Procurement exemption will backfire

Hey there, time traveller!
This article was published 18/11/2009 (5886 days ago), so information in it may no longer be current.

Taxpayers’ dollars should be used to create and support taxpayers’ jobs, not export them to another country.

At least that’s what U.S. governments believe. But Canada’s federal and provincial governments are so frantic to get exemptions from Buy American laws governing the massive U.S. economic stimulus package that they are preparing to open up $21 billion in provincial procurement and perhaps as much as $84 billion in municipal procurement — and who knows how many jobs — to U.S. suppliers in return for a virtually meaningless trade concession.

So says the author of a new research paper from the Canadian Centre for Policy Alternatives. Political economist and CCPA senior researcher Scott Sinclair says the U.S. has cleverly steered the bilateral talks away from U.S. Buy American laws towards what President Barack Obama has called a “multilateral solution.” Obama says Canada can get in on the U.S. stimulus gravy train by following its example and signing up provinces and local governments to the World Trade Organization’s Agreement on Government Procurement (AGP.)

But U.S. federal, state and municipal governments have exempted so many Buy American policies from AGP commitments, they’re almost a dead letter. Federal spending on highways, mass transit, municipal infrastructure and utility spending already are exempt. Thirteen states have no AGP commitments. Many more exclude steel, motor vehicles, coal and printing. All U.S. municipal procurement is protected. Finally, the U.S. federal government itself has carved out the bulk of its federal stimulus spending, leaving it free to apply its buy-local preferences.

“Even if Canada signed up its provinces and local governments to the AGP, the main policies powering U.S. procurement preferences would remain fully intact,” the former B.C. government trade official continues. “Since the U.S. has exempted its key buy-local procurement preferences under the AGP, Canadian suppliers would still be shut out… To represent this astonishingly lopsided arrangement as a ‘Canadian exemption’ from the Buy American provisions is absurd.”

Worse, Sinclair continues, it would “severely curtail the democratic authority of provincial and local governments to maintain and adopt purchasing policies that benefit their citizens. If Canadian negotiators give up too much ground, it could well pry open Canadian public services to U.S. for profit-corporations.” Under the North American Free Trade Agreement’s notorious Chapter 11, once a public service has been privatized, it is automatically opened to all Canadian, American and Mexican investors.

Sinclair says the Harper Conservatives have made the Buy American exemption the highest bilateral issue since the U.S. recovery act passed so “there’s enormous pressure on the government to save face and try to get something…They’ve been pushing on the internal trade front for years to tie the hands of the provinces and basically to implement NAFTA in areas of provincial jurisdiction. It fits very well with their free market economic union strategy.”

Sinclair thinks the provinces are also largely on board. “The use of procurement as an economic development tool in Canada is the exception rather than the rule. In the U.S., it’s the rule rather than the exception.”

Sinclair notes that Canada has a history of trade surrender to the U.S. “Remember the original FTA was premised on the notion that we would get an exemption from their trade remedy laws and we didn’t. Softwood lumber is another example. We were about to win (under the WTO in 1987) and we surrendered and negotiated the FTA instead. So there’s a pattern here.”

Sinclair says Canada’s economic gains from the U.S. stimulus package will arise from being the U.S.’s largest trading partner. This should overshadow any negative impacts from the Buy American policy.

“Our governments should emulate the best of the U.S. buy-local procurement policies and employ them to benefit Canadians. Government spending should seek the greatest benefit for citizens.”

Frances Russell is a Winnipeg author and political commentator.