Friday, February 13, 2009

Buy America is Just the Beginning of Our Trouble



Buy America is Just the Beginning of Our Trouble
(Embassy – Leslie Campbell)


The "Buy American" clause in the U.S. economic stimulus bill could turn out to be just the tip of the iceberg in terms of trade hurdles emanating from the new Democratic Congress.

The mini-crisis about Buy American may pass, but it would be a mistake to view its insertion in the bill as an anomaly to be ignored. Congress is in a mood to protect and reward local fiefdoms and to penalize the multi-national corporations perceived to be exporting jobs.

In one example of newfound chutzpah, seven Democratic senators wrote on February 4 to Tom Vilsack, President Barack Obama's agriculture secretary, asking him to revise country-of-origin labelling (COOL) rules to protect against food produced in countries with "fewer health and safety standards" in order to "boost our livestock producers."

Canada and Mexico have the most to lose from COOL and most Canadians would be surprised to learn that their country has fewer health standards than the U.S. The senators' request seems to be aimed more at shoring up domestic industry than genuinely targeting food safety.

In another example of the congressional mood, a bill hidden deep in the shadows of the stimulus debate would, according to its sponsors, give the office of the U.S. Trade Representative (USTR) more authority to "enforce trade agreements we already have" in order to "stem the outflow of U.S. manufacturing jobs due to trade competition."

The Senate bill, introduced February 2, is co-sponsored by moderate Maine Republican Olympia Snowe and Montana Democrat Max Baucus, with support from Democrats Kent Conrad and Jay Rockefeller. Calling it the "Trade CLAIM Act," the senators want to force the USTR to act on virtually every complaint about foreign trade practices brought forward by U.S. industry. From Canada's perspective, U.S. industry already uses questionable trade complaints to harass their Canadian counterparts, particularly in the softwood lumber industry.

The same public sentiment that felled the nomination of Tom Daschle and that supports Obama's CEO salary cap is driving this rash of nouveau protectionism. The American public believes it has been victimized by rapacious economic predators and, at least within the context of a debate about disappearing jobs, Canada is viewed as just another vested interest with its snout in the American trough.

New York Times columnist Frank Rich warned in his February 8 column of a "tsunami of populist rage" where citizens rebel against corporate greed, indiscriminate government bailouts and the insiders amassing wealth in Washington.

One of the practical effects of this growing rage is that the legislative body is loathe to spend American public money shoring up employment abroad—which is how many Americans view the ability of foreign (read Canadian) companies to bid on or supply materials for American infrastructure projects.

Congress may confirm the existence of a tacit "Canada exemption" from Buy American as a result of existing trade agreements, at least for now. The next steps in the stimulus drama – a "conference committee" comprised of House and Senate members to reconcile differences in the bills passed by their respective chambers – is likely to lead to a compromise on protectionist language that will assuage Canada's immediate concerns.

Obama's White House, which has already acknowledged the international outcries about protectionism, will have more sway with the conference committee, and the House and Senate conference negotiators are seasoned veterans who know how to calm political storms.

Even so, Canada should treat the Buy American clause as a shot across the bow and prepare to protect against future attacks. It is clear that for at least the next two years, no U.S. politician will suffer from being in favour of keeping jobs at home, punishing corporate greed and staving off rapacious foreigners.

Canada's two favourite arguments – that we're the United States' biggest trading partner and that our economies are so integrated that protectionism inadvertently hurts U.S. interests – seem to be falling on deaf ears.

No matter how hard Canada tries to educate about the volume of trade between the countries, regular Americans either don't hear the messages or don't buy them. Flint Journal columnist and blogger Andrew Heller recently scoffed at Canadian trade protests, suggesting that the worst that could result from Canada's pique is that maple syrup and hockey player exports could be suspended.

Canada likes to make the argument that the two economies are so integrated that protectionist trade actions ultimately harm U.S. industry as much as Canadian. As the argument goes, Americans should somehow be thankful that corporations like Boeing, General Motors, Caterpillar, FedEx, Campbell's Soup and many others have significant operations in Canada. Because of this cross-border integration, we say, American politicians mustn't dare do anything that jeopardizes the corporation's profits or Canadian jobs by protecting purely "parochial" interests.

To American ears, the argument doesn't hold water. It's like saying they should be worried if Nike has to reduce its operations in China or if Dell can no longer outsource to India. That's the point, pro-American legislation proponents would say, force made-in-America solutions and keep jobs and manufacturing at home.

Canadians have to understand that Americans are interested in the jobs and economic benefits associated with corporations' domestic operations, not increasing the bottom line of companies operating in foreign lands, including Canada.

Congress, sensitive to the populist backlash about lost jobs and bankrolled by domestic industry, may find that trade protection resonates with a president who owes much to organized labour. The resulting chemistry could be toxic for Canada and Buy American is just the beginning, not the end.

Commentary: If it is going to be this hard for Canada and Mexico, already US bedfellows, just imagine how challenging it will be for non-KORUS ratified Korea?

Andy Heller continues:

Daniel

I'm quoted in the story you posted, but it's nonsense. The comment quoted was in a daily joke thing I do on-line called the Daily Monoblog, which consists of late night-style monologue quips, and yet it was quoted as serious. Absolutely ridiculous reporting on that person's part.

Here's a link to my column about that:

http://blog.mlive.com/flintjournal/aheller/2009/02/andy_seriously_ticks_off_canad.html

Hi Andrew,

I get these articles from import/export Canada as The Embassy is on their listing.

My take is that Canada's export/import community is running with whatever they can find to stir up political resolutions on both sides of the border thickening debate which has been ongoing since 2001.

I would say that thickening has been taking place globally as well.

It's a great quote by the way!

Cheers, Daniel

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andrew heller said...

Daniel

I'm quoted in the story you posted, but it's nonsense. The comment quoted was in a daily joke thing I do on-line called the Daily Monoblog, which consists of late night-style monologue quips, and yet it was quoted as serious. Absolutely ridiculous reporting on that person's part.

Here's a link to my column about that:

http://blog.mlive.com/flintjournal/aheller/2009/02/andy_seriously_ticks_off_canad.html

Daniel Costello said...

Hi Andrew,

I get these articles from import/export Canada as The Embassy is on their listing.

My take is that Canada's export/import community is running with whatever they can find to stir up political resolutions on both sides of the border thickening debate which has been ongoing since 2001.

I would say that thickening has been taking place globally as well.

It's a great quote by the way!

Cheers, Daniel

Daniel Costello said...

Dear Sanjay,

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Cheers, Daniel