US-Canada Resolution of "Buy American" Dispute Is No Reason to Celebrate

The United States Trade Representative announced yesterday that the US and Canada had resolved their dispute over the onerous "Buy American" rules attached to last year's Stimulus* bill:

United States Trade Representative Ron Kirk commented further today on a joint announcement by the United States and Canada of a tentative agreement that would give American exporters guaranteed access to a wide range of contracts across Canada. The agreement, which must be reviewed by domestic stakeholders in both countries before it can be signed, was negotiated both to settle long-standing U.S. requests for access to Canada's significant provincial procurement sector, which would open markets for U.S. exports of goods and services to Canada, and to address concerns expressed by Canada regarding "Buy American" provisions in the American Recovery and Reinvestment Act of 2009.

"This Administration made clear to Canada from the outset that any agreement to provide Canada with expanded access to U.S. procurement absolutely must provide guaranteed reciprocal access for U.S. exporters to supply goods and services to Canada through provincial and territorial procurement contracts. USTR has won that access for American firms, and I look forward to signing the agreement soon," said Ambassador Kirk. "For years, U.S. firms have sought market access to Canadian provincial procurement under the WTO Government Procurement Agreement (GPA), which Canada resisted. USTR took this opportunity to get Canada to open its provincial procurement markets, and also won new additional access for U.S. firms to provincial and municipal construction contracts across Canada. The value of new job-supporting contracts open to U.S. firms will be tens of billions of dollars."

As today's joint statement indicates, the United States has negotiated a deal that will provide permanent U.S. access to Canadian provincial and territorial procurement markets under the [WTO's Government Procurement Agreement]. In addition, the United States has secured access for American suppliers through September 2011 to construction contracts in a number of Canadian provincial and municipal entities not otherwise covered by the GPA. In exchange, the United States agreed to provide Canada with access to 37 states already covered by the GPA and access for suppliers to a limited number of programs funded by the Recovery Act. Both countries agreed to continue a dialogue on mutually beneficial procurement opportunities.

As you'll recall, Buy American essentially restricted all purchases using Stimulus* funding to goods made in the United States (and the other 12 signatories of the WTO's GPA).  It has been widely panned as not only protectionist, but also a practical nightmare to implement and enforce, and it has been the target of intense criticism by Canada and a lot of other US trading partners - even other GPA members.

So basically, the United States erected a massive trade barrier last year and now is patting itself on the back for: (i) exempting a single country from that barrier's obviously nasty provisions, while keeping the protectionism in place for more than 100 other trading partners; and (ii) using Buy American as a club to force Canada into opening its own procurement market, thus reinforcing the outdated and dangerous idea that reciprocity should be the goal of all trade negotiations.  And it only took them a year to do it!

Please pardon me if I don't applaud this exciting breakthrough.

Buy American has been a complete debacle.  It has stymied economic growth here at home and encouraged tit-for-tat protectionism abroad.  To applaud anything but its complete dissolution is absurd, and to applaud its use as a tool in trade negotiations is very, very dangerous.

(Particularly when another Buy American provision is destined for the next StimulusJobs Bill.)