Social Policy in Ontario

Canada gives away the store in return for scraps from U.S.

Posted on February 19, 2010 in Debates

Source: Toronto Star — Authors: Scott Sinclair

Government ministers have avoided saying just how much the recent deal on Buy American preferences, whose implementation was announced at a quiet news conference in Vancouver this week, is worth to Canadian suppliers. As the details of the agreement emerge, the reasons for this evasiveness are now clear.

The agreement gives Canada fleeting access to a sliver of the U.S. stimulus package. Canadian businesses will get to compete for no more than $4 billion to $5 billion (U.S.) worth of projects, amounting to less than 2 per cent of the $275 billion of procurement funded under the U.S. Recovery Act. The rest falls outside the scope of this deal.

Washington has only agreed to exempt Canada from Buy American preferences for the remaining projects under seven federally funded programs. Over three-quarters of the stimulus funds have already been spent and the remainder was supposed to be allocated by Feb. 17, though there may be subcontracts beyond that date.

Given the late hour, and the fact that these projects have already been designed to comply with the Buy American provisions, Canadian suppliers can expect to see very little practical benefit.

In return for these meagre scraps, the provinces and municipalities have offered up temporary market access to U.S. suppliers worth an estimated $25 billion (Canadian). More ominously, Canada has bowed to U.S. pressure to permanently bind purchasing by Canadian provincial governments under the WTO Agreement on Government Procurement (the GPA).

The negative effects will far outweigh any small export boost that this agreement might provide. This is the first time that Canadian provincial procurement has been covered under an international trade deal. Canadian provinces have sacrificed the flexibility to use procurement as a policy tool for purchasing worth tens of billions annually.

The 37 U.S. states bound by the WTO agreement have numerous exemptions, such as purchases of motor vehicles, printing and construction-grade steel. Buy American preferences attached to federally funded mass transit and highway construction are fully excluded, as are public utilities. In addition, federal and state government laws commit upward of 20 per cent of total procurement to small and minority-owned American businesses.

U.S. municipalities are not covered by its GPA commitments. In fact, if a U.S. municipality tore Canadian pipes out of the ground tomorrow, the Canadian supplier would have no legal recourse under this deal or the GPA. A U.S. construction company, however, with a complaint against a Canadian municipality is guaranteed access (until September 2011) to a Canadian trade tribunal with the power to award costs and overturn the contract.

Despite the glaring defects, it is easy to understand why some would favour such a deal. The Harper government is ideologically opposed to the use of procurement as an economic development policy tool. It is happy to tie the hands of provincial and local governments even if Canada gets little in return.

It is harder to understand why provincial governments have gone along. Granted, important provincial procurement policies have been excluded, such as Ontario’s Green Energy Act, which requires wind and solar energy producers to use local goods and services in order to qualify for generous public subsidies. Certain key industrial sectors, such as mass transit, have also been exempted, ensuring that Toronto’s new subway cars can still be manufactured in Northern Ontario, providing hundreds of high-skilled, well-paid jobs

But while these popular programs are not immediately threatened, provinces and municipalities are now on a slippery slope.

Further negotiations with the U.S. and the European Union will certainly mean more concessions and further restrictions on the use of public purchasing for local development.

When they signed up to Ottawa’s negotiations last summer, the provinces were promised a meaningful exemption from U.S. Buy American laws. They didn’t get one.

Through sleight of hand, and with Ottawa’s acquiescence, Washington managed to pocket the provincial governments’ offers on the table, while leaving its Buy American preferences almost fully intact.

The unseemly haste with which this deal was approved is also problematic. The agreement warranted parliamentary scrutiny. The federal Conservatives campaigned on a pledge to submit all international treaties to Parliament for approval. The federal opposition parties have raised legitimate concerns. But with Parliament prorogued, there was no proper debate.

Provincial governments should also have ensured that their citizens had a voice.

If democracy had been allowed to run its course, Canadians would likely have rejected this unfair and detrimental deal.

Scott Sinclair is the director of the Trade and Investment Research Project at the Canadian Centre for Policy Alternatives. His “Buy-American Basics” report is available at policyalternatives.ca.

< http://www.thestar.com/opinion/article/767780–canada-gives-away-the-store-in-return-for-scraps-from-u-s >

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