Blogs & Comment

A U.S. perspective on Buy American

Just got off the phone with Chris Braddock, director of procurement policy for the U.S. Chamber of Commerce, based in Washington, D.C. He’s just a tad frustrated with Buy American the riders added to short-term stimulus funding that imply only U.S. companies can bid on stimulus-related contracts at the state and local level of government. “The point was to stimulate American jobs with American funds,” says Braddock. “Unfortunately, it hasn’t quite worked out that way.”
“We’ve heard talk of Buy China retaliation; Buy Australia … basically, this legislation has sparked Buy Local movements around the globe,” says Braddock. (Buy China isn’t just talk. Check out this report from the FT on new Buy China rules announced yesterday, and what they might mean for foreign companies.) What the Chamber is after, is a solution that ensures free trade for all.
Only 6% to 7% of stimulus funds have been deployed to date. And according to Braddock, Buy American has actually slowed down the stimulus effort in a few key ways. First, it’s created mass confusion as to who can or cannot bid on a stimulus-related contract. Second, it’s meant that some U.S. companies, such as Duferco Steelin Pennsylvania, have found themselves shut out of participation on recovery projects because of foreign products in their supply chains, putting, in this case, 450 American jobs at risk. Third, some U.S. companies have been prevented from bidding on stimulus-related government contracts overseas. (See Canadian Business editor Joe Chidley ‘s post on General Electric chief executive Jeffrey Immelt‘s experiences for context.)
In the past week, the U.S. Chamber has gone very public on this issue. On Thursday, June 11, they held a press conference in D.C. to ask Congress to exempt state and local governments from complying with Buy American riders. That way, federal rules around procurement would trulybe in compliance to the United States’ international obligations to other nations under the terms of free trade treaties as President Barack Obama promised way back in February.
This, in Braddock’s view, is preferable to the legal sleight of hand that’s currently obtaining. Right now, state and local governments in the United States are, for the most part, not covered by international trade treaties. However, conveniently, most procurement decisions are made at the state and local goverment level. In applying Buy American only to state and local governments, the Obama administration has been able to claim it is honouring free trade principles at the international level while requiringlower levels of government to do an end run around them.
In Saskatchewan, where part of my family is from, we have a good phrase for that kind of thing. Unfortunately, it’s not printable.
The U.S. Chamber’s effort was timed to coincide with a joint Hill lobbying spree by the premiers of Canada’s provinces and Prime Minister Stephen Harper. The Harper government is calling for exemptions for Canadian companies only from Buy American riders. Both the feds and the provinces want the U.S. to sign on to open procurement policies at all levels of government.
Of course, what the Harper government is calling for isn’t entirely what Braddock and his colleagues want. That’s because it’s not just Canada that’s affected by the Buy American riders. And in retaliation, Buy Local movements are taking root around the globe.
With Canadian municipalities voting in favour of retaliatory action last week, the United States has 120 days to roll back its Buy American riders on stimulus funds. If the riders aren’t rolled back, then Canadian municipalities will cut companies from countries with discriminatory procurement policies out of bidding on their contracts. And that, says Braddock, represents potentially billions and billions of dollars in lost business for U.S. companies further hampering the American economy’s attempts at recovery. (Canadian cities buy roughly $15-billion worth of goods and services from U.S. suppliers every year.)
In a classic twist on the let’s-bash-up-on-Canada-regardless storyline, some north of the border seem to believe this is still (somehow) the result of lack of Canadian foresight and a missed opportunity. According to one analysis in a respected newspaper, the premiers of all Canadian provinces should have signed on to the World Trade Organization’s Agreement on Government Procurement years ago, thus securing reciprocal access to contracts in 37 American states.
Meanwhile, this thinking goes, competitor nations that did sign on to the WTO’s deal are blithely unconcerned about Buy American riders affecting their companies’ abilities to bid on stimulus contracts.
This reading misses two key points. It overplays Canadian agency in a situation that has been largely driven by U.S. domestic politics. Second, it overplays the reach of the WTO deal, which doesn’t apply at the municipal level where much of the federal stimulus procurement effort is being made. Sure, Canadian business missed an important opportunity when the then-premiers decided not to sign on the WTO’s agreement way, way back. But doing that wouldn’t have solved much of the problem now facing Canadian companies operating down south.
Meanwhile, Buy American riders are popping up across the American legislative landscape. Two new bills that recently passed the House, the Water Quality Investment Act of 2009 and the 21st Century Green High-Performing Public School Facilities Act, included Buy American mandates in their terms. These bills authorize billions of dollars in spending over periods of several years.
Right now, Buy American only matters for the two years stimulus funds are designated to flow. Once 2010 ends, Buy American is history. But if similar provisions become law in bills like these, then the U.S. is very much shutting its doors to free trade for the long haul. And that, for anyone who does business across the border, is a major problem.