I was going to comment on Jim’s post, but ended up writing enough to warrant a new post.
Jim correctly argues that Buy American provisions are tiny in the grand scheme of Canada-US trade. Similarly, whatever potential procurement preferences Canada bargained away would also have been tiny by this standard. The overall economic effect of last week’s deal will be small, but that does not necessarily mean negative for Canada.
While American Recovery and Reinvestment Act funding must be committed by February 17 or risk reallocation, there will be contracting opportunities as projects proceed after that date. Nevertheless, it is true that Canadian manufacturers will gain access to only a small fraction of this procurement.
But Canada gained more than “one-time access to the Recovery Act’s crumbs.” Going forward, the 37 American states that have signed onto the WTO’s Agreement on Government Procurement (abbreviated GPA) are to provide national treatment to Canadian suppliers. Although states have excluded some important areas from their WTO commitments, these commitments still encompass many billions of dollars of ongoing procurement.
Through the WTO system, Canada opens up access to public purchasing in all provinces, and all cities with more than 50,000 inhabitants. . . . we’re doing this right when many struggling Canadian manufacturers – from public transit to pharmaceuticals to windmills – could benefit mightily from the strategic leveraging of a home-field advantage.
The temporary agreement does include Canadian cities (until September 2011) in exchange for access to some Recovery Act procurement by American cities. But as far as anyone knows, the permanent WTO commitments exempt both American and Canadian municipalities.
From page 9 of Scott Sinclair’s primer on the deal:
- Reportedly, Canadian municipal government will not be covered under the GPA offer.
- Canadian provincial governments have also excluded a range of procurement programs, entities (such as crown corporations) and sectors (such as renewable power and mass transit) from Canada’s proposed GPA offer.
So, Canada appears not to have given up actual or potential procurement preferences for municipalities, mass transit, windmills or other renewable power. The Made-in-Canada Matters campaign, which focussed on enacting “Buy Canadian” policies in these areas, can and should continue.
We will know more when we see the deal. However, both countries seem to have exempted major types of procurement – cities, utilities and transit – that include (almost) all existing procurement preferences.
In the remaining areas of provincial procurement, Canada has committed not to discriminate against American products. In the remaining areas of state procurement, the 37 states have committed not to discriminate against Canadian products. Since the two countries sell very similar amounts of manufactured goods to each other, these commitments are unlikely to materially affect the Canada-US trade balance.
However, they could be modestly helpful in industries that are integrated across the border. Canadians working at facilities that sell goods to American state governments, and Americans working at facilities that sell goods to Canadian provincial governments, may be slightly more secure going forward.
We should ensure that the Harper government does not extend Canada’s GPA commitments to countries with which we run severe manufacturing trade deficits. The proposed Canada-EU free trade deal, for example, threatens a net loss of procurement contracts and hence of Canadian jobs.
UPDATE (February 12): Quoted in The Globe and Mail on why Canada should not extend its new GPA commitments to the European Union.
- Polozogistics: Nine Thoughts About the Choice of the New Bank of Canada Governor (May 3rd, 2013)
- The Canada-US FTA at 25 (October 5th, 2012)
- Dutch Disease, the Canada – US Exchange Rate and Trade With Asia (June 1st, 2012)
- Defending Green Jobs at the WTO (May 14th, 2012)
- The Current Account Deficit (March 28th, 2012)