Buy American and "Protectionism"

Buy American and "Protectionism"

You may have missed it — and I think many were more focused on last Sunday's World Cup qualifier soccer match between the U.S. and Mexico — but last week there was a summit meeting of President Obama with his Mexican and Canadian counterparts. Climate change and energy were major pieces of the discussions, but of course the business and trading relationship between the three was also on the table. Canadians especially have been hot-under-the-collar about the "Buy American" requirements included in the February economic stimulus legislation, the American Recovery and Reinvestment Act (ARRA). For its part, NEMA held a webinar on these requirements on June 30. But a lot of uncertainty remains in the industry about how the requirements are actually going to be applied on ARRA-funded bulding renovation projects when you get to the state and local levels.

First, let's review what President Obama said in the summit's closing press conference in response to a question from a Canadian reporter:  

[W]ith respect to the "Buy American" provisions, I want to assure you that [Canadian Prime Minister Harper] raises this with me every time we see each other. So that's important to note, that he is expressing I think his country's concerns.

I think it's also important to keep it in perspective that, in fact, we have not seen some sweeping steps toward protectionism. There was a very particular provision that was in our recovery package, our stimulus package. It did not extend beyond that. It was [World Trade Organization] WTO-compliant. It was not something that I thought was necessary, but it was introduced at a time when we had a very severe economic situation and it was important for us to act quickly and not get bogged down in debates around this particular provision.

Prime Minister Harper and I have discussed this and there may be mechanisms whereby states and local jurisdictions can work with the provinces to allow for cross-border procurement practices that expand the trading relationship. But I do think it's important to keep this in perspective. This in no way has endangered the billions of dollars of trade taking place between our two countries. It's not a general provision, but it was restricted to a very particular aspect of our recovery package.

OK, now let's decode it: The President points to the state and local governments as the key players in developing solutions that will allow Canadian products to be eligible for ARRA projects. This is because Section 1605 of the ARRA, which caused Buy American requirements to be put in place for these projects, specified that the Section be implemented in accordance with U.S. international trade agreements. And when it comes to the government procurement sections of those international agreements, each U.S. state and territory decides whether to implement the agreement for its part and allow its government agencies to choose from non-U.S.-made products that originate in the agreement partner country or countries. And in these instances, Canada, for reasons I will not go into now, has been shut out across the U.S., from California to Oklahoma to Maryland and lots of places in between.  

So in essence, the Canadians have been told to take their concerns to the state capitals. What are the chances our Northern neighbors will be well received there?

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