Buy America Op-Ed Round-Up

Jim’s posting of his excellent Globe column prompts me to review Canadian labour op-eds, and responses to them, on the “Buy America” controversy.

The CAW’s Ken Lewenza was first out of the gate, writing in The Financial Post (Feb. 3) that Canada should mirror Buy America with its own “Buy Canadian” policy.

My National Post op-ed (Feb. 5) argued that such preferential procurement policies are justified to limit the international leakage of stimulus spending, but that balanced trade within North America warrants a Canadian exemption from Buy America.

Tim Armstrong, a former Ontario deputy minister, explained American deviation from “free trade” axioms as a legitimate response to China’s far greater deviation from these axioms. His Toronto Star commentary (Feb. 6) provided a useful reminder that enhanced Buy America rules are directed against countries like China rather than countries like Canada.

On the same day, William Watson’s Financial Post column (Feb. 6) took aim the “CAW’s protectionist racket.” It made the classic case for Canada-US free trade, using the auto industry as an example. He even gave me a slight compliment and/or zing, “Writing in the National Post yesterday, the Steel Workers’ (sic) Erin Weir almost seemed to accept that in good times Buy Canada policies aren’t needed. Good for him.”

A key issue is that both Lewenza and I had suggested exempting the US from proposed Buy Canadian policies in exchange for a Canadian exemption from Buy America. Watson responds that the much larger size of American bargaining chips would slant such negotiations against Canada. However, as I noted, Canadians currently buy more steel from the US than we sell to the US. In that sector and others, Canada actually possesses slightly larger bargaining chips.

Watson is correct that Americans could afford to hurt Canada. But given balanced trade and the cross-border integration of manufacturing, they have no incentive to do so.

The Winnipeg Free Press reprinted (Feb. 8 ) my op-ed opposite the Fraser Institute’s Fred McMahon, who views Buy Canadian proposals as a dangerous provocation given Canada’s trade surplus with the US:

Erin Weir, an economist with the United Steelworkers Canada office, argues for a Buy North American policy because trade in steel products is well balanced between Canada and the United States. Mr. Weir, how long do you think it will be before your U.S. protectionist friends notice that most Canada-U.S. trade is heavily unbalanced in Canada’s favour? Canada’s huge trade surplus could quickly become a bull’s-eye for “saving” U.S. jobs.

In fact, fossil fuels, electricity and mining account for three-quarters of Canada’s trade surplus with the US. Because American manufacturing jobs depend on Canadian energy and ore, US protectionists have no interest in closing the border to these commodities.

Our trade surplus with the US is now smaller than our trade deficit with the rest of the world. A Buy Canadian policy would help keep stimulus spending in Canada, rather than leaking offshore through this trade deficit.

Versions of McMahon’s column also appeared in The Toronto Sun (Feb. 8 ) and Halifax Chronicle-Herald (Feb. 10). USW responded with a Sun letter (Feb. 12) countering the claim that Buy Canadian policy would provoke a trade war and highlighting the union’s role in keeping the American market open to Canadian steel.

The USW’s Ken Neumann made the case in The Toronto Star (Feb. 10) that Buy America rules pose much less threat to Canada than has been assumed and could instead benefit us if properly co-ordinated with Buy Canadian rules.

In The Globe and Mail (Feb. 19), Jim broadened this case to deflate the general hysteria about “protectionism” and to point out that “free trade” facilitated the massive trade imbalances that helped cause the current crisis. Perhaps the best line in the column is “President Barack Obama’s stimulus package would boost Canada-U.S. trade far more than Buy American provisions would limit it.”

Canadian politicians and pundits were outraged that Buy America might deprive our industry of some of the business opportunities created by US stimulus spending. Yet they were unconcerned when it seemed that Congress might eliminate all of these opportunities by not passing the stimulus bill. This obsessive focus on alleged protectionism, as opposed to the overall level of economic demand, was indeed misplaced.

UPDATE (July 15): In yesterday’s Vancouver Sun, Blair Redlin of CUPE correctly argued that “Buy America” policies have limited economic effect on Canada and that Americans are unlikely to abandon them through an expansion of NAFTA.

2 comments

  • And that’s why we call it a “depression.”

  • Nobody in the media seems to get the point that we have been making on this blog several times and echoed in Jim’s globe article.

    The Canadian Stimulus was hardly a stimulus when compared to what the US stimulus package.

    Apparently our economy is not in as much trouble as the US or so the media has been led to believe.

    The paranoia led by Stockwell Day, (one of the thickest fenceposts on the hill, talk about anti- intellectual, I wonder where in the galaxy Stockwell’s positron mirror being is located, cause it sure must be one smart dude), was but a ruse to hide behind the notion that our Stimulus was pathetic.

    Just wait until a few more months roll by, those shovel ready projects, that will not be funded by the city or provinces, will be fully funded by the feds. Why the delay is beyond rationality.

    This whole holding the nose by Harper against government invention and pointing fingers south of the border trying to make Obama seem evil to Canadians is pretty precedent setting worm like behaviour.

    And hey bring on NAFTA renegotiation, lets reel in labour standards and environmental standards. While we are at it we can transform this legalistic, one off agreement into a living framework for governing the entire north American market. More like an EU and less like a NAFTA.

    It maybe something that we are going to have to seriously consider to accommodate the trade imbalances between NA and the rest of the world given the adjustments in markets and the downturn in the economy.

    Rather than protectionism, it is more like rationalizing regional sustainable trade with labour and environmental standards brought into the fold,a s they should have been in the beginning.

    pt

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