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Tit for Tat, "Buy American" Starts Backfiring

Posted By Kevin Binversie On May 21, 2009 @ 1:17 pm In International | Comments Disabled

By now, you are well aware of the infamous “Buy American provisions” inserted into the $787 Billion stimulus package. [1] These were even watered-down and reworded after concerns their language lead to outrage from many of the United States’ key trading partners.  In the end, language was added to alleviate international fears stating the provisions “shall be applied in a manner consistent with United States obligations under international agreements.”

The purpose of this was to ensure that trading partners like Canada and Mexico were not effected by the provisions because of language in the North American Free Trade Agreement (NAFTA), and signatory nations of the World Trade Organization’s Governmental Procurement Agreement (GPA).

However, as the slow trickle of stimulus money goes out across America, the Washington Post reported [2] many local municipalities and state governments are either are ignorant of international trade agreements, or just simply ignoring the added language all together.

The results are having effects across both sides of the Canadian-U.S. border.

Ordered by Congress to “buy American” when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.

Outrage spread in Canada, with the Toronto Star last week bemoaning “a plague of protectionist measures in the U.S.” and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts — the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.

One such town is Halton Hills in Ontario, Canada, which last week passed [3] a resolution asking for the U.S. government to repeal the “Buy American” provisions; a movement which appears to be gaining steam in Canada.

On the surface Halton Region’s recent resolution calling for the U.S. legislature to repeal ‘Buy American’ requirements in a number of already-passed or proposed bills may appear to be a case of David versus Goliath.

Members of the U.S. congress, which passed the legislation— including the $787-billion stimulus bill endorsed by the U.S. government and signed into law by President Barack Obama in mid-February— likely don’t know where Halton Region is.

They may, however, soon find out.

Taking the lead from Halton Hills council, which passed a similar resolution several weeks ago, Region officials last week adopted a resolution that also calls for Canadian municipalities to consider buying goods and materials from companies in countries that don’t impose local trade restrictions against products manufactured in Canada (read U.S.).

Some may see this as a case of tit for tat. Not so, say Region officials.

“This is not ‘Buy Canadian,’” said Halton Hills Regional Councillor Clark Somerville of the resolution. “This is (about) fair trade and free trade.”
Somerville, Halton’s representative on the Federation of Canadian Municipalities, said the issue will be discussed at the executive committee of FCM later this month and will likely be debated at the organization’s annual general meeting in early June.

That could mean municipal leaders across the country jumping on the Halton bandwagon.

This is a new modern form of the classic trade war, but instead of raising taxes, nations will require preferential treatment in governmental procurement under various legislation.  Violations that mock the tradition the United States has had being a leader in free trade and open markets for decades.

Heritage Foundation scholars have long said [4] the “Buy American” provisions were a misplaced and poorly thought out idea which would kill jobs.  Congress would best use its time repealing these provisions instead of throwing new roadblocks to trade up which could have harmful effects to the American and world economies.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/05/21/tit-for-tat-buy-american-starts-backfiring/

URLs in this post:

[1] infamous “Buy American provisions” inserted into the $787 Billion stimulus package.: http://www.foundry.org/2009/01/30/is-a-trade-war-on-the-horizon/

[2] the Washington Post reported: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/14/AR2009051404241.html

[3] last week passed: http://www.independentfreepress.com/editorial/article/69621

[4] Heritage Foundation scholars have long said: http://www.heritage.org/Research/tradeandeconomicfreedom/wm2256.cfm

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