US-Canada Trade War Threatens Core BrandsSeptember 17, 2009
When is a free trade agreement not a free trade agreement? In the wake of “Buy American” provisions contained in Washington’s $787 billion stimulus plan, some companies on both sides of the 49th parallel are wondering.
Designed to give U.S. firms a leg up on foreign competitors, as the country struggles to recover from the biggest downturn since the Great Depression, the provisions are accused of seriously denting the biggest trade relationship both countries have, and of defying the 1988 Free Trade Agreement. Canadian critics warn that unilaterally breaking a treaty damages the core U.S. brand, since international trade depends on relationships and trust.
Some Canadian communities are responding in kind. About a dozen towns, including Halton Hills, near Toronto, are changing their purchasing rules to freeze out American goods. Yet an all-out trade war between close allies who exchange $2 billion worth of goods daily seems odd. If the problem isn't contained, it might complicate FTA renegotiations and both countries' coordinated response to fresh competition from China and India.
Reliability and trust are critical to the image of both the U.S. and Canada. It would be smart for policymakers from both countries to restore order on the trade front and rise above petty retaliation. Then both brands can stop taking a beating.
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Canada, U.S. strike deal to end "Buy American" spat
Feb 5, 2010
OTTAWA (AFP) - Canada has reached a tentative deal with the United States to end a dispute over "Buy American" provisions in U.S. legislation that had strained bilateral ties, the two trading partners announced Friday.
Under the agreement, which is designed to settle months of wrangling over what Canada saw as U.S. protectionism, both nations will open up parts of their internal markets to the other's companies.
Washington said it was happy with the deal because U.S. companies will finally gain access to long-closed and potentially lucrative public works contracts in Canada's 10 provinces and three territories.
In return, Canadian companies will be able to compete for projects in the 37 U.S. states already covered by the World Trade Organization government procurement agreement.
They will also be able to bid for what remains of $18 billion worth of state and local public works projects under seven programs funded by last year's $787 billion U.S. Economic Stimulus Act.
The U.S. Congress had included a "Buy American" mandate in the measure, requiring public works projects to use only U.S.-made products. The move angered critics in both the United States and Canada, which said it would cost jobs.
"Secure and predictable access underpins our trading relationship and is grounded in trade rules and a shared commitment to work together to resolve differences when they arise," Canadian Trade Minister Peter Van Loan and U.S. Trade Representative Ron Kirk said in a joint statement.
The deal must still be approved by both countries.
PROTECTIONISM WORRY FOR CANADA
Any suggestion of U.S. protectionism worries Canada, which sends 75 percent of all its exports to the United States.
Although Canada has a federal government procurement pact with the United States, the provinces and territories do not have their own separate deals.
This had shut them out of U.S. projects affected by the "Buy American" provisions. As part of the deal, U.S. companies will be allowed into the Canadian provincial market.
"For years, U.S. firms have sought market access to Canadian provincial procurement ... which Canada resisted. USTR took this opportunity to get Canada to open its provincial procurement markets," Kirk said in a statement.
"The value of new job-supporting contracts open to U.S. firms will be tens of billions of dollars."
U.S. business groups had unsuccessfully pressed for access to the provincial and territorial market when the North American Free Trade Agreement was negotiated and also when Canada signed the WTO government procurement agreement.
"Canada is our largest market and we are really pleased that we will now have access to their sub-federal procurement," said Frank Vargo of the Washington-based National Association of Manufacturers.
U.S. Republicans also welcomed the deal, but said U.S. stimulus projects remain hampered by confusing Buy American rules facing state and local procurement agencies.
"Until the Obama Administration exempts sub-federal entities (from Buy American), it will struggle with defending a 'stimulus' program that has produced precious few results," said Representative Kevin Brady in a statement.
Canadian manufacturers had been anxious for a deal before the U.S. Congress finishes work on a new jobs bill that is also expected to include a "Buy American" provision.
The Federation of Canadian Municipalities, which last year threatened to retaliate by banning U.S. companies from their projects, welcomed the deal.
"Canadians are fighting hard to recover from the recession, but they need to be on a level playing field with their neighbors south of the border. Today's announcement gives them hope," said federation president Basil Stewart.
Van Loan told reporters that the two nations had agreed to set up a fast-track consultation process in case future U.S. funding measures had a "Buy American" clause.
Canada's official opposition Liberal Party said the deal was "a pathetic attempt to try to create some level of symbolic victory" and was signed so late that Canadian companies have already missed out on most of the eligible U.S. contracts.
http://wehner.tamu.edu/mgmt.www/NAFTA/fta/index.htm
http://www.histori.ca/peace/page.do?pageID=346
