Buy American Deal – Much Speculation

Tomorrow we should receive official details on the new agreement between Canada and the USA regarding easing the “Buy American” provisions in the US stimulus program.

Until then, we have a number of different views, reports, and speculation being fed by numerous “sources”.

From CTV:

CTV's Ottawa Bureau Chief Robert Fife said the deal will be announced Friday at 8:00 a.m. EST. It will allow Canadian firms a chance at what's left of the $900 billion in stimulus spending that Washington announced last year.

Canadian firms will be exempted from "Buy American" restrictions under seven of the stimulus programs, in 37 U.S. states that signed on to the World Trade Organization. Those states will be able to use American stimulus money to buy Canadian manufactured goods.

From The Vancouver Sun:

According to informed sources, the deal would grant Canadian exporters access to procurement markets in the 37 U.S. states covered under the World Trade Organization agreement on government tenders. Further, Canadian companies are freed from Buy American restrictions as they relate to funds remaining in seven programs under the stimulus legislation. In turn, the provinces would agree to open up their procurement markets, roughly valued at $22 billion.

However, sources say what U.S. companies can bid on will be limited, as certain sectors — such as health care, education and correctional facilities — are off limits. The two sides are said to have agreed to continue negotiations on a broader deal governing procurement.

While these stories suggest that this deal presents some measure of progress, whether Canada can take advantage of it now or as a basis for future Buy American-type programs, the CBC dropped a bombshell on The National tonight with their intel on the agreement.

According to the CBC’s report, this “agreement” isn’t really an agreement at all. Instead, Ottawa is signing a WTO agreement. Obama was quoted earlier on in this Buy American fiasco as suggesting that the Canadian provinces were not WTO signatories, and that becoming signatories would allow them to bid for the work. So if this is what the federal government has done then there really isn’t any compromise on the US side…Canada has just rolled over.

Worse yet, signing the WTO agreement means that we’ve now opened up provincial markets to more than 30 other markets that are part of the WTO! So now not only do Canadian firms need to compete against American ones, they also need to compete with firms from Britain, Germany, China, and Japan among others!

If what the CBC is reporting is true, then this has the potential to be a horrible deal for Canada: short term opportunities (if even that) and long term increased competition.

But again, we don’t have the actual deal in hand…these are all speculations from information fed by sources. Still, there’s enough here that we should be nervous about how much we’ve left on the table compared with the Americans…and the WTO countries which might be the biggest beneficiaries of all.