'Buy American' laws creeping back, to Canada's chagrin

Buy American provisions are back, and the Canadian government is sounding off in frustration.

Canada staged an intervention this week over new allegations of U.S. protectionism, with federal officials producing a list of fresh grievances during a meeting at the World Trade Organization.

The government is now airing its frustration in public over American trade measures that have received little attention so far.

"Canada is very concerned with recent legislation in the United States which reflects repeated attempts to impose domestic content requirements for products purchased by federal, state and municipal-level governments within the U.S.," International Trade Minister Ed Fast said a statement.

"Canada's focus is on eliminating trade barriers, not erecting new ones. Protectionism is bad policy, and bad for businesses on both sides of the border."

Prickly issue

Protectionism had receded somewhat as a bilateral irritant the last few years. The Keystone XL pipeline dispute has become the hot-button issue, ever since a 2010 procurement deal calmed earlier tensions over the domestic-procurement provisions in U.S. stimulus legislation.

But the Canadian government has a list of new concerns.

It points to a clause in a major water-infrastructure law just passed by Congress; a transit bill proposed by the Obama administration; several state laws and proposed laws; and a plan to hike inspection fees at the border for agricultural products.

Those irritants were raised at a WTO meeting in Geneva on Wednesday.

Federal officials singled out:

• The multibillion-dollar Water Resources Reform and Development Act, signed into law this month by President Barack Obama. Section 608 of the infrastructure law stipulates that, to be eligible for one of the funding programs, all of the iron and steel products used in a project must be produced in the U.S.
• The new Grow America Act, legislation proposed by the Obama administration, which might not pass Congress. The bill is the administration's attempt to avert a looming crisis: the expiry of funding for U.S. highways. The plan also funds public transit, and one clause stipulates that to be eligible for funding vehicles must be built with American components. The percentage of the required American content would grow each year, from 60 per cent next year to 100 per cent by 2019.
• An administration plan to increase the inspection fees for agricultural goods entering the U.S. The Canadian government estimates the move would increase the cost of inspecting a container to $8 at land borders, up $2.75. It estimates the measure would cost the Canadian trucking industry $15.5 million in new border fees.
• State bills over the last two months, passed in Minnesota and being studied in New York and Massachusetts. The Massachusetts bill pertains to general procurement, while the other two refer specifically to steel.

"These state initiatives raise several systemic issues of concern to Canada," said a Canadian brief presented during a WTO meeting.

"Even though many of these new initiatives may not pass, the reoccurring threat of new forced localization requirements discourages foreign suppliers from investing the time and energy in developing new opportunities in foreign public procurement markets....

"Uncertainty — in and of itself — has the potential to undermine market access."

Meat, drugs are sticking points

One protectionism complaint that has been aired publicly the last few years involves country-of-origin labelling for meat, which has prompted a court dispute as well as a challenge by Canada and Mexico at the WTO.

The Americans have their own irritants when it comes to trade. U.S. pharmaceutical companies, for instance, accuse Canada's political and legal system of being lax in enforcing drug patents.

The U.S. embassy in Ottawa referred questions about the Canadian complaints to the United States Trade Representative in Washington, which said the U.S. takes its trade obligations very seriously.

"While we continue to engage with Canada on its concerns, would emphasize that all of the measures identified by Canada are fully consistent with U.S. international obligations."