As a part of much of the recent stimulus legislation, many US lawmakers have added “Buy American” clauses to ensure that the American economy reaps the intended benefits of government investments, cash injections, subsidies, and tax breaks. These clauses basically stipulate that, in order for companies to take advantage of the benefits from a given piece of legislation, they must purchase a specific amount (percentage) of supplies, services, and labor from American-based companies. According to a recent article from The Canadian Press (Yes The Canadian Press. What you don’t subscribe?), Canadian business groups are not at all pleased.

So what, you may say. Who cares if a few extra Canadians are ending their thoughts about America with a slightly darker, more menacing “Eh”? Well, the answer is that any American company who relies on Canadian state and local contracts for business should care- particularly those who deal in water and wastewater equipment. The article cites U.S. Chamber of Commerce chief executive Tom Donohue as saying, “Retaliation by Canadian municipalities could result in a $3 billion in lost business for U.S. water and wastewater equipment manufacturers.”

The fact of the matter is that a trade war, initiated by either side, would surely be detrimental to businesses on both sides of the border. The most obvious effect is that American businesses would lose any Canadian-based revenues, and vice versa for Canadian companies. While this initially seems like it could end up as more or less of a “wash” for both American and Canadian companies, this is not the case.

The forced redistribution of business to local entities would hurt everyone involved. It’s not as simple as, “I’ll take your business and you take mine.” This interruption of capitalism will force commodity/service providers to redesign the logistical flow of their operations, develop new relationships with former competitor’s customers/clients, and ride the learning curve that comes along with developing these relationships. On the buy-side, purchasers will see increased prices as a result of the reduced level of competition in the market. After these effects are accounted for, both countries would most likely end up worse off than they would have been without any intervention at all.

The good news is that some politicians and lawmakers on both sides realize these potentially negative effects, and they are in negotiations to create an open market in government procurement between the US and Canada. Perrin Beatty, head of the Canadian Chamber of Commerce offered this optimistic opinion, “We can, I think, come to a bilateral agreement with the United States that says our two countries will not discriminate against each other in sub-national procurement, enshrine it and make sure it sticks”
Share To:

Steve Tatum

Post A Comment:

2 comments so far,Add yours

  1. When Michael Moore wrote Canadian Bacon, I believe he was indirectly warning us of this issue. That man is a prophet.

  2. As a Canadian, this is not a small issue for us. Close to 70% of our exports go to the US. So, in these trying times, the pain of this could be quite acute. But bear in mind, a Canadian's favourite thing to do is complain about the US and how unfairly we're treated.

    Ben Sorensen