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Buy American/Buy Canadian: New Protectionism?

Buy American/Buy Canadian: New Protectionism?

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Published by The Wilson Center
This series examines the impact of the U.S. economic stimulus measures designed to generate employment stability in the aftermath of the greatest financial crisis since the Great Depression. Authors Robert Baugh, executive director of the AFL-CIO Industrial Union Council, and William Robson, president and CEO of the C.D. Howe Institute, weigh in on the debate over the Buy American procurement provisions included in the 2008 American Recovery and Reinvestment Act. While Baugh argues that unregulated free market/free trade policies have failed American workers and undermined U.S. industrial and innovation capacity, Robson maintains that protectionism hurts those who raise the barriers.
This series examines the impact of the U.S. economic stimulus measures designed to generate employment stability in the aftermath of the greatest financial crisis since the Great Depression. Authors Robert Baugh, executive director of the AFL-CIO Industrial Union Council, and William Robson, president and CEO of the C.D. Howe Institute, weigh in on the debate over the Buy American procurement provisions included in the 2008 American Recovery and Reinvestment Act. While Baugh argues that unregulated free market/free trade policies have failed American workers and undermined U.S. industrial and innovation capacity, Robson maintains that protectionism hurts those who raise the barriers.

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Published by: The Wilson Center on Sep 18, 2012
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07/02/2013

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BUY AMERICAN / BUY CANADIAN:
Th Nw Pttinim?
RobeRt baugh 
+
 William Robson
INTroducTIoN
Drawing on expertise rom both sideso the Canada-U.S. border, the
One Issue, Two Voices 
seriesis designed to stimulate dialogue on policy issues that have a signicant impact on the bilateral relationship. This twelth issuein the series examines the impact o the U.S. economic stimulusmeasures designed to generate employment stability in the ater-math o the greatest nancial crisis since the Great Depression. Authors Robert Baugh, executive director o the AFL-CIOIndustrial Union Council, and William Robson, president andCEO o the C.D. Howe Institute, are leading internationalpublic policy experts. Together they weigh in on the debate overthe Buy American procurement provisions included in the 2008
 American Recovery and Reinvestment Act 
. Each author expressesstarkly dierent opinions on the accusations o protectionismtriggered by Buy America. Baugh argues that Buy America isnot protectionist but a response in part to global demands orU.S. stimulus investments and carbon emission reductions. Hemaintains that, while recent bilateral negotiations have addressed
1
One Issue
two voices
Issue
12
APrIl 10
 
one issue
TwO VOIces
2
immediate concerns about protectionism, the spat overBuy America has much wider implications. The unregu-lated ree market / ree trade policies have ailed American workers and their communities, just as they have under-mined U.S. industrial and innovation capacity. Baughalso contends that Buy America has a much larger contextdirectly related to climate change. The response to theU.S. eort to achieve environmental and economic goalsportends the diculties ahead, as all countries seek toinvest in their economies to create jobs and to cut carbonemissions. Baugh says it is time to drop the “win-win–reetrade hype” that has proved to be alse and to ace thereality that current trade policy has become a vehicle tooshore and outsource good jobs. He stresses that urgentaction is needed or a rebalancing o trade, as the UnitedStates and Canada nd themselves stumbling toward anindustrial and manuacturing strategy in a world where allour competitors have one.In contrast to Baugh’s position that protectionism inthe orm o Buy America is vital to oster economic growthand promote job creation, William Robson makes the clas-sic case or reer trade. He explains how the pro–ree tradeview turns the language o winners and losers on its head, with taxpayers and consumers o public services beneting  when their governments source the best and best-pricedproducts wherever they originate. His main argument isthat discrimination in government procurement policiesin the name o Buy America or Buy Canada, like all otherprotectionism, hurts those who raise the barriers. Robsonmaintains that his rationale or open borders holds truein both booms and busts. Condence and macroeco-nomic management, not barriers or subsidies to trade,determine the level o output and jobs. He says that thesame argument applies to discrimination against oreignor out-o-state / out-o-province suppliers. In the struggleto maintain open borders, he says, the most crucial battlemay be the one at home. Both authors agree that therecently negotiated Canada-U.S. deal on procurement hasaddressed immediate concerns about Buy America, butthey also concur that hard times oster economic national-ism and that, despite recent signs o growth, myriad chal-lenges to prosperity lie ahead.The Canada Institute thanks the authors or their pro-vocative and cogent analyses o a contentious issue in theongoing bilateral dialogue. We are grateul to the late C. Warren Goldring and AGF Management or their supportor this series, and to
Canadian Business 
magazine or itssupport o this issue.
stephanie MLuhanpm cl (t)c ial 2010
 
Issue 12
apriL 10
3
In the midst o the greatest nancial crisis since the GreatDepression, the U.S. Congress passed the $787 billion
 American Recovery and Reinvestment Act 
(
 ARRA 
), andPresident Barack Obama signed it into law. The Buy  America provisions contained within the
 ARRA 
drew animmediate response rom Canada, the European Union,China, and other countries that condemned the provisionsas “protectionist,” claiming they would “lead to retaliatory measures” and even “trade wars.” These alarmist reactionsneed to be seen or what they really are—warning signsabout everything that has gone wrong with trade and eco-nomic policy. It is time to step back and use this responseas a learning moment—to come to grips with the manu-acturing crisis, a dangerously unbalanced trading systemthat is out o step with economic and political reality, andthe potential confict over climate change.
the
RecoveRy Act 
and Buy aMerica
 As both the U.S. and the international economy implodedin 2008, the American Federation o Labor and Congresso Industrial Organizations (AFL-CIO) and the CanadianLabour Congress joined unions across the world to urgetheir governments to move aggressively on economicstimulus measures designed to generate employmentstability. In the United States the AFL-CIO worked withCongress and the Bush and Obama administrations tosupport the largest stimulus investment in our history.The
 ARRA 
investments are designed to be the leading edgeo a new environmental economic development policy designed to reduce carbon emissions and create good jobs.To ensure, as U.S. taxpayers have every right to expect,that public dollars are recycled to maximum eect in theU.S. economy, Congress included Buy America languagein the Act.The language rearms and strengthens existing  well-established legal precedents, dating back to the
Buy  American Act 
o 1933. The Department o Deense hashad Buy America provisions since 1941, and the FederalHighway Administration, Federal Transit Administration,and Federal Railroad Administration all have long-standing provisions. The
 ARRA 
Buy America requirementsimply states that, or the publicly unded projects, “allo the iron, steel, and manuactured goods used in theproject[s] are produced in the United States.” It also allowsor reasonable waivers.Most notably, the
 ARRA 
requires that the Buy America provision be “applied in a manner consistent with U.S.obligations under international agreements.” It is impor-tant to note that negotiated trade agreements allow ordomestic preerences under a number o circumstances.These preerences were negotiated or a reason, andthey are all perectly legal. The United States would beirresponsible not to use them to the ullest extent possible, just as Canada and our other trading partners do.
the pot caLLing the KettLe BLacK 
 While Canada, the European Union, and China havebeen vocierous critics o the Buy America provision,each one o them has its own ar-reaching domesticpreerences. China, which is not a member o the WorldTrade Organization (WTO) Government Procurement Agreement (GPA), can discriminate against importedproducts in its $586 billion economic stimulus package,and, in addition, it has imposed an 80 percent domesticcontent requirement. The EU and its member states areGPA members but have excluded signicant sectors romcoverage, including all ederal and sub-ederal
 
transporta-tion, telecommunications, and energy contracts. They arethereore ree to discriminate against imported goods inthese government projects.Canada is also a GPA member, and it has excludedsignicant sectors rom coverage—even broader exceptions
Robert Baugh
econoMic reaLity and aLarMist rhetoric:getting reaL aBout Buy aMerica

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