating or preventing trade with foreign nations, through a variety of other government regulations designed to discourage imports, and prevent foreign participation in native markets and companies. An excellent example of this would be IPEX, a Toronto based pipe company, IPEX gained notoriety after the introduction of Buy American rules for having its pipe fittings pulled out of the ground in California because they had a "Made in Canada" designation on them. Since the end of World War II, it has been the stated policy of most First World countries to eliminate protectionism through free trade policies enforced by international treaties and organizations such as the World Trade Organization. Certain policies of First World governments have been criticized as protectionist, however, such as "Buy American" provisions in economic recovery packages in the United States. Most mainstream economists, including Nobel prize winners Milton Friedman and Paul Krugman, believe remaining un-protectionist is necessary, yet not sufficient. It is vital to intensify the process of trade facilitation and removal of the persistent non-tariff border barriers to trade. Discriminatory procurement actions such as the “Buy American” clause included in stimulus packages are clearly not right since they run the risk of encouraging retaliation and severely constrain supply chains that use imported inputs. The spin that Mr. Trew has put on this agreement is rather misleading by saying “for little or no gain in terms of secure new contracts in the U.S. for Canadian firms”, of course it isn’t secure, and they were never intended to be, just as they are not secure in Canada for US firms. However, as I stated in my original column “It will provide companies in both countries with permanent access to projects at the sub-federal level, which means they can bid and work on public works projects at the provincial, state, and municipal levels.”, they can BID ON, they are not automatically given contracts just because they applied for them. This is how business is run; the contract is awarded to the best bid (not necessarily the lowest, but the best) and again, I am surprised that the Trade Campaigner for the Council of Canadians doesn’t seem to know this. This is what is meant by competition (Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms") The greater selection typically causes lower prices for the products or services, compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly) and the only fear Mr. Trew and Mr. Atamanenko should have is if they do not believe that Canadian companies are able to compete at an international level. Mr Trew’s accusation that I need to “read up on these things before attacking one of the few critical articles we’ve seen in print”, should really make him ponder why there are so few critical articles. Maybe it really is good for the Canadian economy, and that its only ideologues that will seek out any issue with the agreement to promote their ideologies.