TORONTO President Obama has left little
doubt that he stands against the forces of protectionism. Time
and again, he has urged nations grappling with ailing economies
to refrain from the temptation to erect trade barriers, warning
that beggar-thy-neighbor policies would ricochet back to the
instigator and sink everyone.
When Congress added a "Buy American" provision to the
$787-billion economic stimulus package, Obama was quick to
declare that such action would not violate trade pacts. Canada,
the country's biggest trading partner, was relieved.
But the human desire to put the prosperity of one's own
country ahead of others-especially when huge tax dollars are
being spent to resurrect a domestic economy-may be just too
strong for a U.S. president to extinguish. Anecdotal evidence
is building that the provisions that require the use of
U.S.-made products is spreading and preventing some Canadian
suppliers from participating in U.S. infrastructure
In May, IPEX Inc. of Toronto was horrified to learn that
some plastic piping it supplied for a new health care center at
the Camp Pendleton Marine Base in California had been ripped
from the ground. The pipe, stamped with the words "Made in
Canada," was replaced with U.S.-made product.
"We've never seen such a wave of protectionism as at this
moment," an IPEX spokesman said at a news conference. He said
that project administrators in other states also were asking
that IPEX's pipe be certified "Made in America." Since they
aren't, the lost sales are racking up.
"Many Canadians believed the issue (of U.S. protectionism)
was settled when (Obama) came to Canada back in February and
gave assurances that all was well. But it's not," the spokesman
said. "This will lead to lost Canadian jobs if it's not dealt
Another Toronto-based industrial equipment company, Hayward
Gordon Ltd., contends it must now certify its pumps and other
equipment are made in the United States. It said it recently
lost out on a municipal water treatment contract in Maryland
and may lose another in Indiana. Hayward, which sells about
one-third of its products to the United States, said it may be
forced to shift some of its production to New York state.
If it does, it would be following in the footsteps of at
least one other Canadian company that set up shop further
south. Real Time Systems Inc., a Toronto-based industrial
automation consultant, opened an office in Chicago earlier this
year after determining that more and more government contracts
contained language disqualifying foreign bidders.
The retaliation has already begun. The town council of
Halton Hills, Ontario, a Toronto-area municipality with a
population of 58,000, passed a resolution in May that allows
biased buying practices against any country that discriminates
against Canada, and other municipalities are said to be
considering similar action if their industries are found to be
shut out of the U.S. market.
The Canadian Institute of Steel Construction said its
members are already losing orders. Ed Whalen, its president,
said that U.S. wholesale steel vendors are opting not to hold
Canadian-made steel because of concerns it won't qualify for
infrastructure projects. "They're saying they don't want the
hassle," Whalen told Canada's Globe and Mail
newspaper. "There's so much ambiguity."
It's an action rife with irony. Canadian-fabricated steel
products, including beams for bridges or constructing
buildings, often are made with raw steel imported from the
United States. Once further manufactured, the products are
deemed Canadian. But if Canadian manufacturers can't sell the
end-product back into the United States, there will be
considerably less demand from north of the border for the
U.S.-produced raw steel.
More than $90 billion has been earmarked for spending on
roads, bridges and other infrastructure as part of Obama's
stimulus package. While Obama has emphasized that the spending
must comply with North American Free Trade Agreement (Nafta)
rules, Canadian manufacturers claim that those on the ground
actually making procurement decisions are playing it safe by
showing preference to companies that hang the stars and
stripes. Meanwhile, a great deal of the infrastructure money is
being spent at the city and state level, where Nafta provisions
do not override the "Buy American" clause in federal
Some of the controversial language in the stimulus bill also
is being adopted in other U.S. spending bills, and that has the
Canadian Manufacturers and Exporters (CME) group worried. It
said that at least seven pieces of legislation now before
Congress-including bills funding the purchase of hybrid
vehicles and the renovation of government buildings-contain
overtly protectionist language.
Of particular concern is the Water Quality Investment Act,
which would finance $15 billion of water and sewage projects
over the next five years. It bars the use of all foreign-made
iron, steel and other manufactured goods on such projects. The
CME contends this alone threatens the livelihood of about 250
Canadian International Trade Minister Stockwell Day said
he's concerned about all this and is spending time in
Washington to try to calm the protectionist impulse that often
comes attached with stimulus spending.
Day has been conveying the fact that the Canadian and U.S.
steel industries are so integrated that a stamp of "Made in
North America" would often be more accurate than breaking it
down into its sovereign components. As for the broader
challenge that faces all kinds of manufacturers in Canada, Day
may have to settle for mitigating the impulses of protectionism
rather than eliminating them. DARCY KEITH