Deal exempts Canadian companies from protectionist Buy American provisions

OTTAWA - The old maxim that nothing concentrates the mind like a hanging at dawn seems an apt description of what threw the provinces together last summer, in an unprecedented show of unity on international trade. Unexpectedly, they saw their industries shut out of fat American stimulus contracts because of Buy American policies. Something had to be done - and fast. "I have never in all my history in politics, I have never seen so many things move so quickly in all my life - we had unanimity within two weeks," said Ontario Trade Minister Sandra Pupatello.

"It was a watershed in the heat of July."

Then-federal trade minister Stockwell Day took the baton from the anxious provinces and with Prime Minister Stephen Harper banged the drum louder for a deal with Washington. Seven months later, Canada has a proposed new deal with the United States that will give the provinces access to procurement contracts in 37 states, and vice-versa. Washington also agreed to waive its protectionist clauses in the US$787 billion Recovery Act for certain contracts, giving Canadian companies the chance to compete for what's left of the stimulus spending. The Americans also promised to fast-track future negotiations on Buy American measures they might build into spending.

"With this agreement, we are sending a clear message: the best way to create and keep jobs is by opening economic opportunities, not by closing them," Trade Minister Peter Van Loan told a news conference Friday.

But observers say the real victory was what politicians and bureaucrats accomplished in Canada, bringing the provinces together to liberalize access to government contracts for the first time. The move could help to clear the road for a trade deal between Canada and the European Union, and bring down more nagging inter-provincial trade barriers. Jayson Myers, president of Canadian Manufacturers and Exporters, says credit is due to Day and other federal officials for overseeing the difficult negotiations. "This is the first time in Canadian history that they've agreed on any procurement deal. That was no mean feat and to be able to bring the provinces on board and launch negotiations with the United States ... that's the type of accomplishment this is," said Myers. But Myers acknowledged that the amount of money left to compete for in the first American stimulus package has largely run out - only US$75 billion left of US$275 billion by that government's own estimates. The deadline for those projects is also Feb. 17, although Myers and Canadian officials say much money has yet to be formally awarded by states and municipalities. Liberal trade critic Scott Brison said the agreement is too little, too late. "The fact is much of the stimulus has been spent, and the rest will be expiring soon," Brison said. "The government has failed to negotiate a good agreement in a timely manner, and as a result Canadian jobs have been lost and Canadian competitiveness has been affected negatively." There are also many details to be hashed out, including myriad exemptions that could include contracts in the health-care, education and cultural sectors. There's also no guarantee of how future talks might go if future stimulus programs include Buy American provisions.

But John Boscariol, who's with law firm McCarthy Tetrault's international trade and investment group, says the deal will set the tone for future negotiations. He notes that many American industries and lawmakers have been brought around to the fact that protectionist measures can hurt their businesses too. "I think it's very significant that they took this step and it will impact how the issues are addressed in the future ... the path will already be trodden." David Jacobson, the U.S. ambassador to Canada, was counting on the issue being put to rest for some time. "Now the first question at every public appearance can be about something other than Buy American,' he said.